01/31/18

These Tax Credits Can Mean a Refund for Individual Taxpayers

Taxpayers who are not required to file a tax return may want to do so. They might be eligible for a tax refund and don’t even know it. Some taxpayers might qualify for a tax credit that can result in money in their pocket. Taxpayers need to file a 2017 tax return to claim these credits.

Here is information about four tax credits that can mean a refund for eligible taxpayers:

  • Earned Income Tax Credit. A taxpayer who worked and earned less than $53,930 last year could receive the EITC as a tax refund. They must qualify for the credit, and may do so with or without a qualifying child. They may be eligible for up to $6,318. Taxpayers can use the 2017 EITC Assistant tool to find out if they qualify.
  • Premium Tax Credit.Taxpayers who chose to have advance payments of the premium tax credit sent directly to their insurer during 2017 must file a federal tax return to reconcile any advance payments with the allowable premium tax credit. In addition, taxpayers who enrolled in health insurance through the Health Insurance Marketplace in 2017 and did not receive the benefit of advance credit payments may be eligible to claim the premium tax credit when they file. They can use the Interactive Tax Assistant to see if they qualify for this credit.
  • Additional Child Tax Credit. If a taxpayer has at least one child that qualifies for the Child Tax Credit, they might be eligible for the ACTC. This credit is for certain individuals who get less than the full amount of the child tax credit.
  • American Opportunity Tax Credit. To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student who was enrolled at least half time for one academic period. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. They are required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students. Taxpayers should complete Form 8863, Education Credits, and file it with their tax return.

By law, the IRS is required to hold EITC and Additional Child Tax Credit refunds until mid-February — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest of these refunds to be available in taxpayer bank accounts or debit cards starting February 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting Payroll CPA Tax  Tax Returns Internet Based Tax Returns Citywide Bank Louisville Lafayette Erie Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

01/23/18

Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC

Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.

The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less  federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:

  • A grandparent who is working and has a grandchild living with them may qualify for the EITC, even if the grandparent is 65 years of age or older.
  • Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency and qualifying child requirements for EITC.
  • The rules for grandparents claiming the EITC are the same for parents claiming the EITC.
  • Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.
  • There are also special rules for individuals receiving disability benefits and members of the military.
  • To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.
  • The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.
  • Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.

Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting Payroll CPA Tax  Tax Returns Internet Based Tax Returns Citywide Bank Louisville Lafayette Erie Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

01/16/18

IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered

WASHINGTON ─ The Internal Revenue Service today strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt.  A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

  • Paying the tax debt in full
  • Paying the tax debt timely under an approved installment agreement,
  • Paying the tax debt timely under an accepted offer in compromise,
  • Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
  • Having requested or have a pending collection due process appeal with a levy, or
  • Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer:

  • Who is in bankruptcy
  • Who is identified by the IRS as a victim of tax-related identity theft
  • Whose account the IRS has determined is currently not collectible due to hardship
  • Who is located within a federally declared disaster area
  • Who has a request pending with the IRS for an installment agreement
  • Who has a pending offer in compromise with the IRS
  • Who has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:

  • Taxpayers can request a payment agreement with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.
  • Some financially distressed taxpayers may qualify for an offer in compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. To help determine eligibility, use the Offer in Compromise Pre-Qualifier, a free online tool available on IRS.gov.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting Payroll CPA Tax  Tax Returns Internet Based Tax Returns Citywide Bank Louisville Lafayette Erie Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

01/10/18

Here’s Five Reasons to Use Direct Deposit for a Tax Refund

As taxpayers prepare for the January 29 start of filing season, they should consider a direct deposit of any refunds due. It’s easy, safe, fast — and the best way to get a refund. That’s why 80 percent of taxpayers choose it every year.

IRS Direct Deposit:

  • Is Fast. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit. They can use IRS Free File to prepare and e-file federal returns for free.  Taxpayers who file a paper return can also use direct deposit.
  • Is Secure. Since refunds go right into a bank account, there’s no risk of having a paper check stolen or lost. This is the same electronic transfer system that deposits nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.
  • Is Easy.  Choosing direct deposit is easy. With e-file, just follow the instructions in the tax software. For paper returns, the tax form instructions serve as a guide. Make sure to enter the correct bank account and routing number.
  • Has Options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit a refund in up to three accounts. Do not use this form to designate part of a refund to pay tax preparers.

Taxpayers should deposit refunds into accounts in their own name, their spouse’s name or both. Avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules.

There is a limit of three electronic direct deposit refunds made into a single financial account or pre-paid debit card. The IRS will send a notice and a refund check in the mail to taxpayers who exceed the limit.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting Payroll CPA Tax  Tax Returns Internet Based Tax Returns Citywide Bank Louisville Lafayette Erie Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

01/03/18

Strong Passwords Help Keep Tax Data Safe

Passwords are often the key to guarding access to personal information and data stored on computers or sent over email. Because most taxpayers file their returns electronically and access account information online, it is critical for taxpayers to not only create strong passwords for all tax-related accounts, but to do everything in their power to protect those passwords.

Here are seven things taxpayers should consider when creating and protecting passwords:

  • Longer passwords are safer and more difficult to guess. A strong password should be a minimum of eight characters. It should include a combination of letters, numbers, symbols and special characters.
  • A password should include at least one uppercase letter, one lowercase letter, one number, and one symbol or character.
  • Taxpayers should not include personal information in passwords.  A criminal can find names of siblings, friends, children and pets on social media sites. This makes it easier for cybercriminals to figure out a person’s password that includes these names.
  • Avoid using the same password for all information systems, accounts and devices. If someone does guess one password, they will not have access to all the other accounts.
  • Taxpayers can substitute numbers and symbols for letters in words or phrases to make it more difficult for a thief to guess a password.
  • People should never share passwords.
  • Taxpayers should be careful of attempts to trick you into revealing your password.

More information:

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting Payroll CPA Tax  Tax Returns Internet Based Tax Returns Citywide Bank Louisville Lafayette Erie Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

 

08/16/17

Moving Expenses May Be Deductible

Taxpayers may be able to deduct certain expenses of moving to a new home because they started or changed job locations. Use Form 3903, Moving Expenses, to claim the moving expense deduction when filing a federal tax return.

Home means the taxpayer’s main home. It does not include a seasonal home or other homes owned or kept up by the taxpayer or family members. Eligible taxpayers can deduct the reasonable expenses of moving household goods and personal effects and of traveling from the former home to the new home.

Reasonable expenses may include the cost of lodging while traveling to the new home. The unreimbursed cost of packing, shipping, storing and insuring household goods in transit may also be deductible.

Who Can Deduct Moving Expenses?

  1. The move must closely relate to the start of work. Generally, taxpayers can consider moving expenses within one year of the date they start work at a new job location.
  2. The distance test. A new main job location must be at least 50 miles farther from the employee’s former home than the previous job location. For example, if the old job was three miles from the old home, the new job must be at least 53 miles from the old home. A first job must be at least 50 miles from the employee’s former home.
  3. The time test. After the move, the employee must work full-time at the new job for at least 39 weeks in the first year. Those self-employed must work full-time at least 78 weeks during the first two years at the new job site.

Different rules may apply for members of the Armed Forces or a retiree or survivor moving to the United States.

Here are a few more moving expense tips from the IRS:

  • Reimbursed expenses. If an employer reimburses the employee for the cost of a move, that payment may need to be included as income. The employee would report any taxable amount on their tax return in the year of the payment.
  • Nondeductible expenses. Any part of the purchase price of a new home, the cost of selling a home, the cost of entering into or breaking a lease, meals while in transit, car tags and driver’s license costs are some of the items not deductible.
  • Recordkeeping. It is important that taxpayers maintain an accurate record of expenses paid to move. Save items such as receipts, bills, canceled checks, credit card statements, and mileage logs. Also, taxpayers should save statements of reimbursement from their employer.
  • Address Change. After any move, update the address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank


02/01/17

Choosing the Correct Filing Status

When taxpayers file their tax return, it’s important they use the right filing status because it can affect the amount of tax they owe for the year. It may even determine if they must file a tax return at all. Taxpayers should keep in mind that their marital status on Dec. 31 is their status for the whole year.

Sometimes more than one filing status may apply to taxpayers. When that happens, taxpayers should choose the one that allows them to pay the least amount of tax.

When filing their tax return, taxpayers have IRS e-file as the easiest and most accurate way to file. Its tax software helps them choose the right filing status. Most people can use tax software and e-file for free with IRS Free File. This is a free service only available on the IRS website. Visit IRS.gov and click “Free File” on the home page.

Here’s a list of the five filing statuses:

  1. Single. Normally this status is for taxpayers who aren’t married, or who are divorced or legally separated under state law.
  2. Married Filing Jointly. If taxpayers are married, they can file a joint tax return. If a spouse died in 2016, the widowed spouse can often file a joint return for that year.
  3. Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit them if it results in less tax owed than if they file a joint tax return. Taxpayers may want to prepare their taxes both ways before they choose. They can also use this status if each wants to be responsible only for their own tax.
  4. Head of Household. In most cases, this status applies to a taxpayer who is not married, but there are some special rules. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules.
  5. Qualifying Widow(er) with Dependent Child. This status may apply to a taxpayer if their spouse died during 2014 or 2015 and they have a dependent child. Other conditions also apply.

 

01/31/17

How Exemptions and Dependents Can Reduce Taxable Income

Most taxpayers can claim an exemption for themselves and reduce their taxable income on their tax return. They may also be able to claim an exemption for each of their dependents. Each exemption normally allows them to deduct $4,050 on their 2016 tax return. Here are seven key points to keep in mind on dependents and exemptions:

1. Personal Exemptions.  Taxpayers can usually claim exemptions for themselves and their spouses on a jointly filed tax return. For married taxpayers filing separate returns, an exemption can only be claimed for a spouse if that spouse:

  • Had no gross income,
  • Is not filing a tax return, and
  • Was not the dependent of another taxpayer.

2. Exemptions for Dependents.  A dependent is either a child or a relative who meets a set of tests. Taxpayers can normally claim dependents as exemptions. List a Social Security number for each dependent. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.

3. No Exemption on Dependent’s Return. If a taxpayer can claim a person as a dependent, then that dependent cannot claim a personal exemption on his or her own tax return. This is true even if no one claims that person on a tax return.

4. Dependents May Have to File. A dependent may have to file a tax return. This depends on certain factors like total income, whether they are married and if they owe certain taxes.

5. Exemption Phase-Out.  Taxpayers earning above a certain amount will lose part or all the $4,050 exemption. See Publication 501 for details.

6. E-file Your Tax Return.  The IRS urges taxpayers to kick the paper habit. IRS E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

7. Try the IRS Online Tool.  Get questions answered by using  the Interactive Tax Assistant tool on IRS.gov.

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

01/27/17

Claim the Earned Income Tax Credit

The Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break for 40 plus years. Yet, one out of every five eligible workers fails to claim it. Here are some things taxpayers should know about the EITC:

  • Review Your Eligibility. Taxpayers who worked and earned under $53,505 may qualify for EITC. Filers should review EITC eligibility rules if their household income or family situation has changed. They may qualify for EITC this year, even if they did not in the past. To qualify, a taxpayer must file a federal income tax return claiming the Earned Income Tax Credit.  This is true even if a taxpayer is not otherwise required to file a tax return. Use the EITC Assistant tool to find out about eligibility rules and amounts.
  • Know the Rules. Taxpayers need to understand the rules before they claim the EITC. It is important to get this right. Here are some factors to consider:
    • Taxpayers who are married and file a separate return do not qualify for the EITC.
    • Filers must have a Social Security number valid for employment for themselves, their spouse (if married), and any qualifying child listed on their filed tax return.
    • Taxpayers must have earned income. This may include earnings from working for someone else as an employee or being self-employed.
    • Filers may be married or single, with or without children to qualify. Those who do not have children must also meet the age, residency and dependency rules. For a child to qualify, they must have lived with the taxpayer for more than six months in 2016. In addition, the child must meet the age, residency, relationship and joint return rules to qualify.
    • U.S. Armed Forces members serving in a combat zone have special rules that apply.
  • Lower Your Tax or Get a Refund. Filers who qualify for EITC could pay less federal tax, no tax or even get a refund. The EITC could be worth up to $6,269. The average credit was $2,482 last year.
  • Use Free Services. For those who do their own taxes, the best way to file a return to claim EITC is to use IRS Free File. Free brand name software will figure out taxes and the EITC automatically. Combining e-file with direct deposit is the fastest and safest way to get a refund. Free File is only available on IRS.gov/freefile.

Taxpayers can also get free help preparing and e-filing their return to claim the EITC. The IRS Volunteer Income Tax Assistance, or VITA program, offers free help at thousands of sites around the country. Get help with health care law tax provisions with Free File or VITA.

  • Refunds Held Until Feb 15. Beginning in 2017, if taxpayers claim the Earned Income Tax Credit or Additional Child Tax Credit on their tax return, the IRS must hold their refund until at least February 15. This applies to the entire refund, even the portion not associated with these credits. However, the IRS will begin accepting and processing tax returns once the filing season begins. Taxpayers should file as usual. There is no need to wait until February 15.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

 

01/26/17

Five Reasons to Choose Direct Deposit

Easy, safe and fast — that’s direct deposit. It’s the best way to get a tax refund. Eighty percent of taxpayers choose it every year. The IRS knows taxpayers have a choice of how to receive their refunds.

IRS Direct Deposit:

  1. Is Fast. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit. Use IRS Free File to prepare and e-file federal returns for free. Use direct deposit for paper tax returns, too.
  2. Is Secure. Since refunds go right into a bank account, there’s no risk of having a paper check stolen or lost in the mail. This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.
  3. Is Convenient. There’s no need to wait for a refund check to come in the mail.
  4. Is Easy.  Choosing direct deposit is easy. With e-file, just follow the instructions in the tax software. For paper returns, the tax form instructions serve as a guide. Make sure to enter the correct bank account and routing number.
  5. Has Options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. The U.S. Treasury Department offers a retirement account. It’s called a MyRA account.  Designate all or a part of a refund to a new MyRA account. Simply mark the “savings” box in the refund section of the return. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit a refund in up to three accounts. Do not use Form 8888 to designate part of a refund to pay tax preparers.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono Centennial Bank

01/25/17

Five Tips on Whether to File a 2016 Tax Return

Most people file a tax return because they have to. Even if a taxpayer doesn’t have to file, there are times they should. They may be eligible for a tax refund and not know it.

Here are five tips on whether to file a tax return:

  1. General Filing Rules.  In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or a dependent of another person. For example, if a taxpayer is single and under age 65, they must file if their income was at least $10,350. There are other instances when a taxpayer must file. Go to IRS.gov/filing  for more information.
  2. Tax Withheld or Paid.  Did the taxpayer’s employer withhold federal income tax from their pay? Did the taxpayer make estimated tax payments? Did they overpay last year and have it applied to this year’s tax? If the answer is “yes” to any of these questions, they could be due a refund. They have to file a tax return to get it.
  3. Earned Income Tax Credit.  A taxpayer who worked and earned less than $53,505 last year could receive the EITC as a tax refund. They must qualify and may do so with or without a qualifying child. They may be eligible for up to $6,269. Use the 2016 EITC Assistant tool on IRS.gov to find out. Taxpayers need to file a tax return to claim the EITC.
  4. Additional Child Tax Credit.  Did the taxpayer have at least one child that qualifies for the Child Tax Credit? If they do not qualify for the full credit amount, they may be eligible for the Additional Child Tax Credit. Beginning in January 2017, by law, the IRS must hold refunds for any tax return claiming either the EITC or the Additional Child Tax Credit until Feb. 15. This means the entire refund, not just the part related to either credit.
  5. American Opportunity Tax Credit.  To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. Complete Form 8863, Education Credits, and file it with the tax return. Learn more by visiting the Education Credits web page.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono

01/03/17

IRS, States, Industry Urge Taxpayers to Learn Signs of Identity Theft

No matter how careful you are, identity thieves may be able to steal your personal information. If this happens, thieves try to turn that data quickly into cash by filing fraudulent tax returns.

The IRS, state tax agencies and the nation’s tax industry ask for your help in their effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign called “Taxes. Security. Together.” We’ve also started a new series of security awareness tips that can help protect you from cybercriminals.

Here are a few signs that you may be a victim of tax-related identity theft:

  1. Your attempt to file your tax return electronically is rejected. You get a message saying a return with a duplicate Social Security number has been filed. First, check to make sure you did not transpose any numbers. Also, make sure one of your dependents, for example, your college-age child, did not file a tax return and claim themselves. If your information is accurate, and you still can’t successfully e-file because of a duplicate SSN, you may be a victim of identity theft. You should complete Form 14039, Identity Theft Affidavit. Attach it to the top of a paper tax return and mail to the IRS.
  2. You receive a letter from the IRS asking you to verify whether you sent a tax return bearing your name and SSN. The IRS holds suspicious tax returns and sends taxpayers letters to verify them. If you did not file the tax return, follow the instructions in the IRS letter immediately.
  3. You receive income information at tax time from an employer unknown to you. Employment-related identity theft involves the use of your SSN by someone, generally an undocumented worker, for employment purposes only.
  4. You receive a tax refund that you did not request. You may receive a paper refund check by mail that the thief intended to have sent elsewhere. If you receive a tax refund you did not request, return it to the IRS. Write “VOID” in the endorsement section, and include a note on why you are returning it. If it is a direct deposit refund that you did not request, contact your bank and ask them to return it to the IRS. Search IRS.gov for “Returning an Erroneous Refund” for more information.
  5. You receive a tax transcript by mail that you did not request. Identity thieves sometimes try to test the validity of the personal data they have chosen or they attempt to use your data to steal even more information. If you receive a tax transcript in the mail and you did not request it, be alert to the possibility of identity theft.
  6. You receive a reloadable, pre-paid debit card in the mail that you did not request. Identity thieves sometimes use your name and address to create an account for a reloadable prepaid debit card that they use for various schemes, including tax-related identity theft.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono

12/07/16

Tax Professionals: Protect Your Clients; Protect Yourself

Due to the sensitive client data held by tax professionals, cybercriminals increasingly target the tax preparation community. Thieves use a variety of tactics, from remote computer takeovers to phishing scams.

The IRS, state tax agencies and the private-sector tax industry ask for your help to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference. That’s why we launched a public awareness campaign that we call, “Protect Your Clients; Protect Yourself.”

Identity thieves are a formidable enemy. Data breaches are increasing in number and scope. Thieves often use the stolen identity information to file tax returns. As a tax preparer, you play a critical role in protecting taxpayer data.

Most tax professional’s software includes security protections. You should take other defensive moves as well.

Here are a few critical steps:

  • Secure Data. Make sure that taxpayer data, including data left on hardware and media, is never left unsecured; use security software on all digital devices.
  • Shred Documents and Destroy Media. Securely dispose of taxpayer information.
  • Use Strong Passwords. Require strong passwords (numbers, symbols, upper and lowercase) on all computers, tax software programs and Wi-Fi.
  • Change Passwords. Require periodic password changes every 60 – 90 days.
  • Safely Store Data. Store taxpayer data in secure systems and encrypt information when transmitting across networks.
  • Encrypt Email. Encrypt e-mail that contains taxpayer data.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Bookkeeping Accounting  CPA Tax  Tax Returns Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder Longmont Brighton Broomfield Dacono

 

12/06/16

Avoid Identity Theft; Learn How to Recognize Phishing Scams

Simply ask for it. That’s the easiest way for an identity thief to steal your personal information.

Each day, people fall victim to phishing scams through emails, texts or phone calls and mistakenly turn over important data. In turn, cybercriminals try to use that data to file fraudulent tax returns or commit other crimes.

The Internal Revenue Service, state tax agencies and the tax industry — all partners in the fight against identity theft — urge you to learn to recognize and avoid phishing scams.

We need your help in the fight against identity theft. That’s why, as part of the Security Summit effort, we launched a public awareness campaign that we call Taxes. Security. Together. We’ve launched a series of security awareness tips that can help protect you from cybercriminals.

It’s called “phishing” because thieves attempt to lure you into the scam mainly through impersonations. The scam may claim to be from a friend, a company with whom you do business, a prize award – anything to get you to open the email or text.

A good general rule: Don’t give out personal information based on an unsolicited email request.

Here are a few basic tips to recognize and avoid a phishing email:

  • It contains a link. Scammers often pose as the IRS, financial institutions, credit card companies or even tax companies or software providers. They may claim they need you to update your account or ask you to change a password. The email offers a link to a spoofing site that may look similar to the legitimate official website. Do not click on the link. If in doubt, go directly to the legitimate website and access your account.
  • It contains an attachment. Another option for scammers is to include an attachment to the email. This attachment may be infected with malware that can download malicious software onto your computer without your knowledge. If it’s spyware, it can track your keystrokes to obtain information about your passwords, Social Security number, credit cards or other sensitive data. Do not open attachments from sources unknown to you.
  • It’s from a government agency. Scammers attempt to frighten people into opening email links by posing as government agencies. Thieves often try to imitate the IRS and other government agencies.
  • It’s an “off” email from a friend. Scammers also hack email accounts and try to leverage the stolen email addresses. You may receive an email from a “friend” that just doesn’t seem right. It may be missing a subject for the subject line or contain odd requests or language. If it seems off, avoid it and do not click on any links.
  • It has a lookalike URL. The questionable email may try to trick you with the URL. For example, instead of www.irs.gov, it may be a false lookalike such as www.irs.gov.maliciousname.com. You can place your cursor over the text to view a pop-up of the real URL.
  • Use security features. Your browser and email provider generally will have anti-spam and phishing features. Make sure you use all of your security software features.

Opening a phishing email and clicking on the link or attachment is one of the most common ways thieves are able not just steal your identity or personal information but also to enter into computer networks and create other mischief.

Learning to recognize and avoid phishing emails – and sharing that knowledge with your family members – is critical to combating identity theft and data loss. Businesses should educate employees about the dangers.

The IRS, state tax agencies and the tax industry joined as the Security Summit to enact a series of initiatives to help protect you from tax-related identity theft in 2017. You can help by taking these basic steps.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

 

08/24/16

Tax Effects of Divorce or Separation

If you are divorcing or recently divorced, taxes may be the last thing on your mind. However, these events can have a big impact on your wallet. Alimony and a name or address change are just a few items you may need to consider. Here are some key tax tips to keep in mind:

  • Child Support.  Child support payments are not deductible and if you received child support, it is not taxable.
  • Alimony Paid.  You can deduct alimony paid to or for a spouse or former spouse under a divorce or separation decree, regardless of whether you itemize deductions. Voluntary payments made outside a divorce or separation decree are not deductible. You must enter your spouse’s Social Security Number or Individual Taxpayer Identification Number on your Form 1040 when you file.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, be sure to notify the Social Security Administration. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can cause problems in the processing of your return and may delay your refund.  Health Care Law Considerations.
  • Special Marketplace Enrollment Period.  If you lose health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. You may enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period, if you lose coverage due to a divorce.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit. If you do, you should report changes in circumstances to your Marketplace throughout the year. These changes include a change in marital status, a name change, a change of address, and a change in your income or family size. Reporting these changes will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation. For more on this topic, see Publication 504, Divorced or Separated Individuals. You can get it on IRS.gov/forms at any time.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

08/17/16

Moving Expenses Can Be Deductible

Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. Here are the top tax tips for moving expenses.

In order to deduct moving expenses, your move must meet three requirements:

  1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov/forms anytime.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances. 

If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report. Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

03/16/16

Five Things You Should Know about the AMT

You may not know about the Alternative Minimum Tax because you’ve never had to pay it before. However, your income may have changed and you may have to pay it this year. The AMT is an income tax imposed at nearly a flat rate on an adjusted amount of taxable income above a certain threshold. If you have a higher income, you may be subject to the AMT.

Here are five things you should know about the AMT:

1. Know when the AMT applies. You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your AMT exemption amount. Your filing status and income define the amount of your exemption. In most cases, if your income is below this amount, you will not owe the AMT.

2. Know exemption amounts. The 2015 AMT exemption amounts are:

• $53,600 if you are Single or Head of Household.

• $83,400 if you are Married Filing Jointly or Qualifying Widow(er).

• $41,700 if you are Married Filing Separately.

You will reduce your AMT exemption if your income is more than a certain amount.

3. Use IRS e-file. Keep in mind that the AMT rules are complex. The easiest way to prepare and file your tax return is to use IRS e-file. The tax software will figure the AMT for you, if you owe the tax.

4. Try the tool. Use the AMT Assistant tool on IRS.gov to find out if you need to pay the tax.

5. Use the right forms. Usually, if you owe the AMT, you must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe the AMT can file Form 1040A and use the AMT Worksheet in the instructions.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

 

03/12/16

What You Need to Know About the Child and Dependent Care Tax Credit

Don’t overlook the Child and Dependent Care Tax Credit. It can reduce the taxes you pay. Here are 10 facts from the IRS about this important tax credit:

1. Child, Dependent or Spouse. You may be able to claim the credit if you paid someone to care for your child, dependent or spouse last year.

2. Work-Related Expense. The care must have been necessary so you could work or look for work. If you are married, the care also must have been necessary so your spouse could work or look for work. This rule does not apply if your spouse was disabled or a full-time student.

3. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.

4. Earned Income. You must have earned income for the year, such as wages from a job. If you are married and file a joint tax return, your spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.

5. Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person. The limit is $6,000 if you paid for the care of two or more.

6. Dependent Care Benefits. If your employer gives you dependent care benefits, special rules apply. For more on these rules see Form 2441, Child and Dependent Care Expenses.

7. Qualifying Person’s SSN. You must include the Social Security number of each qualifying person to claim the credit.

8. Care Provider Information. You must include the name, address andtaxpayer identification number of your care provider on your tax return.

9. Form 2441. You file Form 2441 with your tax return to claim the credit.

10. IRS Free File. You can use IRS Free File to prepare and e-file your federal tax return, including Form 2441, Child and Dependent Care Expenses, for free. Free File is the fastest and easiest way to file your tax return and it’s only available at  IRS.gov/freefile.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

03/10/16

Top Ten Facts about the Adoption Tax Credit

If you adopted or tried to adopt a child in 2015, you may qualify for a tax credit. Here are ten things you should know about the adoption credit.

1. Credit or Exclusion. The credit is nonrefundable. This means that the credit may reduce your tax to zero. If the credit is more than your tax, you can’t get any additional amount as a refund. If your employer helped pay for the adoption through a written qualified adoption assistance program, you may qualify to exclude that amount from tax.

2. Maximum Benefit. The maximum adoption tax credit and exclusion for 2015 is $13,400 per child.

3. Credit Carryover. If your credit is more than your tax, you can carry any unused credit forward. This means that if you have an unused credit in 2015, you can use it to reduce your taxes for 2016. You can do this for up to five years, or until you fully use the credit, whichever comes first.

4. Eligible Child. An eligible child is an individual under age 18 or a person who is physically or mentally unable to care for themself.

5. Qualified Expenses. Adoption expenses must be directly related to the adoption of the child and be reasonable and necessary. Types of expenses that can qualify include adoption fees, court costs, attorney fees and travel.

6. Domestic or Foreign Adoptions. In most cases, you can claim the credit whether the adoption is domestic or foreign. However, the timing rules for which expenses to include differ between the two types of adoption.

7. Special Needs Child. If you adopted an eligible U.S. child with special needs and the adoption is final, a special rule applies. You may be able to take the tax credit even if you didn’t pay any qualified adoption expenses.

8. No Double Benefit. Depending on the adoption’s cost, you may be able to claim both the tax credit and the exclusion. However, you can’t claim both a credit and exclusion for the same expenses. This rule prevents you from claiming both tax benefits for the same expense.

9. Income Limits. The credit and exclusion are subject to income limitations. The limits may reduce or eliminate the amount you can claim depending on the amount of your income.

10. IRS Free File. You can use IRS Free File to prepare and e-file your federal tax return for free. File Form 8839, Qualified Adoption Expenses, with your Form 1040. Free File is only available on IRS.gov/freefile.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

03/02/16

What is the Additional Medicare Tax and Who Pays It?

Some taxpayers may be required to pay an Additional Medicare Tax if their income exceeds certain limits. Here are some things that you should know about this tax:

  • Tax Rate.  The Additional Medicare Tax rate is 0.9 percent.
  • Income Subject to Tax.  The tax applies to the amount of certain income that is more than a threshold amount. The types of income include your Medicare wages, self-employment income and railroad retirement (RRTA) compensation. See the instructions for Form 8959, Additional Medicare Tax, for more on these rules.
  • Threshold Amount.  You base your threshold amount on your filing status. If you are married and file a joint return, you must combine your spouse’s wages, compensation or self-employment income with yours. Use the combined total to determine if your income exceeds your threshold. The threshold amounts are:
Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household $200,000
Qualifying widow(er) with dependent child $200,000
  • Withholding/Estimated Tax. Employers must withhold this tax from your wages or compensation when they pay you more than $200,000 in a calendar year. If you are self-employed you should include this tax when you figure your estimated tax liability.
  • Underpayment of Estimated Tax.  If you had too little tax withheld, or did not pay enough estimated tax, you may owe an estimated tax penalty. For more on this, see Publication 505, Tax Withholding and Estimated Tax.

If you owe this tax, file Form 8959, with your tax return. You also report any Additional Medicare Tax withheld by your employer on Form 8959.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

02/25/16

Here’s What You Need to Do with Your Form 1095-C

This year, you may receive one or more forms that provide information about your 2015 health coverage.  These forms are 1095-A, 1095-B and 1095-C. This tip is part of a series that answers your questions about these forms.

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance, provides you with information about the health coverage offered by your employer.  In some cases, it may also provide information about whether you enrolled in this coverage.

Here are the answers to questions you’re asking about Form 1095-C:

Will I get a Form 1095-C?

  • You will receive a Form 1095-C – which is a new form this year – if you were a full time employee working for an applicable large employer last year. An applicable larger employer is generally an employer with 50 or more full-time employees, including full-time equivalent employees.
  • Even if you were not a full time employee, you will receive form 1095-C if your employer offered self-insured coverage and you or a family member enrolled in that coverage.
  • You might get more than one Form 1095-C if you worked for more than one applicable large employer last year.

How do I use the information on my Form 1095-C?

  • This form provides you with information about the health coverage offered by your employer and, in some cases, about whether you enrolled in this coverage.
  • If you enrolled in a health plan through the Marketplace, the information in Part II of Form 1095-C could help determine if you’re eligible for the premium tax credit. If you did not enroll in a health plan through the Marketplace, this information is not relevant to you.
  • If there is information in Part III of Form 1095-C, review this information to determine if there are months when you or your family members did not have coverage. If there are months you did not have coverage, you should determine if you qualify for an exemption from the requirement to have coverage. If not, you must make an individual shared responsibility payment.
  • You are not required to file a tax return solely because you received a Form 1095-C if you are otherwise not required to file a tax return.
  • Do not attach Form 1095-C to your tax return – keep it with your tax records.

What if I don’t get my Form 1095-C?

  • You might not receive a Form 1095-C by the time you are ready to file your 2015 tax return, and it is not necessary to wait for it to file.
  • The information on these forms may assist in preparing a return.  However, you can prepare and file your return using other information about your health insurance.
  • The IRS does not issue and cannot provide you with your Form 1095-C. For questions about your Form 1095-C, contact your employer. See line 10 of Form 1095-C for a contact number.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

02/22/16

IRS Releases Dirty Dozen Scam List: Don’t be a Victim

IRS Special Edition Tax Tip 2016-03

Each year, people fall prey to tax scams. That’s why the IRS sends a list of its annual “Dirty Dozen.” Stay safe and be informed – don’t become a victim.

 

If you get involved in illegal tax scams, you can lose money or face stiff penalties, interest and even criminal prosecution. Remember, if it sounds too good to be true, it probably is. Be on the lookout for these scams:
Identity theft.Identity theft, especially around tax time, is at the top of the “Dirty Dozen” list again this year. The IRS continues to aggressively pursue criminals who file fraudulent returns using someone else’s Social Security number. The IRS is making progress on this front. Remain vigilant to avoid becoming a victim.

Telephone scams. Threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRShas seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.

Phishing. Phishing scams typically use unsolicited emails or fake websites that appear legitimate but are attempting to steal your personal information. The IRS will not send you an email about a bill or tax refund out of the blue. Don’t click on strange emails and websites that may be scams to steal your personal information.

 

Return Preparer Fraud.
About 60 percent of taxpayers use tax professionals to prepare their returns. While most tax professionals provide honest, high-quality service, there are some dishonest ones who set up shop each filing season to perpetrate refund fraud, identity theft and other scams. Be on the lookout for unscrupulous tax return preparers. Choose your preparer wisely.

Offshore Tax Avoidance.
Hiding money and income offshore is a bad bet. If you have money in offshore banks, it’s best to contact the IRS to get your taxes in order.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

02/18/16

Change Your Name?  It Can Affect Your Taxes

A name change can have an impact on your taxes. All the names on your tax return must match Social Security Administration records. A name mismatch can delay your refund. Here’s what you should know if you changed your name:

  • Report Name Changes.  Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.
  • Make Dependent’s Name Change.  Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed.

If you adopted a child who does not have a Social Security number, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. You can visit IRS.gov to view, download, print or order the form at any time.

  • Get a New Card.  File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form on SSA.gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.
  • Report Changes in Circumstances when they happen. If you enrolled in health insurance coverage through the Health Insurance Marketplace you may receive the benefit of advance payments of the premium tax credit. These are paid directly to your insurance company to lower your monthly premium. Report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace when they happen throughout the year. Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

02/12/16

Scam Calls and Emails Using IRS as Bait Persist

Scams using the IRS as a lure continue. They take many different forms. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too.

Be wary if you get an out-of-the-blue phone call or automated message from someone who claims to be from the IRS. Sometimes they say you owe money and must pay right away. Other times they say you are owed a refund and ask for your bank account information over the phone. Don’t fall for it. Here are several tips that will help you avoid becoming a scam victim.

The real IRS will NOT:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand tax payment and not allow you to question or appeal the amount you owe.
  • Require that you pay your taxes a certain way. For example, demand that you pay with a prepaid debit card.
  • Ask for your credit or debit card numbers over the phone.
  • Threaten to bring in local police or other agencies to arrest you without paying.
  • Threaten you with a lawsuit.

If you don’t owe taxes or have no reason to think that you do:

  • Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your report.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

02/08/16

Ten Key Tax Tips for Farmers and Ranchers

Farms include ranches, ranges and orchards. While some may raise cattle, poultry or fish and others grow fruits or vegetables, all will report their farm income on Schedule F, Profit or Loss from Farming. If you own a farm or ranch, here are 10 tax tips:

1.  Crop insurance.  Insurance payments from crop damage count as income. Generally, you should report these payments in the year you get them.

2. Sale of items purchased for resale.  If you sold livestock or items that you bought for resale, you must report the sale. Your profit or loss is the difference between your selling price and your basis in the item. Basis is usually the cost of the item. Your cost may also include other expenses such as sales tax and freight.

3. Weather-related sales.  Bad weather such as a drought or flood may force you to sell more livestock than you normally would in a year. If so, you may defer tax on the gain from the sale of the extra animals.

4. Farm expenses.  Farmers can deduct ordinary and necessary expenses they paid for their business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense means a cost that is proper for that business.

5. Employee wages.  You can deduct wages you paid to your farm’s full- and part-time workers. You must withhold Social Security, Medicare and income taxes from their wages.

6. Loan repayment. You can only deduct the interest you paid on a loan if the loan is used for your farming business. You can’t deduct interest you paid on a personal loan.

7. Net operating losses.  If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid in prior years. You may also be able to lower your tax in future years.

8. Farm income averaging.  You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may cut your taxes if your farm income is high in the current year and low in the prior three years.

9. Tax credit or refund.  You may be able to claim a tax credit or refund of excise taxes you paid on fuel used on your farm for farming purposes.

10. Farmers Tax Guide.  For more details on this topic see Publication 225, Farmer’s Tax Guide. You can get it on IRS.gov/forms anytime. You can order it on IRS.gov/orderforms to have it mailed to you.

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel Boulder

 

 

02/05/16

Ways to Pay Your Tax Bill

If you owe federal tax, the IRS offers many easy ways to pay. Make sure you pay by the April 18 deadline, even if you get an extension of time to file your 2015 tax return. You can get an automatic extension of time to file when you make an electronic payment by April 18. Here are some of the ways to pay your tax:

  • Use Direct Pay.  IRS Direct Pay offers taxpayers a free, secure and easy way to pay. You can schedule a payment in advance to pay your tax directly from your checking or savings account. You don’t need to register, write a check or find a mailbox. Direct Pay gives you instant confirmation after you make a payment.
  • Pay by Debit or Credit Card.  Choose a payment processor  to make a tax payment online, by phone or by mobile device. It’s safe and secure. The payment processor will charge a processing fee. The fees vary by service provider and may be tax deductible. No part of the fee goes to the IRS.
  • Use IRS2Go. IRS2Go is a free app that you can use to make a payment with Direct Pay and by debit or credit card. Simply download IRS2Go from Google Play, the Apple App Store or Amazon.
  • Pay When You E-file. If you file your federal tax return electronically, you can schedule a payment at the time that you file. You can pay directly from your bank account using Electronic Funds Withdrawal.  You choose the date and amount of the payment, and as long as it is on or before April 18, it will be on time. Some software that you use to e-file also allows you to pay by debit or credit card with a processing fee.
  • Choose Other Options to Pay. The IRS offers other ways to pay:
    • Use the Electronic Federal Tax Payment System to pay your taxes online or by phone. This free system provides security, ease and accuracy. To enroll or for more information, call 888-555-4477 or visit EFTPS.gov.
    • Pay by Check or Money Order. Make the check, money order or cashier’s check payable to the U.S. Treasury. Do not staple, clip or attach your payment to the tax form. Include your name, address, daytime phone number and Social Security number or Employer Identification Number on the front of the payment. Use the SSN shown first if it’s a joint return. Also include the tax year and related tax form or notice number. Do not send cash through the mail.
  • Can’t Pay Now?  If you are unable to pay in full, you have options:
    • Apply for an online payment agreement to pay your tax liability over time. Use the IRS.gov tool to set up a direct debit installment agreement. With a direct debit plan there is no need to write a check and mail it each month.
    • Owe more than you can afford? An offer in compromise may allow you to settle for less than the full amount you owe. It may be an option for you if you can’t pay your full tax liability. It may also be an option if paying in full creates a financial hardship. Not everyone qualifies. Use the Offer in Compromise Pre-Qualifiertool to see if you are eligible for an OIC.

In short, remember to pay your tax bill on time. If you are suffering a financial hardship, the IRS is willing to work with you.

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.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot  Gunbarrel

 

02/02/16

Ten Great Ways to Use IRS.gov

No matter when you need tax help or information, start by visiting IRS.gov. A variety of tools and services are only a click away on our website. Here are ten great ways to use IRS.gov:

1. Get Answers to Your Tax Questions. The Interactive Tax Assistant covers many common tax topics. Type in your question or search terms, and it can lead you step-by-step to the answer. Or, try the IRS Tax Map. It gives you a list of tax law subjects to review. It combines tax topics, forms, instructions and publications into one research tool.

2. Get Forms and Publications. View, download and print federal tax forms and publications anytime. Approximately 100 IRS publications will be available for download in ePub format this year.

3. Use IRS Free File. If you need to file your tax return, you can file a federal tax return for free using IRS Free File. If you earned $62,000 or less, you can prepare and e-file your taxes using free brand-name tax software. If you e-file your tax return, you don’t need to prepare or mail any paper forms to the IRS.

4. Get Information on the Affordable Care Act. Find out how to:

  • Report health care coverage.
  • Claim an exemption from the coverage requirement.
  • Make an individual shared responsibility payment.
  • Claim the premium tax credit.
  • Reconcile advance payments of the premium tax credit.

Use the Interactive Tax Assistant tool to determine if you qualify for an exemption from the coverage requirement or need to make an individual shared responsibility payment.

5. Check on Your Refund. The Where’s My Refund? tool is a fast and easy way to check on your tax refund. Use the IRS2Go mobile app to access the tool, or click on the ‘Refunds’ tab on IRS.gov.

6. Use IRS Direct Pay. If you owe taxes, pay with IRS Direct Pay. It’s a safe, easy and free way to pay from your checking or savings account. Go toIRS.gov/directpay to pay your federal tax bill.

7. Apply for an IRS Payment Plan. If you can’t pay all your taxes at once, apply for an IRS Online Payment Agreement.

8. Check Out a Charity. You must donate to a qualified charity if you want to deduct the donation on your tax return. Use the IRS EO Select Check tool to see if a charity is qualified.

9. Calculate your Tax Withholding. If you get a larger refund or owe more taxes than expected, you may want to change your tax withholding. Use the IRS Withholding Calculator tool to help you figure it out.

10.  Get a Transcript. The quickest way to get a copy of your tax transcript is to use the Get Transcript tool on IRS.gov. You should receive your transcript in the mail within five to 10 days from the time the IRS receives your request online. Plan ahead to ensure you have it when you need it.

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.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

02/01/16

Choosing the Correct Filing Status

It’s important to use the right filing status when you file your tax return. The status you choose can affect the amount of tax you owe for the year. It may even determine if you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole year. Sometimes more than one filing status may apply to you. If that happens, choose the one that allows you to pay the least amount of tax.

IRS e-file is the easiest and most accurate way to file your tax return. Tax software helps you choose the right filing status. Most people can use tax software and e-file for free with IRS Free File. This free service is only available on the IRS website. Visit IRS.gov and click “Free File” on the home page.

Here’s a list of the five filing statuses:

1. Single. This status normally applies if you aren’t married. It applies if you are divorced or legally separated under state law.

2. Married Filing Jointly. If you’re married, you and your spouse can file a joint tax return. If your spouse died in 2015, you can often file a joint return for that year.

3. Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax owed than if you file a joint tax return. You may want to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.

4. Head of Household. In most cases, this status applies if you are not married, but there are some special rules. For example, you must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules.

5. Qualifying Widow(er) with Dependent Child. This status may apply to you if your spouse died during 2013 or 2014 and you have a dependent child. Other conditions also apply.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

01/29/16

Six Tips about Individual Shared Responsibility Payments

For any month during the year that you or any of your family members don’t have minimum essential coverage and don’t qualify for a coverage exemption, you are required to make an individual shared responsibility payment when you file your tax return.

 

Here are six things to know about this payment:  

  • You are not required to make a payment if you had coverage or qualify for an exemption for each month of the year.

  • If you did not have coverage and your income was below the tax filing threshold for your filing status, you qualify for a coverage exemptionand you should not make a payment.

  • If you are not a U.S. citizen or national, and are not lawfully present in the United States, you are exempt from the individual shared responsibility provision and do not need to make a payment. For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present and therefore is exempt.  You may qualify for this exemption even if you have a social security number.

  • If you are responsible for the individual shared responsibility payment, you should pay it with your tax return or in response to a letter from the IRS requesting payment. You should not make the payment directly to any individual or return preparer.

  • The amount due is reported on Form 1040 in the Other Taxes section, and in the corresponding sections of Form 1040A and 1040EZ. You only make a payment for the months you or your dependents did not have coverage or qualify for a coverage exemption.

In most cases, the shared responsibility payment reduces your refund. If you are not claiming a refund, the payment will increase the amount you owe on your tax return.

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

01/26/16

Choose Your Tax Preparer Wisely

If someone helps you do your taxes, you’re not alone. The IRS asks you to choose your tax return preparer wisely – for good reason. You are responsible for the information on your income tax return. That’s true no matter who prepares your return. Here are ten tips to keep in mind when choosing a tax preparer:

1. Check the Preparer’s Qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on IRS.gov. This tool can help you find a tax return preparer with the qualifications that you prefer. The Directory is a searchable and sortable listing of certain preparers registered with the IRS. It includes the name, city, state and zip code of:

  • Attorneys.
  • CPAs.
  • Enrolled Agents.
  • Enrolled Retirement Plan Agents.
  • Enrolled Actuaries.
  • Annual Filing Season Program participants.

Attorneys, CPAs and enrolled agents can represent any client before the IRS in any situation. However, new rules apply to the rights of non-credentialed tax preparers to represent their clients before the IRS. Non-credentialed preparers without an Annual Filing Season Program – Record of Completion – may only prepare tax returns. The new rules do not allow them to represent clients before the IRS on any returns prepared and filed after December 31, 2015. Annual Filing Season Program participants can represent clients in limited situations. For more, visit IRS.gov and see the Understanding Tax Return Preparer Credentials and Qualifications page.

2. Check the Preparer’s History. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.

3. Ask about Service Fees. Avoid preparers who base fees on a percentage of their client’s refund. Also avoid those who boast bigger refunds than their competition. Make sure that your refund goes directly to you – not into your preparer’s bank account.

4. Ask to E-file Your Return. Make sure your preparer offers IRS e-file. Paid preparers who do taxes for more than 10 clients generally must file electronically. The IRS has safely processed more than 1.5 billion e-filed tax returns.

5. Make Sure the Preparer is Available. You may want to contact your preparer after this year’s April 18 due date. Avoid fly-by-night preparers.

6. Provide Records and Receipts. Good preparers will ask to see your records and receipts. They’ll ask questions to figure your total income, tax deductions, credits, etc. Do not use a preparer who will e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

7. Never Sign a Blank Return. Don’t use a tax preparer that asks you to sign a blank tax form.

8. Review Your Return Before Signing. Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.

9. Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number, or PTIN. By law, paid preparers must sign returns and include their PTIN. Be sure you get a copy of your return.

10. Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients; however, some preparers are dishonest. Report abusive tax preparers and suspected tax fraud to the IRS. UseForm 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms on IRS.gov at any time.

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

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

01/25/16

Tax Tips will start this week

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

2/4/15

Ten Great Reasons to Visit IRS.gov

No matter when you need tax help or information, your best option is to visit IRS.gov. Our website has many tools and services, which make getting help from the IRS just a click away. Here are ten great reasons to visit IRS.gov, night or day:

1. Use IRS Free File.  If you need to file your tax return, you can e-file for free by using IRS Free File. If you earned $60,000 or less you can prepare and e-file your taxes using free brand name tax software. If you made more, you can use Free File Fillable Forms. This option is the electronic version of IRS paper forms.

2. Get answers to tax questions.  The Interactive Tax Assistant covers many common tax topics. Type in your question or search terms and it can lead you step-by-step to the answer. The IRS Tax Map gives you a list of tax law subjects to select. It integrates tax topics, forms, instructions and publications into one research tool.

3. Get health care tax information.  IRS.gov has information about the Affordable Care Act at IRS.gov/aca. You can visit this site for details on how the health care law affects your taxes. For example, the pages provide information about:

• Reporting health insurance coverage.

• Claiming an exemption from the coverage requirement.

• Making an individual shared responsibility payment.

• Claiming the premium tax credit.

• Reconciling advance payments of the premium tax credit.

You can also use the Interactive Tax Assistant tool for help on how some of these laws apply to your situation.

4. Check out a charity.  You must donate to a qualified charity if you want to deduct the donation on your tax return. Use the IRS Select Check toolto see if a charity is qualified.

5. Check on your refund.  The Where’s My Refund? tool is a fast and easy way to check on your tax refund. Use the IRS2Go mobile app to access the tool, or click on the ‘Refunds’ tab on IRS.gov.

6. Try IRS Direct Pay.  If you owe taxes, pay with IRS Direct Pay. It’s a safe, easy and free way to pay from your checking or savings account. Go toIRS.gov/directpay to pay your federal tax bill.

7. Apply for an IRS payment plan.  If you can’t pay all your taxes at once, apply for an IRS Online Payment Agreement. A direct debit payment plan is a great way to pay. It has a lower set-up fee, you won’t miss a payment and you won’t get an IRS reminder to send a check each month.

8. Get forms and publications.  View, download and print federal tax forms and publications anytime.

9. Calculate your tax withholding.  If you get a larger refund or owe more taxes than you expect when you file your tax return, you may need to change your tax withholding. You can complete and give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. Use theIRS Withholding Calculator tool to help you fill out a new form.

10. Get a tax transcript.  If you apply for a loan or student financial aid, you may need a tax transcript. Visit IRS.gov and use the Get Transcript tool.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

2/4/15

How to Get What You Need to do Your Taxes

It’s easier than ever to get what you need from the IRS. Here are the best ways to get the services and products you need to do your taxes:

  • E-file your return.  The best way to file is joining with nearly 126 million taxpayers who used IRS e-file last year. E-file is the safe, accurate and easier way to file your tax return. If you use IRS Free File, you can prepare and file your taxes for free. Free File is only available on IRS.gov. Go toIRS.gov/filing and review your options.
  • Use IRS.gov.  Get what you need 24 hours a day 7 days a week on IRS.gov. Click on the “Tools” link on the home page for a number of online tools. You can get answers to your tax questions with theInteractive Tax Assistant and the IRS Tax Map. Use ‘Where’s My Refund?’ to check the status of your refund. Use the EITC Assistant to see if you’re eligible for the Earned Income Tax Credit. To view and download tax products, click on the ‘Forms and Pubs’ tab on the home page. You can often view, download or print the many tax products that appear online before paper versions are available.
  • Get tax products online.  If you e-file your tax return, you don’t need to prepare or mail any paper forms to the IRS. If you still need paper forms or publications you can visit IRS.gov to view, download or print what you need right away. As an alternative, you can go to IRS.gov/orderformsand place an order. If you can’t order online, you can call the IRS at 800-829-3676 to place an order.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

2/3/15

If You Work, The Earned Income Tax Credit Can Work For You!

Since 1975, the Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break each year. Four out of five eligible workers claim EITC, but the IRS wants everyone who is eligible to claim this credit. Here are some things you should know about this valuable credit:

  • Review your eligibility.  If you worked and earned under $52,427, you may qualify for EITC. If your financial or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. If you qualify for EITC you must file a federal income tax return and claim the credit to get it. This is true even if you are not otherwise required to file a tax return. Don’t guess about your EITC eligibility. Use the EITC Assistant tool on IRS.gov. The tool helps you find out if you qualify and estimates the amount of your EITC.
  • Know the rules.  You need to understand the rules before you claim the EITC, to be sure you qualify. It’s important that you get this right. Here are some factors you should consider:

o Your filing status can’t be Married Filing Separately.

o You must have a Social Security number that is valid for employment for yourself, your spouse if married, and any qualifying child listed on your tax return.

o You must have earned income. Earned income includes earnings from working for someone else or working for yourself.

o You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules. If you have a child who lived with you for more than six months of 2014, the child must meet age, residency, relationship and the joint return rules to qualify.

o If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

  • Lower your tax or get a refund.  The EITC reduces your federal tax and could result in a refund. If you qualify, the credit could be worth up to $6,143. The average credit was $2,407 last year.
  • Use free services.  If you do your own taxes, the best way to file your return to claim EITC is to use IRS Free File. Free brand-name software will figure your taxes and EITC for you. Combining e-file with direct deposit is the fastest and safest way to get your refund. Free File is available exclusively on IRS.gov/freefile. Free help preparing and e-filing your return to claim your EITC is also available at thousands of Volunteer Income Tax Assistance sites around the country. You can also get help with the new health care law tax provisions.

For more information, see IRS Publication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Videos:

  • Earned Income Tax Credit – 2015English | ASL
  • Earned Income Tax Credit – 2015Spanish

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

2/2/15

Choose the Right Filing Status

It’s important that you use the correct filing status when you file your tax return. Your status can affect the amount of tax you owe for the year. It may even affect whether you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole tax year. Sometimes more than one filing status may apply to you. If that happens, choose the one that allows you to pay the lowest tax.

IRS e-file is the easiest and most accurate way to file your tax return. The tax software you use to e-file helps you choose the right filing status. Remember, most people can use tax software and e-file for free with IRS Free File. The free service is only available through the IRS.gov website. Just click on “Free File” on the IRS.gov home page.

Here’s a list of the five filing statuses:

1. Single.  This status normally applies if you aren’t married. It applies if you are divorced or legally separated under state law.

2. Married Filing Jointly.  If you’re married, you and your spouse can file a joint tax return together. If your spouse died in 2014, you often can file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax than if you file a joint tax return. It’s a good idea for you to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  In most cases, this status applies if you are not married, but there are some special rules. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  This status may apply to you if your spouse died during 2012 or 2013 and you have a dependent child. Certain other conditions also apply.

Note for same-sex married couples. In most cases, you and your spouse must use a married filing status on your federal tax return if you were legally married in a state or foreign country that recognizes same-sex marriage. That’s true even if you now live in a state that doesn’t recognize same-sex marriage. Visit IRS.gov for more information.

Visit IRS.gov and click on the “Filing” tab for help with all your federal income tax filing needs. Use the Interactive Tax Assistant tool to help you choose the right filing status. For more on this topic see Publication 501, Exemptions, Standard Deduction, and Filing Information. Go to IRS.gov/forms to view, download or print the tax products you need.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

  • First Time Filing a Tax Return?Spanish
  • Tax Information About Same-Sex MarriageEnglish | Spanish
  • Interactive Tax AssistantEnglish

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

2/1/15

he Health Care Law’s Effect on Your Tax Return

The Affordable Care Act contains tax provisions that affect the 2014 income tax return you file this year. Almost everyone is affected by the individual shared responsibility provision while only people who purchased coverage through the Marketplace are affected by the premium tax credit. The following chart will help you better understand what you need to do on your tax return. This chart is also available on IRS.gov/aca.

To help navigate these changes, taxpayers and their tax professionals should consider filing returns electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRSFree File for taxpayers who qualify, commercial software, and professional assistance

IF YOU…

THEN YOU…

And everyone in your tax household had health coverage for the entire year

Will simply check the box on line 61 of Form 1040,  line 38 of Form 1040-A, or line 11 of Form 1040-EZ

Enrolled in health insurance through the Marketplace

Should receive a Form 1095-AHealth Insurance Marketplace Statement from the Marketplace

Received a Form 1095-A, Health Insurance Marketplace Statement,showing you received the benefit of advance payments of the premium tax credit in 2014

Must file a tax return in 2015 and reconcile the advance payments with the amount of the premium tax credit allowed on your return.
Need to reconcile the advance payments of the credit with the credit allowed Make the calculations using IRSForm 8962 Premium Tax Credit (PTC)
Must repay any excess advance payments of the premium tax credit Must report the information on line 46 Form 1040 or line 29 of Form1040-A, and cannot file Form 1040-EZ
Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit  Must file a tax return and IRSForm 8962, Premium Tax Credit (PTC)
 Did not receive a Form 1095-A,Healthcare Insurance Marketplace Statement,from the Marketplace  Should contact the state or federalMarketplace through which you enrolled
Are claiming an exemption from the requirement to have health coverage for anyone on your tax return  Will complete Form 8965, Health Coverage Exemptions,and submit it with your tax return
Still need to obtain a religious conscience exemption or a hardship exemption that can only be granted by the Marketplace Should file an application with theMarketplace and follow the instructions below about how to report exemptions from the Marketplace on your tax return
Obtained an exemption from the Marketplace, and received your unique Exemption Certificate Number Will enter the Exemption Certificate Number in Part I of Form 8965,Health Coverage Exemptions, and submit the form with your return
Applied for an exemption from the Marketplace, but do not currently have an Exemption Certificate Number Will enter ‘PENDING’ in  Part I ofForm 8965 Health Coverage Exemptions, and submit the form with your return
Are claiming an exemption that can be granted only from the IRS Will not need an Exemption Certificate Number, but will complete Parts II and III of Form 8965, Health Coverage Exemptions, and submit the form with your return
Are able to obtain the exemption from either the IRS or the Marketplace

Should obtain the exemption from the RS by completing Part II and III of Form 8965,Health Coverage Exemptions, and attach this form to your federal tax return when you file

Are making a shared responsibility payment because you did not have health coverage or qualify for an exemption for any month in 2014

Will enter the payment amount on line 61 of Form 1040, line 38 of Form 1040-A, or line 11 of Form 1040-EZ

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/30/15

Ten IRS Tips about Free Tax Preparation

Each year, millions of people have their taxes prepared for free. The IRS’s Volunteer Income Tax Assistance or and Tax Counseling for the Elderly programs have helped people for more than 40 years. Many people know these programs by their initials. Here are 10 tips from the IRS about VITA and TCE:

1. Trained and Certified.  The IRS works with local community groups to train and certify VITA and TCE volunteers.

2. VITA Program.  VITA generally offers free tax return preparation to people who earn $53,000 or less.

3. TCE Program.  TCE is mainly for people age 60 or older. The program specializes in tax issues unique to seniors. AARP participates in the TCE program and helps people with low to moderate incomes.

4. Free E-file.  VITA and TCE provide free electronic filing. E-filing is the safest, most accurate way to file your tax return. Combining e-file with direct deposit is the fastest way to get your refund.

5. Tax Benefits.  Using VITA and TCE can help you get all the tax benefits for which you are eligible. For example, you may qualify for the Earned Income Tax Credit or the Credit for the Elderly. You can also get help with the new Health Care Law tax provisions.

6. Bilingual Help.  Some VITA and TCE sites provide bilingual help for people who speak limited English.

7. Help for Military.  VITA offers free tax assistance to members of the military and their families. Volunteers help with many military tax issues. These may include the special rules and tax benefits that apply to those serving in combat zones.

8. “Self-Prep” Option.  At some VITA sites, you can prepare your own federal and state tax returns using free web-based software. This is an option if you don’t have a home computer or need much help. Volunteers are on site to guide you if you need help. In most cases, this option offers free tax return preparation software and e-filing to people who earn $60,000 or less.

9. Local Sites.  The IRS partners with community organizations to offer free tax services at thousands of sites around the nation. Sites start to open in late January and early February.

10. Visit IRS.gov.  You can visit IRS.gov to find a VITA site near you. Search the word “VITA” and click on “Free Tax Return Preparation for You by Volunteers.” Site information is also available by calling the IRS at 800-906-9887. To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/29/15

Top 10 Tax Facts about Exemptions and Dependents

Nearly everyone can claim an exemption on their tax return. It usually lowers your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions to help you file your tax return.

1. E-file your tax return.  Filing electronically is the easiest way to file a complete and accurate tax return. The software that you use to e-file will help you determine the number of exemptions that you can claim. E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

2. Exemptions cut income.  There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $3,950 for each exemption you claim on your 2014 tax return.

3. Personal exemptions.  You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. If you file a separate return, you can claim an exemption for your spouse only if your spouse:

• had no gross income,

• is not filing a tax return, and

• was not the dependent of another taxpayer.

4. Exemptions for dependents.  You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. You can get Publication 501 on IRS.gov. Just click on the “Forms & Pubs” tab on the home page.

5. Report health care coverage. The health care law requires you to report certain health insurance information for you and your family. Theindividual shared responsibility provision requires you and each member of your family to either:

• Have qualifying health insurance, called minimum essential coverage, or

• Have an exemption from this coverage requirement, or

• Make a shared responsibility payment when you file your 2014 tax return.

Visit IRS.gov/ACA for more on these rules.

6. Some people don’t qualify.  You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

7. Dependents may have to file.  A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like the amount of their income, whether they are married and if they owe certain taxes.

8. No exemption on dependent’s return.  If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person on your tax return. This rule applies because you can claim that person is your dependent.

9. Exemption phase-out.  The $3,950 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income. See Publication 501 for details.

10. Try the IRS online tool.  Use the Interactive Tax Assistant tool on IRS.gov to see if a person qualifies as your dependent.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

IRS YouTube Videos:

  • Welcome to Free FileEnglish
  • First Time Filing a Tax Return?English
  • Interactive Tax AssistantEnglish| ASL

IRS Podcast:

  • First Time Filing a Tax Return?Spanish

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/29/15

The Individual Shared Responsibility Provision brings changes to 2014 Income Tax Returns

When filing your 2014 federal income tax return, you will notice some changes related to the individual shared responsibility provision of the Affordable Care Act.

The individual shared responsibility provision in the Affordable Care Act calls for you to have qualifying health care coverage for each month of the year, qualify for a health coverage exemption, or make an Individual Shared ResponsibilityPayment when filing your federal income tax return. Individuals are responsible for themselves and anyone they can claim as a dependent.  Taxpayers who have coverage for the entire year will simply check a box on their tax return and won’t need to do anything else when they file.

However, if you don’t have qualifying health care coverage and you meet certain criteria, you might be eligible for an exemption from coverage. Most exemptions are available on your tax return, but some must be claimed through the Marketplace. If you or any of your dependents are exempt from the requirement to have health coverage, you will complete the new IRS Form 8965,Health Coverage Exemptions and submit it with your tax return.

If you could have afforded coverage for yourself or any of your dependents but chose not to get it and you do not qualify for an exemption, you must make a payment called the individual shared responsibility payment. You calculate the shared responsibility payment using a worksheet included in the instructions for Form 8965 and enter your payment amount on your tax return.

Whether you are simply checking the box on your tax return to indicate that you had coverage in 2014, claiming a health coverage exemption, or making an individual shared responsibility payment, you or your tax professional can prepare and file your tax return electronically.  Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. Electronic filing options include IRS Free File for taxpayers who qualify, freevolunteer assistance, commercial software, and professional assistance.

For more information about the Affordable Care Act and filing your 2014 income tax return, visit IRS.gov/aca.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/28/15

 

Ten IRS Tips to Help You Choose a Tax Preparer

Many people pay to have their taxes prepared. You need to be careful when you pick a preparer to do your taxes. You are legally responsible for all the information on the tax return even if someone else prepares it. Here are 10 IRS tax tips to help you choose a tax preparer:

1. Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. The IRS will soon offer a new Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on IRS.gov. You will be able to use this tool to help you find a tax return preparer with the qualifications that you prefer. The Directory will be a searchable and sortable listing of certain preparers with a valid PTIN for 2015. It will include the name, city, state and zip code of:

  • Attorneys.
  • CPAs.
  • Enrolled Agents.
  • Enrolled Retirement Plan Agents.
  • Enrolled Actuaries.
  • Annual Filing Season Program participants.

2. Check the preparer’s history.  You can check with the Better Business Bureau to find out if a preparer has a questionable history. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status.

3. Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. You should not have your refund deposited into a preparer’s bank account.

4. Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns generally must e-file their clients’ returns. The IRS has safely processed more than 1.3 billion e-filed tax returns.

5. Make sure the preparer is available.  You need to ensure that you can contact the tax preparer after you file your return. That’s true even after the April 15 due date. You may need to contact the preparer if questions come up about your tax return at a later time.

6. Provide tax records.  A good preparer will ask to see your records and receipts. They ask you questions to report your total income and the tax benefits you’re entitled to claim. These may include tax deductions, tax credits and other items. Do not use a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

7. Never sign a blank tax return.  Do not use a tax preparer who asks you to sign a blank tax form.

8. Review your return before signing.  Before you sign your tax return, review it thoroughly. Ask questions if something is not clear to you. Make sure you’re comfortable with the information on the return before you sign it.

9. Preparer must sign and include their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS.  You can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can download and print these forms on IRS.gov. If you need a paper form by mail go toIRS.gov/orderforms to place an order.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

1/27/15

Premium Tax Credit Brings Changes to Your 2014 Income Tax Returns

When filing your 2014 federal income tax return, you will see some changes related to the Affordable Care Act. Millions of people who purchased their coverage through a health insurance Marketplace are eligible for premium assistance through the new premium tax credit, which individuals chose to either have paid upfront to their insurers to lower their monthly premiums, or receive when they file their taxes. When you bought your insurance, if you chose to have advance payments of the premium tax credit, the Marketplace estimated the amount based on information you provided about your expected household income and family size for the year.

If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return.  You will use IRS Form 8962,Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.

If you purchased your coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace. You should receive this form by early February.

Form 1095-A will provide the information you need to file your taxes, including the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.

Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. Electronic filing options include IRS Free File for taxpayers who qualify, free volunteer assistance, commercial software, andprofessional assistance.

For more information about the Affordable Care Act and filing your 2014 income tax return, visit IRS.gov/aca.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

1/26/15

Use the Tax Form That’s Right for You

This tax filing season, get things off to a good start. Make it easy on yourself and let the software you use to e-file select the right form for you. Filing electronically is the easiest way to file a complete and accurate return. The software asks questions that guide you, minimizes errors and helps you get the tax credits and deductions that you are entitled to claim. Brand-name software’s also free when you use IRS Free File on IRS.gov.

If you do file a paper return, here are some tips to help you use the right forms.

You can generally use the 1040EZ if:

  • Your taxable income is below $100,000;
  • Your filing status is single or married filing jointly;
  • You don’t claim dependents; and
  • Your interest income is $1,500 or less.

Note: You can’t use Form 1040EZ to claim the new Premium Tax Credit. You also can’t use this form if you received advance payments of this credit in 2014.

The 1040A may be best for you if:

  • Your taxable income is below $100,000;
  • You have capital gain distributions;
  • You claim certain tax credits; and
  • You claim adjustments to income for IRA contributions and student loan interest.

You must use the 1040 if:

  • Your taxable income is $100,000 or more;
  • You claim itemized deductions;
  • You report self-employment income; or
  • You report income from sale of a property.

Remember, if you e-file your tax return you don’t need any paper forms to mail to the IRS. Go to IRS.gov and click on the ‘IRS e-file’ icon to review your options. If you still need a paper form you can visit IRS.gov/Forms to view, download or print what you need right away.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

IRS YouTube Videos:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/23/15

Six Tips on Who Should File a 2014 Tax Return

Most people file their tax return because they have to, but even if you don’t, there are times when you should. You may be eligible for a tax refund and not know it. This year, there are a few new rules for some who must file. Here are six tax tips to help you find out if you should file a tax return:

1. General Filing Rules.  Whether you need to file a tax return depends on a few factors. In most cases, the amount of your income, your filing status and your age determine if you must file a tax return. For example, if you’re single and 28 years old you must file if your income was at least $10,150. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. Go to IRS.gov/filing to find out if you need to file.

2. New for 2014: Premium Tax Credit.  If you bought health insurance through the Health Insurance Marketplace in 2014, you may be eligible for the new Premium Tax Credit. You will need to file a return to claim the credit. If you purchased coverage from the Marketplace in 2014 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year you must file a federal tax return. You will reconcile any advance payments with the allowable Premium Tax Credit. Your Marketplace will provide Form 1095-A, Health Insurance Marketplace Statement, to you by Jan. 31, 2015, containing information that will help you file your tax return.

3. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

4. Earned Income Tax Credit.  Did you work and earn less than $52,427 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,143. Use the 2014 EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return to claim it.

5. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.

6. American Opportunity Credit.  The AOTC is available for four years of post secondary education and can be up to $2,500 per eligible student.  You or your dependent must have been a student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. However, you must complete Form 8863, Education Credits, and file a return to claim the credit. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim the credit. Learn more by visiting the IRS’ Education Credits Web page.

The instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. You can also use the Interactive Tax Assistant tool on IRS.gov to see if you need to file. The tool is available 24/7 to answer many tax questions.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/22/15

The Health Care Law – Getting Ready to File Your Tax Return

It’s always a good idea to prepare early to file your federal income tax return.  Certain provisions of the Affordable Care Act – also known as the Health Care Law – will probably affect your federal income tax return when you file this year.

You or your tax professional should consider preparing and filing your tax return electronically.  Using tax preparation software is the easiest way to file a complete and accurate tax return. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify,commercial software, and professional assistance.

Here are five things you should know about the health care law that will help you get ready to file your tax return.

Coverage requirements

The Affordable Care Act requires that you and each member of your family have qualifying health insurance coverage for each month of the year, qualify for an exemption from the coverage requirement, or make an individual shared responsibility payment when filing your federal income tax return.

Reporting requirements

Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required. Qualifying health insurance coverage includes coverage under most, but not all, types of health care coverage plans. Use the chart on IRS.gov/aca to find out if your insurance counts as qualifying coverage.

For a limited group of taxpayers -those who qualify for, or received advance payments of the premium tax credit – the health care law could affect the amount of tax refund or the amount of money they may owe when they file in 2015. Visit IRS.gov/aca to learn more about the premium tax credit.

Exemptions

You may be eligible to claim an exemption from the requirement to have coverage.  If you qualify for an exemption, you will need to complete the new IRS Form 8965, Health Coverage Exemptions, when you file your tax return.   You must apply for some exemptions through the Health Care Insurance Marketplace.  However, most of the exemptions are easily obtained from the IRS when you file your tax return. Some of the exemptions are available from either the Marketplace or the IRS.

If you receive an exemption through the Marketplace, you’ll receive an Exemption Certificate Number to include when you file your taxes. If you have applied for an exemption through the Marketplace and are still waiting for a response, you can put “pending” on your tax return where you would normally put your Exemption Certificate Number.

Individual Shared Responsibility Payment

If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment when you file your return for choosing not to purchase coverage. Examples and information about figuring the payment are available on the IRS Calculating the Payment page.

Premium Tax Credits

If you bought coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. Save this form because it has important information needed to complete your tax return.

If you are expecting to receive Form 1095-A and you do not receive it by early February, contact the Marketplace where you purchased coverage.  Do not contact the IRS because IRS telephone assistors will not have access to this information.

If you benefited from advance payments of the premium tax credit, you must file a federal income tax return. You will need to reconcile those advance payments with the amount of premium tax credit you’re entitled to based on your actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting.  When you file your return, you will use IRS Form 8962, Premium Tax Credit (PTC), to calculate your premium tax credit and reconcile the credit with any advance payments.

For more information about the Affordable Care Act and your 2014 income tax return, visit IRS.gov/aca.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/21/15

Do Your Taxes for Free; Use IRS Free File

Make taxes less taxing this year by using free software offered exclusively through the IRS. Join the 43 million Americans who already have saved by using IRS Free File. You can use name-brand software or fillable forms to prepare and e-file your federal tax return – all for free. Combined with direct deposit, electronic filling is the quickest way to get your refund.

Here are some tips about IRS Free File:

1. Go to IRS.gov/FreeFile.  The only way to use IRS Free File is through the IRS website. Once you choose a Free File company, you’ll go to their website to prepare and e-file your federal tax return.

2. Find tax breaks.  The question and answer format of tax software will help you find tax breaks. This could include tax credits, such as the Earned Income Tax Credit. The software selects the appropriate tax forms and does the calculations for you. Free File can help with the new health care law tax provisions as well.

3. Free for all.  If you made $60,000 or less you can use brand-name software. If you earned more, you can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for people who are used to doing their own taxes.

4. Easy online extensions.  If you can’t finish your tax return by the April 15 deadline, it’s easy to use Free File to ask for a six-month extension. An extension of time to file is not an extension of time to pay. If you owe federal taxes, you need to estimate the amount and pay it with your request to avoid penalties and interest.

The IRS partners with 14 leading tax software companies, the Free File Alliance, to make this service available. Some companies offer free federal and free state returns. Choose your option on IRS.gov/freefile.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

IRS YouTube Video:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

1/20/15

Top Five Reasons to E-file

Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:

1. Accurate and easy.  IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms.

2. Convenient options.  You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file throughIRS Free File, the free tax preparation and e-file program available only on IRS.gov. You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older.

3. Safe and secure.  IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began.

4. Faster refunds.  In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days.

5. Payment flexibility.  If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card. Visit IRS.gov/payments for more information.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

IRS YouTube Videos:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

1/13/15

Health Care Law Brings Changes to IRS Tax Forms

This year, there are some changes to tax forms related to the Affordable Care Act. Along with a few new lines on existing forms, there will also be two new forms that will need to be included with some tax returns. While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2014, there are also new lines on Forms 1040, 1040A, and 1040EZ related to the health care law.

To help navigate these changes, taxpayers and their tax professionals should consider filing their return electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRSFree File for taxpayers who qualify, commercial software, and professional assistance.

Here is information about the new forms and updates to the existing forms:

Form 8965, Health Coverage Exemptions

  • Complete this form to report a Marketplace-granted coverage exemption or claim an IRS-granted coverage exemption on the return.
  • Use the worksheet in the Form 8965 Instructions to calculate the shared responsibility payment.

Form 8962, Premium Tax Credit

  • Complete this form to reconcile advance payments of the premium tax credit, and to claim this credit on the tax return.

Additionally, if individuals purchased coverage through the Health Insurance Marketplace, they should receive Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962.

Form 1040

  • Line 46: Enter advance payments of the premium tax credit that must be repaid
  • Line 61: Report health coverage and enter individual shared responsibility payment
  • Line 69: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040A

  • Line 29: Enter advance payments of the premium tax credit that must be repaid
  • Line 38: Report health coverage and enter individual shared responsibility payment
  • Line 45: If eligible, claim net premium tax credit, which is the excess of allowed premium tax credit over advance credit payments

Form 1040EZ

  • Line 11: Report health coverage and enter individual shared responsibility payment
  • Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit

For more information about the Affordable Care Act and filing your 2014 income tax return visit IRS.gov/aca.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

12/30/14

 New IRS Publication helps you understand the Health Care Law
There is a new publication that will help you learn about how the Affordable Care Act affects your taxes.  IRS Publication 5187, Health Care Law: What’s New for Individuals and Families is now available on IRS.gov/aca. While the health care law has several parts, this publication breaks down what’s new for the 2014 federal tax return you will be filing in 2015.
This new publication provides important information for taxpayers who:
  • Had health insurance coverage for the entire year
  • Did not have health coverage for each month of the year
  • Purchased health insurance from the Marketplace
  • Might be eligible for an exemption from  the coverage requirement
  • Had advance payments of the premium tax credit sent to their insurance provider
  • Is claiming the premium tax credit on their tax return
The publication includes a glossary that will help you understand new terms related to ACA. It also addresses the new lines for reporting ACA information on Forms 1040, 1040-A and 1040-EZ.
Most people have qualifying health coverage, and all they will need to do is simply check a box on their tax return.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

12/29/14

New Law Renews IRA Transfers to Charity for 2014; Owners Must Act by Dec. 31 IRS Special Edition Tax Tip 2014-26


The Tax Increase Prevention Act extends the provision that allows certain IRA owners to make tax free distributions to charity. The extension applies for the 2014 tax year. This means if the law applies to you, the deadline to complete your transactions is Dec. 31. Here are some key points about the extension:

  • If you are an IRA owner age 70½ or older you have until Dec. 31 to make a qualified charitable distribution, or QCD.
  • A QCD is direct transfer of part or all of your IRA distributions to an eligible charity. You may transfer up to $100,000 per year.
  • You may exclude the distributed amounts from your income. You can claim this benefit regardless of whether you itemize your deductions. If you do exclude the QCD from your income, you can’t also deduct it as a charitable contribution on Schedule A if you do itemize.
  • You can count your QCDs in determining whether you meet the IRA’s required minimum distribution.
  • The provision had expired at the end of 2013. The new law is retroactive for 2014. This means any eligible QCD in 2014 will qualify.
  • Not all charities are eligible. For example, donor-advised funds and supporting organizations are not eligible recipients.

Additional IRS Resources:

  • IR-2014-117, Tax-Free Transfers to Charity Renewed For IRA Owners 70½ or Older; Rollovers This Month Can Still Count For 2014

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

12/22/14

Taxpayer Bill of Rights

Every taxpayer has a set of fundamental rights. You should be aware of these rights when you interact with the Internal Revenue Service.

The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 broad categories. That makes them easier to find and to understand.

You can find a list of your rights and the IRS’s obligations to protect them in Publication 1, Your Rights as a Taxpayer. It includes the following:

1. The Right to Be Informed.
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

2. The Right to Quality Service.
Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS and to speak to a supervisor about inadequate service.

3. The Right to Pay No More than the Correct Amount of Tax.
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard.
Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

5. The Right to Appeal an IRS Decision in an Independent Forum.
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

6. The Right to Finality.
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

7. The Right to Privacy.
Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections, and will provide, where applicable, a collection due process hearing.

8. The Right to Confidentiality.
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

9. The Right to Retain Representation.
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System.
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

The IRS is trying to increase the number of Americans who know and understand their rights under the tax law. To expand awareness, the IRS is making Publication 1 available in multiple languages on IRS.gov. This important publication is available in English, Chinese, Korean, Russian, Spanish andVietnamese.

The IRS will include Publication 1 when sending notices to taxpayers on a range of issues, such as an audit or collection matter. All IRS facilities will publicly display the rights for taxpayers and employees to see.

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service. TAS is an independent office inside the IRS that represents the interests of U.S. taxpayers.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. Subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

12/9/14

Top Four Year-End IRA Reminders

Individual Retirement Accounts are an important way to save for retirement. If you have an IRA or may open one soon, there are some key year-end rules that you should know. Here are the top four reminders on IRAs from the IRS:

1. Know the limits.  You can contribute up to a maximum of $5,500 ($6,500 if you are age 50 or older) to a traditional or Roth IRA. If you file a joint return, you and your spouse can each contribute to an IRA even if only one of you has taxable compensation. In some cases, you may need to reduce your deductionfor traditional IRA contributions. This rule applies if you or your spouse has aretirement plan at work and your income is above a certain level. You have until April 15, 2015, to make an IRA contribution for 2014.

2. Avoid excess contributions.  If you contribute more than the IRA limits for 2014, you are subject to a six percent tax on the excess amount. The tax applies each year that the excess amounts remain in your account. You can avoid the tax if you withdraw the excess amounts from your account by the due date of your 2014 tax return (including extensions).

3. Take required distributions.  If you’re at least age 70½, you must take arequired minimum distribution, or RMD, from your traditional IRA. You are not required to take a RMD from your Roth IRA. You normally must take your RMD by Dec. 31, 2014. That deadline is April 1, 2015, if you turned 70½ in 2014. If you have more than one traditional IRA, you figure the RMD separately for each IRA. However, you can withdraw the total amount from one or more of them. If you don’t take your RMD on time you face a 50 percent excise tax on the RMD amount you failed to take out.

4. Claim the saver’s credit.  The formal name of the saver’s credit is theretirement savings contributions credit. You may qualify for this credit if you contribute to an IRA or retirement plan. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. Subscribe to IRS Tax Tips or any of our e-news subscriptions.
Additional IRS Resources:

  • Publication 590, Individual Retirement Arrangements (IRAs)
  • Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

IRS YouTube Videos:

IRS Podcasts:

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank Louisville Lafayette Niwot Gunbarrel

 

 

12/8/14

Affordable Care Act – Individuals   

New IRS Publication Helps You Find out if You Qualify for a Health Coverage Exemption

Taxpayers who might qualify for an exemption from having qualifying health coverage and making a payment should review a new IRS publication for information about these exemptions. Publication 5172, Health Coverage Exemptions, which includes information about how you get an exemption, is available on IRS.gov/aca.

The Affordable Care Act calls for each individual to have qualifying health insurance coverage for each month of the year, have an exemption, or make an individual shared responsibility payment when filing his or her federal income tax return.

You may be exempt if you:

  • Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,
  • Have a gap in coverage for less than three consecutive months, or
  • Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage or belonging to a group explicitly exempt from the requirement.

On IRS.gov/ACA, you can find a comprehensive list of the coverage exemptions.

How you get an exemption depends upon the type of exemption. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS when you file your income tax return, and others from either the Marketplace or the IRS.

Additional information about exemptions is available on the Individual Shared Responsibility Provision web page on IRS.gov. The page includes a link to a chart that shows the types of exemptions available and how to claim them. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/26/14

Unpaid Debt Can Affect Your Refund

If you owe a debt that’s past-due, it can reduce your federal tax refund. The Treasury Department’s Offset Program can use all or part of your refund to pay outstanding federal or state debt.

Here are five facts to know about tax refunds and ‘offsets.’

1. The Bureau of Fiscal Service runs the Treasury Offset Program.

2. Debts such as past due child support, student loan, state income tax or unemployment compensation may reduce your refund. BFS may use part or all of your tax refund to pay the debt.

3. You’ll receive a notice if BFS offsets your refund to pay your debt. The notice will list the original refund and offset amounts. It will also include the agency that received the offset payment and their contact information.

4. If you believe you don’t owe the debt or you want to dispute it, contact the agency that received the offset. You should not contact the IRS or BFS.

5. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation.

You can get forms on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

 

11/25/14

Ten Things to Know about IRS Notices and Letters

Each year, the IRS sends millions of notices and letters to taxpayers for a variety of reasons. Here are ten things to know in case one shows up in your mailbox.

1. Don’t panic. You often only need to respond to take care of a notice.

2. There are many reasons why the IRS may send a letter or notice. It typically is about a specific issue on your federal tax return or tax account. A notice may tell you about changes to your account or ask you for more information. It could also tell you that you must make a payment.

3. Each notice has specific instructions about what you need to do.

4. You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return.

5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

6. If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice. Send it to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7. You shouldn’t have to call or visit an IRS office for most notices. If you do have questions, call the phone number in the upper right-hand corner of the notice. Have a copy of your tax return and the notice with you when you call. This will help the IRS answer your questions.

8. Keep copies of any notices you receive with your other tax records.

9. The IRS sends letters and notices by mail. We do not contact people by email or social media to ask for personal or financial information.

10. For more on this topic visit IRS.gov. Click on the link ‘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 by calling 800-TAX-FORM (800-829-3676).

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/24/17

Getting Married Can Affect Your Premium Tax Credit

The IRS reminds newlyweds to add a health insurance review to their to-do list. This is particularly important if you receive premium assistance through advance payments of the premium tax credit through a Health Insurance Marketplace.

If you, your spouse or a dependent gets health insurance coverage through the Marketplace, you need to let the Marketplace know you got married. Informing the Marketplace about changes in circumstances, such as marriage or divorce, allows the Marketplace to help make sure you have the right coverage for you and your family and adjust the amount of advance credit payments that the government sends to your health insurer.

Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on monthly premium assistance that you deserve. You should also check whether getting married affects your, your spouse’s, or your dependents’ eligibility for coverage through your employer or your spouse’s employer, because that will affect your eligibility for the premium tax credit.

Other changes in circumstances that you should report to the Marketplace include:

  • the birth or adoption of a child,
  • divorce,
  • getting or losing a job,
  • moving to a new address, gaining or losing eligibility for employer or government sponsored health care coverage, and
  • any other changes that might affect family composition, family size, income or your enrollment.

In addition, certain life events – like marriage – give you and your spouse the opportunity to sign up for health care during a special enrollment period. That means that if one or both of you is uninsured, you may be able to get coverage now.  In most cases, the special enrollment period for Marketplace coverage is open for 60 days from the date of the life event.

More Information

Find out more about the premium tax credit and other tax-related provisions of the health care law at IRS.gov/aca. See IRS Publication 5152 for more information about reporting changes in circumstances to the Marketplace.

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

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

 

11/20/14

Five Easy Ways to Spot a Scam Phone Call

The IRS continues to warn the public to be alert for telephone scams and offers five tell-tale warning signs to tip you off if you get such a call. These callers claim to be with the IRS. The scammers often demand money to pay taxes. Some may try to con you by saying that you’re due a refund. The refund is a fake lure so you’ll give them your banking or other private financial information.

These con artists can sound convincing when they call. They may even know a lot about you. They may alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. If you don’t answer, they often leave an “urgent” callback request.

The IRS respects taxpayer rights when working out payment of your taxes. So, it’s pretty easy to tell when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a sign of a scam. The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the chance to question or appeal the amount they say you owe.
3. Require you to use a certain payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what to do:

  • If you know you owe taxes or think you might owe, call the IRS at 800-829-1040 to talk about payment options. You also may be able to set up a payment plan online at IRS.gov.
  • If you know you don’t owe taxes or have no reason to believe that you do, report the incident to TIGTA at 1.800.366.4484 or at www.tigta.gov.
  • If phone scammers target you, also contact the Federal Trade Commission at FTC.gov. Use their “FTC Complaint Assistant” to report the scam. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, the IRS currently does not use unsolicited email, text messages or any social media to discuss your personal tax issues. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/18/14

 Moving Can Affect Your Premium Tax Credit

If you moved recently, you’ve probably notified the U.S. Postal Service, utility companies, financial institutions and employers of your new address.  If you get health insurance coverage through a Health Insurance Marketplace, the IRS reminds you about one more important notification to add to your list – the Marketplace.

If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, to the Marketplace. There’s a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.

Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.

Changes in circumstances that you should report to the Marketplace include, but are not limited to:

  • an increase or decrease in your income
  • marriage or divorce
  • the birth or adoption of a child
  • starting a job with health insurance
  • gaining or losing your eligibility for other health care coverage

Many of these changes in circumstances – including moving out of the area served by your current Marketplace plan – qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at HealthCare.gov.

More Information

Find out more about the health care law, the premium tax credit and the individual shared responsibility provision at IRS.gov/aca

Find out more about the Health Insurance Marketplace at HealthCare.gov, or by calling (800) 318-2596.

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/17/14

IRS Grants Tax Relief to Drought-Stricken Farmers and Ranchers in 30 States

If you’re a farmer or rancher and drought forced you to sell your livestock, special IRS tax relief may help you.

The IRS has extended the time to replace livestock that farmers were forced to sell due to drought. If you’re eligible, this may help you defer tax on any gains you received from the forced sales. The relief applies to all or part of 30 states affected by drought. Here are several points you should know about this relief:

  • If the drought caused you to sell more livestock than usual, you may be able to defer tax on the extra gains from those sales.
  • You generally must replace the livestock within a four-year period. The IRS has the authority to extend the period if the drought continues. For this reason, the IRS has added one more year to the replacement period in 30 states.
  • The one-year extension of time generally applies to certain sales due to drought.
  • If you are eligible, your gains on sales of livestock that you held for draft, dairy or breeding purposes apply.
  • Sales of other livestock, such as those you raised for slaughter or held for sporting purposes and poultry, are not eligible.
  • The IRS relief applies to farms in areas suffering exceptional, extreme or severe drought conditions. The National Drought Mitigation Center has listed all or parts of 30 states that qualify for relief. Any county that is contiguous to a county that is on the NDMC’s list also qualifies.
  • This extension immediately impacts drought sales that occurred during 2010.
  • However, the IRS has granted previous extensions that affect some of these localities. This means that some drought sales before 2010 are also affected. The IRS will grant additional extensions if severe drought conditions persist.

Get more on this relief in Notice 2014-60 on IRS.gov. This includes a list of states and counties where the IRS relief applies. For more on these tax rules seePublication 225, Farmer’s Tax Guide on IRS.gov. You can get a copy of it by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

 

11/14/14

Small Employers Should Check Out the Health Care Tax Credit

New and existing small employers who do not yet benefit from the Small Business Health Care Tax Credit should look into whether the credit can help them provide insurance to their employees.

For tax years beginning in 2014 and after, the maximum credit is 50 percent of premiums paid for small business employers, and 35 percent of premiums paid for tax-exempt small employers, such as charities.

Beginning in 2014, a small employer may qualify for the credit if:

  • It has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one full-time employee for purposes of the credit.
  • It pays premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace or qualifies for an exception to this requirement.
  • The average annual wages of full-time equivalent employees are less than $51,000. The annual average wages will be adjusted annually for inflation.
  • It pays a uniform percentage for all employees that is equal to at least 50 percent of the premium cost of the insurance coverage.

The credit is available to eligible employers for two consecutive taxable years.

A small business employer who did not owe tax during the year can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is greater than the total credit claimed, eligible small employers can still claim a business expense deduction for premiums in excess of the credit.

For tax-exempt small employers, the credit is refundable. Even if the tax-exempt small employer has no taxable income, it may be eligible to receive the credit as a refund so long as it does not exceed its income tax withholding and Medicare tax liability.

More information

More information about the Small Business Health Options Program Marketplace – better known as the SHOP Marketplace – including the Federally Facilitated Marketplace, is available at HealthCare.gov .

Find out more about the small business health care tax credit at IRS.gov/aca.

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

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/13/14

Information for Employers about Their Responsibilities Under the Affordable Care Act

If you are an employer, the number of employees in your business will affect what you need to know about the Affordable Care Act (ACA).

Employers with 50 or more full-time and full-time-equivalent employees are generally considered to be “applicable large employers” (ALEs) under the employer shared responsibility provisions of the ACA.  Applicable large employers are subject to the employer shared responsibility provisions.  However, more than 95 percent of employers are not ALEs and are not subject to these provisions because they have fewer than 50 full-time and full-time-equivalent employees.

Whether an employer is an ALE is determined each calendar year based on employment and hours of service data from the prior calendar year. An employer can find information about determining the size of its workforce in the employer shared responsibility provision questions and answers section of the IRS.gov/aca website and in the related final regulations.

In general, beginning January 1, 2015, ALEs with at least 100 full-time and full-time equivalent employees must offer affordable health coverage that provides minimum value to their full-time employees and their dependents or they may be subject to an employer shared responsibility payment.  This payment would apply only if at least one of its full-time employees receives a premium tax credit through enrollment in a state based Marketplace or a federally facilitated or Marketplace.  Also, starting in 2016 ALEs must report to the IRS information about the health care coverage, if any, they offered to their full-time employees for calendar year 2015, and must also furnish related statements to their full-time employees.

For 2014, the IRS will not assess employer shared responsibility payments and the information reporting related to the employer shared responsibility provisions is voluntary.  In addition, the employer shared responsibility provisions will be phased in for smaller ALEs from 2015 to 2016.  Specifically, ALEs that meet certain conditions regarding maintenance of workforce size and coverage in 2014 are not subject to the employer shared responsibility provision for 2015.  For these employers, no employer shared responsibility payment will apply for any calendar month during 2015 (including, for an employer with a non-calendar year plan, the months in 2016 that are part of the 2015 plan year). However these employers are required to meet the information reporting requirements for 2015.  The employer shared responsibility provision questions and answers section of the IRS.gov/aca website and the preamble to the employer shared responsibility final regulations describe the requirements for this relief in more detail.  Both resources also describe additional forms of transition relief that apply for 2015.

Small employers, specifically those with fewer than 25 full-time equivalent employees, may be eligible for the small business health care tax credit.

Regardless of the number of employees, if an employer sponsors a self-insured health plan, it must report to the IRS certain information about its health insurance coverage plan for each covered employee.

More information

Find out more about the small business health care tax credit, applicable large employers, the employer shared responsibility provision, information reporting requirements and the premium tax credit at IRS.gov/aca.

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

 

Michael B. Welch, CPA  199 S. Briggs Street, Ste. 205  Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns Summit Bank

 

11/12/14

It’s Not Too Late to Report Changes in Circumstances that May Affect Your Premium Tax Credit

 

If you enrolled in insurance coverage through the Health Insurance Marketplace , you are required to report changes to the Marketplace when they happen, like changes to your household income or family size, because they may affect your eligibility for the advance payments of the premium tax credits.

 

Changes in circumstances that you should report to the Marketplace include, but are not limited to:

·         an increase or decrease in your income
·         marriage or divorce
·         the birth or adoption of a child
·         starting a job with health insurance
·         gaining or losing your eligibility for other health care coverage
·         changing your residence

 

For the full list of changes you should report, visitHealthCare.gov/how-do-i-report-life-changes-to-the-marketplace.

 

There is still time left this year to report changes. Reporting changeswill help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing premium assistance to reduce your monthly premiums. Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.  

 

When you report a change, you may be eligible for a Special Enrollment Period. For more information, visit HealthCare.gov.

 

11/11/2014

Save Twice with the Saver’s Credit

If you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:

1. Save for retirement.  The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.

2. Save on taxes.  The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

3. Income limits.  Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:

• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.

• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.

• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.

4. When to contribute.  If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.

If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.

5. Special rules apply.  Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2014.

• Another person can’t claim you as a dependent on their tax return.

6. Visit IRS.gov.  You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information visit IRS.gov.

 

 

4/16/14

IRS Renews Phone Scam Warning

The IRS today renewed its Oct. 2013 warning about a pervasive phone scam that continues to target people across the nation, including recent immigrants. The Treasury Inspector General for Tax Administration called it the largest scam of its kind. As of March 20, TIGTA reported that it has received reports of over 20,000 contacts related to this scam. TIGTA also stated that thousands of victims have paid over $1 million to fraudsters claiming to be from the IRS.

In this scam, the thief poses as the IRS and makes an unsolicited call to their target. The caller tells the victim they owe taxes to the IRS. They demand that the victim pay the money immediately with a pre-loaded debit card or wire transfer. The caller often threatens the victim with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Thieves who run this scam often:

  • Use common names and fake IRS badge numbers.
  • Know the last four digits of the victim’s Social Security Number.
  • Make caller ID appear as if the IRS is calling.
  • Send bogus IRS e-mails to support the bogus calls.
  • Call a second time claiming to be the police or department of motor vehicles. The caller ID again appears to support their claim.

If you get a call from someone who claims to be with the IRS asking you to pay back taxes, here’s what you should do:

  • If you owe, or think you might owe federal taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
  • If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
  • You can also file a complaint with the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

Here are a few warning signs so you can protect yourself and avoid becoming a victim of these crimes:

  • Be wary of any unexpected phone or email communication allegedly from the IRS.
  • Don’t fall for phone and phishing email scams that use the IRS as a lure. Thieves often pose as the IRS using a bogus refund or warnings to pay past-due taxes.
  • The IRS usually first contacts people by mail – not by phone – about unpaid taxes.
  • The IRS won’t ask for payment using a pre-paid debit card or wire transfer. The IRS also won’t ask for a credit card number over the phone.
  • The IRS doesn’t initiate contact with taxpayers by email to request personal or financial information. This includes any type of e-communication, such as text messages and social media channels.
  • The IRS doesn’t ask for PINs, passwords or similar confidential information for credit card, bank or other accounts.

The IRS urges you to be vigilant against the many different types of tax scams. Their common goal is to steal your money, and often to steal your identity. Visit the genuine IRS website, IRS.gov, for more on what you should do to avoid becoming a victim.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/15/14

Ten Tips for Paying Your Taxes

If you owe taxes with your tax return this year, you should know a few things before you file. Here are 10 helpful tips from the IRS about how to pay your federal taxes.

1. Never send cash.

2. If you e-file, you can file and pay in a single step with an electronic funds withdrawal. If you e-file on your own, you can use your tax preparation software to make the withdrawal. If you use a tax preparer to e-file, you can ask the preparer to make your tax payment electronically.

3. You can pay taxes electronically 24/7 on IRS.gov. Just click on the ‘Payments’ tab near the top left of the home page for details.

4. You can also pay by check or money order. Make your check or money order payable to the “United States Treasury.”

5. Whether you e-file your tax return or file on paper, you can also pay with a credit or debit card. The company that processes your payment will charge a processing fee.

6. You may be able to deduct the credit or debit card processing fee on next year’s return. It’s claimed on Schedule A, Itemized Deductions. The fee is a miscellaneous itemized deduction subject to the 2 percent limit.

7. Be sure to write your name, address and daytime phone number on the front of your payment. Also, write the tax year, form number you are filing and your Social Security number.

8. Complete Form 1040-V, Payment Voucher, and mail it with your tax return and payment to the IRS. Make sure you send it to the address listed on the back of Form 1040-V. This will help the IRS process your payment and post it to your account. You can get the form on IRS.gov.

9. Remember to enclose your payment with your tax return but do not staple it to any tax form.

10. For more information, call 800-829-4477 and select TeleTax Topic 158, Ensuring Proper Credit of Payments. You can also get information in the instructions for Form 1040-V.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/13/14

Find Out if Your Health Insurance Coverage is Considered
Minimum Essential Coverage Under the Affordable Care Act

The Affordable Care Act calls for individuals to have qualifying health insurance coverage for each month of the year, have an exemption, or make a shared responsibility payment when filing their federal income tax return next year.

Qualifying health insurance coverage, called minimum essential coverage, includes coverage under various, but not all, types of health care coverage plans. The majority of coverage that people have today counts as minimum essential coverage.

Examples of minimum essential coverage include:

  • Health insurance coverage provided by your employer,
  • Health insurance purchased through the Health Insurance Marketplace in the area where you live, where you may qualify for financial assistance,
  • Coverage provided under a government-sponsored program for which you are eligible (including Medicare, Medicaid, and health care programs for veterans),
  • Health insurance purchased directly from an insurance company, and
  • Other health insurance coverage that is recognized by the Department of Health & Human Services as minimum essential coverage.

Minimum essential coverage does not include coverage providing only limited benefits, such as:

  • Coverage consisting solely of excepted benefits, such as:
    • Stand-alone vision and dental insurance
    • Workers’ compensation
    • Accident or disability income insurance
  • Medicaid plans that provide limited coverage such as only family planning services or only treatment of emergency medical conditions.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/11/14

Four Tips If You Can’t Pay Your Taxes on Time

If you find you owe more than you can pay with your tax return, don’t panic. Make sure to file on time. That way you won’t have a penalty for filing late.

Here is what to do if you can’t pay all your taxes by the due date.

1. File on time and pay as much as you can.  File on time to avoid a late filing penalty. Pay as much as you can to reduce interest charges and a late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.

2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

3. Use the Online Payment Agreement tool.  You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month. It also means you won’t miss payments that could lead to more penalties.

4. Don’t ignore a tax bill.  If you get a bill, don’t ignore it.  The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can. Find out more about the IRS collection process on IRS.gov. Also check out IRSVideos.gov/OweTaxes.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/10/14

What You Should Know if You Need More Time to File Your Taxes

The April 15 tax deadline is approaching. What happens if you can’t get your taxes done by the due date? If you need more time, you can get an automatic six-month extension from the IRS. You don’t have to explain why you’re asking for more time. Here are five important things to know about filing an extension:

1. File on time even if you can’t pay.  If you complete your tax return but can’t pay the taxes you owe, do not request an extension. Instead, file your return on time and pay as much as you can. That way you will avoid the late filing penalty, which is higher than the penalty for not paying all of the taxes you owe on time. Plus, you do have payment options. Apply for a payment plan using the Online Payment Agreement tool on IRS.gov. You can also fileForm 9465, Installment Agreement Request, with your tax return. If you are unable to make payments because of a financial hardship, the IRS will work with you.

2. Extra time to file is not extra time to pay.  An extension to file will give you six more months to file your taxes, until Oct. 15. It does not give you extra time to pay your taxes. You still must estimate and pay what you owe by April 15. You will be charged interest on any amount not paid by the deadline. You may also owe a penalty for not paying on time.

3. Use IRS Free File to request an extension.  You can use IRS Free File to e-file your extension request. Free File is only available through the IRS.gov website. You must e-file the request by midnight on April 15. If you e-file your extension request, the IRS will acknowledge receipt. You also can return to Free File any time by Oct. 15 to prepare and e-file your tax return for free.

4. Use Form 4868.  You can also request an extension by mailing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must submit this form to the IRS by April 15. Form 4868 is available on IRS.gov.

You don’t need to submit a paper Form 4868 if you make a payment using an IRS electronic payment option. The IRS will automatically process your extension when you pay electronically. You can pay online or by phone.

5. Electronic funds withdrawal.  If you e-file an extension request, you can also pay any balance due by authorizing an electronic funds withdrawal from your checking or savings account. To do this you will need your bank routing and account numbers.

Visit IRS.gov for more information about filing an extension and the many options you have to pay your taxes.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/9/14

 

Ten Facts about Amended Tax Returns

Did you discover that you made a mistake after you filed your federal tax return? You can make it right by filing an amended tax return. Here are the top ten things to know about filing an amended tax return.

1. Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct errors on your tax return. You must file an amended return on paper. It can’t be e-filed.

2. You usually should file an amended tax return if you made an error claiming your filing status, income, deductions or credits on your original return.

3. You normally don’t need to file an amended return to correct math errors. The IRS will automatically make those changes for you. Also, do not file an amended return because you forgot to attach tax forms, such as a W-2 or schedule. The IRS will usually send you a request for those.

4. You usually have three years from the date you filed your original tax return to file Form 1040X to claim a refund. You can file it within two years from the date you paid the tax, if that date is later. That means the last day for most people to file a 2010 claim for a refund is April 15, 2014. See the 1040X instructions for special rules that apply to certain claims.

5. If you are amending more than one tax return, prepare a 1040X for each year. You should mail each year in separate envelopes. Note the tax year of the return you are amending at the top of Form 1040X. Check the form’s instructions for where to mail your return.

6. If you use other IRS forms or schedules to make changes, make sure to attach them to your Form 1040X.

7. If you are due a refund from your original return, wait to receive that refund before filing Form 1040X to claim an additional refund. Amended returns take up to 12 weeks to process. You may spend your original refund while you wait for any additional refund.

8. If you owe more tax, file your Form 1040X and pay the tax as soon as possible. This will reduce any interest and penalties.

9. You can track the status of your amended tax return three weeks after you file with ‘Where’s My Amended Return?’ This tool is available on IRS.gov or by phone at 866-464-2050. It’s available in English and in Spanish. The tool can track the status of an amended return for the current year and up to three years back.

10. To use ‘Where’s My Amended Return?’ enter your taxpayer identification number, which is usually your Social Security number. You will also need your date of birth and zip code. If you have filed amended returns for multiple years, select each year one by one.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/8/14

 

Top Tips on Making IRA Contributions

If you made IRA contributions or you’re thinking of making them, you may have questions about IRAs and your taxes. Here are some important tips from the IRS about saving for retirement using an IRA.

1. You must be under age 70 1/2 at the end of the tax year in order to contribute to a traditional IRA. There is no age limit to contribute to a Roth IRA.

2. You must have taxable compensation to contribute to an IRA. This includes income from wages and salaries and net self-employment income. It also includes tips, commissions, bonuses and alimony. If you’re married and file a joint return, generally only one spouse needs to have compensation.

3. You can contribute to an IRA at any time during the year. To count for 2013, you must make all contributions by the due date of your tax return. This does not include extensions. That means you usually must contribute by April 15, 2014. If you contribute between Jan. 1 and April 15, make sure your plan sponsor applies it to the right year.

4. In general, the most you can contribute to your IRA for 2013 is the smaller of either your taxable compensation for the year or $5,500. If you were age 50 or older at the end of 2013, the maximum you can contribute increases to $6,500.

5. You normally won’t pay income tax on funds in your traditional IRA until you start taking distributions from it. Qualified distributions from a Roth IRA are tax-free.

6. You may be able to deduct some or all of your contributions to your traditional IRA. Use the worksheets in the Form 1040A or Form 1040instructions to figure the amount that you can deduct. You may claim the deduction on either form. Unlike a traditional IRA, you can’t deduct contributions to a Roth IRA.

7. If you contribute to an IRA you may also qualify for the Saver’s Credit. The credit can reduce your taxes up to $2,000 if you file a joint return. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. You can file Form 1040A or 1040 to claim the Saver’s Credit.

8. See Publication 590, Individual Retirement Arrangements, for more about IRAs.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/7/14

 

Tips on Making Estimated Tax Payments
If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.
Here are six tips you should know about estimated taxes:
1. You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.
2. Estimate the amount of income you expect to receive for the year to determine the amount of taxes you may owe. Make sure that you take into account any tax deductions and credits that you will be eligible to claim. Life changes during the year, such as a change in marital status or the birth of a child, can affect your taxes.
3. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 16 and Sept. 15 in 2014, and Jan. 15, 2015.
4. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. If you mail your payments to the IRS, use the payment vouchers that come with Form 1040-ES, Estimated Tax for Individuals.
5. Check out the electronic payment options on IRS.gov. The Electronic Filing Tax Payment System is a free and easy way to make your payments electronically.
6. Use Form 1040-ES and its instructions to figure your estimated taxes.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/5/14

 

Six Tips to Make Filing Less Taxing

Doing your taxes doesn’t have to be taxing. You can make preparing and filing your federal income taxes easier by following these six tips from the IRS:

1. Use IRS Free File.  If you made $58,000 or less, prepare your return using free, brand-name tax software. If you made more and you’re comfortable doing your own tax return, use Free File Fillable Forms. This option is the electronic version of IRS paper forms. Go to IRS.gov/freefile to get started today.

2. Try IRS e-file.  You should try IRS e-file whether you do your own taxes or have them done for you. E-file is the safest, easiest, most accurate way to file a tax return. In fact, you’re 20 times more likely to make a mistake when you file a tax return on paper because e-file software will usually catch your errors. It will also alert you to tax credits and deductions you may otherwise miss. If you owe taxes, you can file now and pay later. The easiest way to do this is to use the Electronic Funds Withdrawal option to pay by the April 15 deadline.

3. Don’t delay.  Avoid doing your taxes at the last minute. If you rush to make the filing deadline and file a tax return on paper, you may overlook tax savings. You’re also more likely to make a mistake. An error will usually delay your refund and often causes the IRS to send you a letter.

4. Visit IRS.gov.  Go online for tax news and information. Make ‘1040 Central’ your go-to source for all the tax help you need to file your tax return.

5. File on time.  If you owe taxes but can’t pay by April 15, you should still file on time and pay as much as you can. This will minimize penalties and interest charges. If you can’t pay all the tax you owe, you may apply for an installment agreement. The best way to apply is to use the Online Payment Agreement tool on IRS.gov. You can also apply by mail using IRS Form 9465, Installment Agreement Request.

6. File an extension.  If your tax return is not ready by April 15, you can get an automatic six-month extension. E-file your extension request using theFree File program. You can also get an extension using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You should e-file or mail Form 4868 and pay any tax due by April 15.

Visit IRS.gov to get the tax forms you need. You can also call 800-TAX-FORM (800-829-3676) to have them mailed to you. Allow at least 10 days for mailing.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/4/14

Four Things to Know about Net Investment Income Tax

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

  • interest
  • dividends
  • capital gains
  • rental and royalty income
  • non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

 Filing Status                            Threshold Amount
Single or Head of household            $200,000
Married filing jointly                        $250,000
Married filing separately                  $125,000
Qualifying widow(er) with a child       $250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enough estimated taxes, you may have to pay an estimated tax penalty.

For more on this topic visit IRS.gov/aca. You can also get tax forms on IRS.gov or by mail by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/3/14

Energy-Efficient Home Improvements Can Lower Your Taxes

You may be able to reduce your taxes if you made certain energy-efficient home improvements last year. Here are some key facts that you should know about home energy tax credits.

Non-Business Energy Property Credit

  • This credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This includes items such as insulation, windows, doors and roofs.
  • You may also be able to claim the credit for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. Each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
  • Your main home must be located in the U.S. to qualify for the credit.
  • Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
  • This credit expired at the end of 2013. You may still claim the credit on your 2013 tax return if you didn’t reach the lifetime limit in prior years.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters, solar electric equipment and wind turbines.
  • There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • The home must be in the U.S. It does not have to be your main home.
  • This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more on this topic refer to the form’s instructions. You can get it on IRS.gov or order it by mail by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/2/14

 

Eight Common Tax Mistakes to Avoid

We all make mistakes. But if you make a mistake on your tax return, the IRS may need to contact you to correct it. That will delay your refund.

You can avoid most tax return errors by using IRS e-file. People who do their taxes on paper are about 20 times more likely to make an error than e-filers. IRS e-file is the most accurate way to file your tax return.

Here are eight common tax-filing errors to avoid:

1. Wrong or missing Social Security numbers.  Be sure you enter all SSNs on your tax return exactly as they are on the Social Security cards.

2. Wrong names.  Be sure you spell the names of everyone on your tax return exactly as they are on their Social Security cards.

3. Filing status errors.  Some people use the wrong filing status, such as Head of Household instead of Single. The Interactive Tax Assistant on IRS.gov can help you choose the right one. Tax software helps e-filers choose.

4. Math mistakes.  Double-check your math. For example, be careful when you add or subtract or figure items on a form or worksheet. Tax preparation software does all the math for e-filers.

5. Errors in figuring credits or deductions.  Many filers make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, and the standard deduction. If you’re not e-filing, follow the instructions carefully when figuring credits and deductions. For example, if you’re age 65 or older or blind, be sure you claim the correct, higher standard deduction.

6. Wrong bank account numbers.  You should choose to get your refund by direct deposit. But it’s important that you use the right bank and account numbers on your return. The fastest and safest way to get a tax refund is to combine e-file with direct deposit.

7. Forms not signed or dated.  An unsigned tax return is like an unsigned check – it’s not valid. Remember that both spouses must sign a joint return.

8. Electronic filing PIN  errors.  When you e-file, you sign your return electronically with a Personal Identification Number. If you know last year’s e-file PIN, you can use that. If not, you’ll need to enter the Adjusted Gross Income from your originally-filed 2012 federal tax return. Don’t use the AGI amount from an amended 2012 return or a 2012 return that the IRS corrected.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

4/1/14

 

Early Retirement Plan Withdrawals and Your Taxes

Taking money out early from your retirement plan may trigger an additional tax. Here are seven things from the IRS that you should know about early withdrawals from retirement plans:

1. An early withdrawal normally means taking money from your plan before you reach age 59½.

2. If you made a withdrawal from a plan last year, you must report the amount you withdrew to the IRS. You may have to pay income tax as well as an additional 10 percent tax on the amount you withdrew.

3. The additional 10 percent tax does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

4. A rollover is a type of nontaxable withdrawal. Generally, a rollover is a distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan. You usually have 60 days to complete a rollover to make it tax-free.

5. There are many exceptions to the additional 10 percent tax. Some of the exceptions for retirement plans are different from the rules for IRAs.

6. If you make an early withdrawal, you may need to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax return.

7. The rules for retirement plans can be complex. The fast, safe and free way to prepare and e-file your tax return is to use IRS Free File. Free File offers brand-name software or online fillable forms for free. Free File software will pick the right tax forms, do the math and help you get the tax benefits you’re due. No matter how you prepare your taxes, you should always file electronically with IRS e-file. More than 80 percent of taxpayers e-file for faster refunds or for easier electronic payment options.

More information on this topic is available on IRS.gov.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/31/14

 

Ten Helpful Tips for Farm Tax Returns

There are many tax benefits for people in the farming business. Farms include plantations, ranches, ranges and orchards. Farmers may raise livestock, poultry or fish, or grow fruits or vegetables.

Here are 10 things about farm income and expenses to help at tax time.

1.  Crop insurance proceeds.  Insurance payments from crop damagecount as income. Generally, you should report these payments in the year you get them.

2. Deductible farm expenses.  Farmers can deduct ordinary and necessary expenses they paid for their business. An ordinary expense is a common and accepted cost for that type of business. A necessary expense means a cost that is appropriate for that business.

3. Employees and hired help.  You can deduct reasonable wages you paid to your farm’s full and part-time workers. You must withhold Social Security, Medicare and income taxes from their wages.

4. Sale of items purchased for resale.  If you sold livestock or items that you bought for resale, you must report the sale. Your profit or loss is the difference between your selling price and your basis in the item. Basis is usually the cost of the item. Your cost may also include other amounts you paid such as sales tax and freight.

5. Repayment of loans. You can only deduct the interest you paid on a loan if the loan is used for your farming business. You can’t deduct interest you paid on a loan that you used for personal expenses.

6. Weather-related sales.  Bad weather such as a drought or flood may force you to sell more livestock than you normally would in a year. If so, you may be able to delay reporting a gain from the sale of the extra animals.

7. Net operating losses.  If your expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid in prior years. You may also be able to lower your tax in future years.

8. Farm income averaging.  You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may lower your taxes if your farm income is high in the current year and low in one or more of the past three years.

9. Fuel and road use.  You may be able to claim a tax credit or refund of excise taxes you paid on fuel used on your farm for farming purposes.

10. Farmers Tax Guide.  For more details on this topic see Publication 225, Farmer’s Tax Guide. You can get it on IRS.gov or call the IRS at 800-TAX-FORM (800-829-3676) to have it mailed to you.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/29/14

 

Time May be Running Out – March 31 is an Important Deadline

Health Care Law Considerations for 2014

For most people, the Affordable Care Act has no effect on the 2013 income tax return they are filing in 2014. However, some people may need to make important decisions by the March 31, 2014 deadline for open enrollment.

Below are five things about the health care law you may need to consider soon.

• Currently Insured – No Change: If you already insured, you do not need to do anything more than continue your insurance.

• Uninsured – Enroll by March 31: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more atHealthCare.gov.

• Premium Tax Credit To Lower Your Monthly Premium: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014 so that the monthly premium you pay is lower, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need to do nothing at this time unless you have a change in circumstance like a change in income or family size. Learn More.

• Change in Circumstances: If you’re receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to the Marketplace. Reporting changes will help to make sure you have the right coverage and are getting the proper amount of advance payments of the premium tax credit.

• Individual Shared Responsibility Payment: Starting January 2014, you and your family have been required to have health care coverage or have an exemption from coverage.  Most people already have qualifying health care coverage.  These individuals will not need to do anything more than maintain that coverage throughout 2014. If you can afford coverage but decide not to buy it and remain uninsured, you may have to make an individual shared responsibility payment when you file your 2014 tax return in 2015. Learn More.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

3/28/14

 

Tips for U.S. Taxpayers with Foreign Income

Did you live or work abroad or receive income from foreign sources in 2013? If you are a U.S. citizen or resident, you must report income from all sources within and outside of the U.S. The rules for filing income tax returns are generally the same whether you’re living in the U.S. or abroad. Here are seven tips from the IRS that U.S. taxpayers with foreign income should know:

1. Report Worldwide Income.  By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms.  You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See IRS.gov for more information.

3. Consider the Automatic Extension.  If you’re living abroad and can’t file your return by the April 15 deadline, you may qualify for an automatic two-month filing extension. You’ll then have until June 16, 2014 to file your U.S. income tax return. This extension also applies to those serving in the military outside the U.S. You’ll need to attach a statement to your return to explain why you qualify for the extension.

4. Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $97,600 of your wages and other foreign earned income in 2013. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

5. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce the amount of taxes you have to pay if both countries tax the same income.

6. Use IRS Free File.  Everyone can prepare and e-file their federal tax return for free by using IRS Free File. If you make $58,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website. Some Free File software products and fillable forms also support foreign addresses for those who live abroad.

7. Get Tax Help Outside the U.S.  The IRS has offices in Frankfurt, London, Paris and Beijing. IRS staff at these offices can help you with tax filing issues and answer your tax questions. Visit IRS.gov for more information.

You can get more on this topic in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. IRS forms and publications are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/27/14

 

Get Connected to the IRS with Social Media

The tax deadline’s almost here. If you haven’t yet filed, you may think you need to rush to find what you need to file your tax return. However, a quick and easy method to get help is to use IRS social media. It’s a convenient way to get the tax information and tools you need to help you file your federal tax return.

Consider using these IRS social media tools to help you navigate the tax deadline.

  • IRS2Go.  IRS’s free mobile app gives you your refund status, tax news updates, IRS YouTube videos and lets you request your tax records. IRS2Gois available for the iPhone, iTouch or Android mobile devices.
  • YouTube.  IRS offers dozens of video tax tips on a variety of topics in English, Spanish and American Sign Language.
  • Twitter.  Tweets from @IRSnews provide tax-related announcements and daily tax tips. Tweets from @IRStaxpros offer news and guidance for tax professionals. Tweets from @IRSenEspanol have news and information in Spanish, The Taxpayer Advocate Service sends tweets from@YourVoiceAtIRS@RecruitmentIRS provides updates for job seekers.
  • Podcasts.  IRS has short audio recordings that offer one tax-related topic per podcast. They are available through the Multimedia Center on the IRS website. Podcast transcripts are also available.
  • Tumblr.  Follow the IRS on Tumblr and never miss a post! IRS Tumblr is a microblogging platform where users can access IRS tax tips, videos and podcasts. The IRS uses Tumblr to share information about important programs. Access Tumblr from your browser, Smartphone, tablet or desktop.
  • Facebook.  IRS has four Facebook pages that provide news and information for taxpayers and tax return preparers. You can check the IRS pages to get updates on job openings or for tax assistance from the Taxpayer Advocate Service.

Protecting your privacy is a top priority at the IRS. The IRS uses social media tools to share public information, not to answer personal tax or account questions. You should never post your Social Security number or any other confidential information on social media sites.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/26/14

 

Two Tax Credits Help Pay Higher Education Costs

Did you, your spouse or your dependent take higher education classes last year? If so, you may be able to claim the American Opportunity Credit or the Lifetime Learning Credit to help cover the costs. Here are some facts from the IRS about these important credits.

The American Opportunity Credit is:

  • Worth up to $2,500 per eligible student.
  • Only available for the first four years at an eligible college or vocational school.
  • Subtracted from your taxes but can also give you a refund of up to $1,000 if it’s more than your taxes.
  • For students earning a degree or other recognized credential.
  • For students going to school at least half-time for at least one academic period that started during the tax year.
  • For the cost of tuition, books and required fees and supplies.

The Lifetime Learning Credit is:

  • Limited to $2,000 per tax return, per year, no matter how many students qualify.
  • For all years of higher education, including classes for learning or improving job skills.
  • Limited to the amount of your taxes.
  • For the cost of tuition and required fees, plus books, supplies and equipment you must buy from the school.

For both credits:

  • Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. Make sure it’s correct.
  • You must file Form 8863, Education Credits, to claim these credits on your tax return.
  • You can’t claim either credit if someone else claims you as a dependent.
  • You can’t claim both credits for the same student or for the same expense, in the same year.
  • The credits are subject to income limits that could reduce the amount you can claim on your return.
  • Visit IRS.gov and use the Interactive Tax Assistant tool to see if you’re eligible to claim these credits.

See Publication 970, Tax Benefits for Education for more on this topic. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/25/14

 

Tax Rules for Children with Investment Income

You normally must pay income tax on your investment income. That is also true for a child who must file a federal tax return. If a child can’t file his or her own return, their parent or guardian is normally responsible for filing their tax return.

Special tax rules apply to certain children with investment income. Those rules may affect the tax rate and the way you report the income.

Here are four facts from the IRS that you should know about your child’s investment income:

1. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Special rules apply if your child’s total investment income is more than $2,000. Your tax rate may apply to part of that income instead of your child’s tax rate.

3. If your child’s total interest and dividend income was less than $10,000 in 2013, you may be able to include the income on your tax return. If you make this choice, the child does not file a return. See Form 8814, Parents’ Election to Report Child’s Interest and Dividends.

4. Children whose investment income was $10,000 or more in 2013 must file their own tax return. File Form 8615, Tax for Certain Children Who Have Investment Income, along with the child’s federal tax return.

Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child’s modified adjusted gross income that is over a threshold amount. Use Form 8960, Net Investment Income Tax, to figure this tax. For more on this topic, visit IRS.gov.

For more on this topic, see Publication 929, Tax Rules for Children and Dependents. Visit IRS.gov to get this booklet and IRS forms. You may also have them mailed to you by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/24/14

 

Tips on Deducting Charitable Contributions

If you are looking for a tax deduction, giving to charity can be a ‘win-win’ situation. It’s good for them and good for you. Here are eight things you should know about deducting your gifts to charity:

1. You must donate to a qualified charity if you want to deduct the gift. You can’t deduct gifts to individuals, political organizations or candidates.

2. In order for you to deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. If you get a benefit in return for your contribution, your deduction is limited. You can only deduct the amount of your gift that’s more than the value of what you got in return. Examples of such benefits include merchandise, meals, tickets to an event or other goods and services.

4. If you give property instead of cash, the deduction is usually that item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market.

5. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.

6. You must file Form 8283, Noncash Charitable Contributions, if your deduction for all noncash gifts is more than $500 for the year.

7. You must keep records to prove the amount of the contributions you make during the year. The kind of records you must keep depends on the amount and type of your donation. For example, you must have a written record of any cash you donate, regardless of the amount, in order to claim a deduction. It can be a cancelled check, a letter from the organization, or a bank or payroll statement. It should include the name of the charity, the date and the amount donated. A cell phone bill meets this requirement for text donations if it shows this same information.

8. To claim a deduction for donated cash or property of $250 or more, you must have a written statement from the organization. It must show the amount of the donation and a description of any property given. It must also say whether the organization provided any goods or services in exchange for the gift.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/22/14

 

Time Expiring to Claim $760 Million in Refunds for 2010 Tax Returns

If you did not file a tax return for 2010, you may be one of over 900,000 taxpayers who may be due a refund from that year. If you are, you must claim your share of almost $760 million by the April 15 tax deadline. To claim your refund, you must file a 2010 federal income tax return. Here are the facts you need to know about unclaimed refunds:

  • The unclaimed refunds apply to people who did not file a federal income tax return for 2010. The IRS estimates that half the potential refunds are more than $571.
  • Some people, such as students and part-time workers, may not have filed because they had too little income to require filing a tax return. They may have a refund waiting if they had taxes withheld from their wages or made quarterly estimated payments. A refund could also apply if they qualify for certain tax credits, such as the Earned Income Tax Credit.
  • If you didn’t file a 2010 return, the law generally provides a three-year window to claim a refund from that year. For 2010 returns, the window closes on April 15, 2014.
  • The law requires that you properly address, mail and postmark your tax return by that date to claim your refund.
  • If you don’t file a claim for a refund within three years, the money becomes property of the U.S. Treasury. There is no penalty for filing a late return if you are due a refund.
  • The IRS may hold your 2010 refund if you have not filed tax returns for 2011 and 2012. The U.S. Treasury will apply the refund to any federal or state tax you owe. It also may use your refund to offset unpaid child support or past due federal debts such as student loans.
  • If you’re missing Forms W-2, 1098, 1099 or 5498 for prior years, you should ask for copies from your employer, bank or other payer. If you can’t get copies, get a free transcript showing that information by going to IRS.gov. You can also file Form 4506-T to get a transcript.
  • The three-year window also usually applies to a refund from an amended return. In general, you must file Form 1040X, Amended U.S. Individual Income Tax Return, within three years from the date you filed your original tax return. You can also file it within two years from the date you paid the tax, if that date is later than the three-year rule. That means the deadline for most people to amend their 2010 tax return and claim a refund will expire on April 15, 2014.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/21/14

Early Retirement Plan Withdrawals and Your Taxes

Taking money out early from your retirement plan may trigger an additional tax. Here are seven things from the IRS that you should know about early withdrawals from retirement plans:

1. An early withdrawal normally means taking money from your plan before you reach age 59½.

2. If you made a withdrawal from a plan last year, you must report the amount you withdrew to the IRS. You may have to pay income tax as well as an additional 10 percent tax on the amount you withdrew.

3. The additional 10 percent tax does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

4. A rollover is a type of nontaxable withdrawal. Generally, a rollover is a distribution to you of cash or other assets from one retirement plan that you contribute to another retirement plan. You usually have 60 days to complete a rollover to make it tax-free.

5. There are many exceptions to the additional 10 percent tax. Some of the exceptions for retirement plans are different from the rules for IRAs.

6. If you make an early withdrawal, you may need to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with your federal tax return.

7. The rules for retirement plans can be complex. The fast, safe and free way to prepare and e-file your tax return is to use IRS Free File. Free File offers brand-name software or online fillable forms for free. Free File software will pick the right tax forms, do the math and help you get the tax benefits you’re due. No matter how you prepare your taxes, you should always file electronically with IRS e-file. More than 80 percent of taxpayers e-file for faster refunds or for easier electronic payment options.

More information on this topic is available on IRS.gov.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/20/14

 

What do I need to know about the Health Care Law for my 2013 Tax Return?

For most people, the Affordable Care Act has no effect on their 2013 federal income tax return. For example, you will not report health care coverage under the individual shared responsibility provision or claim the premium tax credit until you file your 2014 return in 2015.

However, for some people, a few provisions may affect your 2013 tax return, such as increases in the itemized medical deduction threshold, the additional Medicare tax and the net investment income tax.

Here are some additional tips:

Filing Requirement: If you do not have a tax filing requirement, you do not need to file a 2013 federal tax return to establish eligibility or qualify for financial assistance, including advance payments of the premium tax credit to purchase health insurance coverage through a Health Insurance Marketplace. Learn more at HealthCare.gov.

W-2 Reporting of Employer Coverage: The value of health care coverage reported by your employer in box 12 and identified by Code DD on your Form W-2 is not taxable. Learn more.

Information available about other tax provisions in the health care law: More information is available on IRS.gov regarding the following tax provisions: Premium Rebate for Medical Loss RatioHealth Flexible Spending Arrangements, and Health Saving Accounts.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/19/14

 

2013 Home Office Deduction Features Simpler Option

If you work from home, you should learn the rules for how to claim the home office deduction. Starting this year, there is a simpler option to figure the deduction for business use of your home. The new option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. It does not change the rules for who may claim the deduction.

Here are six facts from the IRS about the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. Also, the part of your home used for business must be:

• your principal place of business, or

• a place where you meet clients or customers in the normal course of business, or

• a separate structure not attached to your home. Examples might include a studio, garage or barn.

2. If you use the actual expense method, the home office deduction includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid could qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid could qualify. The amount you can deduct usually depends on the percentage of your home used for business.

3. Beginning with 2013 tax returns, you may be able to use the simplified option to claim the home office deduction instead of claiming actual expenses. Under this method, you multiply the allowable square footage of your office by a prescribed rate of $5. The maximum footage allowed is 300 square feet. The deduction limit using this method is $1,500 per year.

4. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. If you are self-employed and choose the actual expense method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You claim your deduction on Schedule C, Profit or Loss From Business, if you use either the simplified or actual expense method. See theSchedule C instructions for how to report your deduction.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

For more on this topic, see Publication 587, Business Use of Your Home. It’s available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/18/14

 

Tips for Self-Employed Taxpayers

If you are an independent contractor or run your own business, there are a few basic things to know when it comes to your federal tax return. Here are six tips you should know about income from self-employment:

  • Self-employment income can include income you received for part-time work. This is in addition to income from your regular job.
  • You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
  • You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Make sure to file the schedule with your tax return.
  • You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You may be charged a penalty if you do not pay enough taxes throughout the year.
  • You can deduct some expenses you paid to run your trade or business. You can deduct most business expenses in full, but some must be ’capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  • You can deduct business costs only if they are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.Visit the Small Business and Self-Employed Tax Center on IRS.gov for all your federal tax needs. You can also get IRS tax forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/17/14

Three Timely Tips about Taxes and the Health Care Law
The health care law has provisions that may affect your personal income taxes. How the law may affect you may depend on your employment status, whether you participate in a tax favored health plan and your age.
Here are three tips about how the law may affect you:
1. Employment Status
  • If you are employed your employer may report the value of the health insurance provided to you on your W-2 in Box 12 with Code DD.  However, it is not taxable.
  • If you are self-employed, you can deduct the cost of health insurance premiums, within limits, on your income tax return.
2. Tax Favored Health Plans
  • If you have a health flexible spending arrangement (FSA) at work, money you put into it normally reduces your taxable income.
  • If you have a health savings account (HSA) at work, money your employer puts into it for you, within limits, is not taxable.
  • Money you put into an HSA usually counts as a deduction and can lower your taxes.
  • Money you take from an HSA to use for qualified medical expenses is not taxable income; however, withdrawals for other purposes are taxable and can even be subject to an additional tax.
  • If you have a health reimbursement arrangement (HRA) at work, money you receive from it is generally not taxable.
3. Age
If you are age 65 or older, the threshold for itemized medical deductions remains at 7.5 percent of your Adjusted Gross Income (AGI) until 2017; for others the threshold increased to 10 percent of AGI in 2013. Your AGI is shown on your Form 1040 tax form.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/15/14

 

Five Tax Credits That Can Reduce Your Taxes

Tax credits help reduce the taxes you owe. Some credits are also refundable. That means that, even if you owe no tax, you may still get a refund.

Here are five tax credits you shouldn’t overlook when filing your 2013 federal tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work but don’t earn a lot of money. It can boost your refund by as much as $6,044. You may be eligible for the credit based on the amount of your income, your filing status and the number of children in your family. Single workers with no dependents may also qualify for EITC. Visit IRS.gov and use the EITC Assistant tool to see if you can claim this credit. For more seePublication 596, Earned Income Credit.

2. The Child and Dependent Care Credit can help you offset the cost of daycare or day camp for children under age 13. You may also be able to claim it for costs paid to care for a disabled spouse or dependent. For details, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit can reduce the taxes you pay by as much as $1,000 for each qualified child you claim on your tax return. The child must be under age 17 in 2013 and meet other requirements. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim the credit. See Publication 972, Child Tax Credit, for more about the rules.

4. The Saver’s Credit helps workers save for retirement. You may qualify if your income is $59,000 or less in 2013 and you contribute to an IRA or a retirement plan at work. Check out Publication 590, Individual Retirement Arrangements (IRAs).

5. The American Opportunity Tax Credit can help you offset college costs. The credit is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. However, you must complete Form 8863, Education Credits, and file a tax return to claim the credit. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim the credit. Publication 970, Tax Benefits for Education, has the details.

Before you claim any tax credit, be sure you qualify for it. Find out more about these credits on IRS.gov. You can also get free IRS forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/14/14

 

Ten Facts about Capital Gains and Losses
When you sell a ’capital asset,’ the sale usually results in a capital gain or loss. A ‘capital asset’ includes most property you own and use for personal or investment purposes. Here are 10 facts from the IRS on capital gains and losses:
1. Capital assets include property such as your home or car. They also include investment property such as stocks and bonds.
2. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
3. You must include all capital gains in your income. Beginning in 2013, you may be subject to the Net Investment Income Tax. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts. For details see IRS.gov/aca.
4. You can deduct capital losses on the sale of investment property. You can’t deduct losses on the sale of personal-use property.
5. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.
6. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a ‘net capital gain.’
7. The tax rates that apply to net capital gains will usually depend on your income. For lower-income individuals, the rate may be zero percent on some or all of their net capital gains. In 2013, the maximum net capital gain tax rate increased from 15 to 20 percent. A 25 or 28 percent tax rate can also apply to special types of net capital gains.
8. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened that year.
10. You must file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your return.
For more information about this topic, see the Schedule D instructions and Publication 550, Investment Income and Expenses. They’re both available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/13/14

 

Free Tax Help for Military Families

The IRS provides free tax help to military members and their families through its Volunteer Income Tax Assistance program. VITA offers free tax preparation and e-filing at sites both on and off base. It also has sites to help our military overseas. Here are five things to know about free tax help for the military:

1. Armed Forces Tax Council.  The Armed Forces Tax Council oversees the military tax programs offered worldwide. AFTC partners with the IRS to conduct outreach to military personnel and their families. This includes the Army, Air Force, Navy, Marine Corps and Coast Guard.

2. Volunteer tax sites.  IRS-trained volunteers staff the military VITA sites. They receive training on military tax issues, such as combat zone tax benefits,extensions of time to file and pay and special rules for the Earned Income Tax Credit.

3. What to bring.  To get free tax help, bring the following records to your military VITA site:

• Valid photo identification.

• Social Security cards for you, your spouse and dependents. If you don’t have a card you should get a letter from the Social Security Administration to verify your information.

• Birth dates for you, your spouse and dependents.

• Your wage and earning forms, such as Forms W-2, W-2G, and 1099-R.

• Interest and dividend statements (Forms 1099).

• A copy of your last year’s federal and state tax returns, if available.

• Routing and account numbers for direct deposit of your tax refund.

• Total amount you paid for day care and the day care provider’s identifying number. This is usually an Employer Identification Number or Social Security number.

• Other relevant information about your income and expenses.

4. Joint returns.  If you are married and file a joint return, generally both you and your spouse need to sign the return. If you both can’t be present to sign, you should bring a valid power of attorney form. Use Form 2848, Power of Attorney and Declaration of Representative.

There is a special exception to this rule if your spouse is in a combat zone. The exception allows a spouse to file a joint return with a signed statement explaining that the other spouse is in a combat zone and unable to sign.

5. IRS Free File.  Do your own taxes with IRS Free File. You can use free, brand-name software or online fillable forms. If your income was $58,000 or less, you qualify for Free File software. If you made more than $58,000, you can use Free File Fillable Forms. Learn more at IRS.gov/freefile.

See IRS Publication 3, Armed Forces’ Tax Guide, for more on this topic. You can get the booklet on IRS.gov or order it by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/12/14

 

Special Exclusion for Cancelled Home Mortgage Debt

If a lender cancels or forgives money you owe, you usually have to pay tax on that amount. But when it comes to your home, an important exception to this rule may apply in 2013. Here are several key facts from the IRS about the special exclusion for cancelled home mortgage debt:

• If the cancelled debt was a mortgage loan on your main home, you may be able to exclude the cancelled amount from your income. To qualify you must have used the loan to buy, build or substantially improve your main home. The loan must also be secured by your main home.

• If your lender cancelled part of your mortgage through a loan modification, or ‘workout,’ you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program. Visit IRS.gov for more details about HAMP. The exclusion may also apply to the amount of debt cancelled in a foreclosure.

• The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or greatly improve your main home. Proceeds used for other purposes don’t qualify. For example, a loan that you used to pay your credit card debt doesn’t qualify.

• Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit card debt or car loans.

• If your lender reduced or cancelled at least $600 of your mortgage debt, you should receive Form 1099-C, Cancellation of Debt, in January of the following year. This form shows the amount of cancelled debt and other information. Notify your lender if any information on the form is wrong.

• Report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. File the completed form with your federal tax return.

• Use IRS e-file to file your tax return. E-file is the easiest way to file because the software will do the hard work for you. You can use IRS Free File to prepare and e-file your tax return with either free, brand-name software or online fillable forms – all for free. Otherwise, you may file electronically with commercial software, or through a paid preparer.

• Whether you use IRS e-File or mail a paper return, you can use theInteractive Tax Assistant on IRS.gov to find out if you must pay tax on cancelled mortgage debt.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/12/14

 

Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees.

A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one employee for purposes of the credit.

For 2013, the average annual wages of employees must be less than $50,000, and the employer must pay a uniform percentage for all employees that is equal to at least 50% of the premium cost of the insurance coverage.

The maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years.

For small tax-exempt employers, the credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

More information

 

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/11/14

Boost Your Retirement Savings with a Tax Credit

If you contribute to a retirement plan, like a 401(k) or an IRA, you may be eligible for the Saver’s Credit. The Saver’s Credit can help you save for retirement and reduce the tax you owe. Here are five facts from the IRS that you should know about this credit:

1. The Saver’s Credit is the short name for the Retirement Savings Contribution Credit. It can be worth up to $2,000 for married couples filing a joint return. The credit is worth up to $1,000 for single taxpayers.

2. Eligibility depends on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2013 tax return if you’re:

• Married filing separately or a single taxpayer with income up to $29,500

• Head of household with income up to $44,250

• Married filing jointly with income up to $59,000

3. Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2013.

• You can’t be claimed as a dependent on another person’s tax return.

4. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2013. The due date for most people is April 15, 2014.

5. File Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Tax software will do this for you if you e-file.

The Saver’s Credit is in addition to other tax savings you can get if you set aside money for retirement. For example, you may also be able to deduct your contributions to a traditional IRA.

Visit IRS.gov for more information about this important tax credit.
Additional IRS Resources:

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

3/10/14

 

Three Timely Tips about Taxes and the Health Care Law

The health care law has provisions that may affect your personal income taxes. How the law may affect you may depend on your employment status, whether you participate in a tax favored health plan and your age.

Here are three tips about how the law may affect you:

1. Employment Status

  • If you are employed your employer may report the value of the health insurance provided to you on your W-2 in Box 12 with Code DD.  However, it is not taxable.
  • If you are self-employed, you can deduct the cost of health insurance premiums, within limits, on your income tax return.

2. Tax Favored Health Plans

  • If you have a health flexible spending arrangement (FSA) at work, money you put into it normally reduces your taxable income.
  • If you have a health savings account (HSA) at work, money your employer puts into it for you, within limits, is not taxable.
  • Money you put into an HSA usually counts as a deduction and can lower your taxes.
  • Money you take from an HSA to use for qualified medical expenses is not taxable income; however, withdrawals for other purposes are taxable and can even be subject to an additional tax.
  • If you have a health reimbursement arrangement (HRA) at work, money you receive from it is generally not taxable.

3. Age

If you are age 65 or older, the threshold for itemized medical deductions remains at 7.5 percent of your Adjusted Gross Income (AGI) until 2017; for others the threshold increased to 10 percent of AGI in 2013. Your AGI is shown on your Form 1040 tax form.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/9/14

 

Ten Facts about Capital Gains and Losses

When you sell a ’capital asset,’ the sale usually results in a capital gain or loss. A ‘capital asset’ includes most property you own and use for personal or investment purposes. Here are 10 facts from the IRS on capital gains and losses:

1. Capital assets include property such as your home or car. They also include investment property such as stocks and bonds.

2. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income. Beginning in 2013, you may be subject to the Net Investment Income Tax. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts. For details seeIRS.gov/aca.

4. You can deduct capital losses on the sale of investment property. Youcan’t deduct losses on the sale of personal-use property.

5. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.

6. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a ‘net capital gain.’

7. The tax rates that apply to net capital gains will usually depend on your income. For lower-income individuals, the rate may be zero percent on some or all of their net capital gains. In 2013, the maximum net capital gain tax rate increased from 15 to 20 percent. A 25 or 28 percent tax rate can also apply to special types of net capital gains.

8. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened that year.

10. You must file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your return.

For more information about this topic, see the Schedule D instructions andPublication 550, Investment Income and Expenses. They’re both available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

3/7/14

Four Things You Should Know if You Barter
Bartering is the trading of one product or service for another. Often there is no exchange of cash. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services.
If you barter, you should know that the value of products or services from bartering is taxable income.
Here are four facts about bartering:
1. Barter exchanges.  A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to its members who barter and file a copy with the IRS.
2. Bartering income.  Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.
3. Tax implications.  Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.
4. Reporting rules.  How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/6/14

 

Five Facts about Unemployment Benefits

If you lose your job or your employer lays you off, you may be able to get unemployment benefits. The payments may be a welcomed relief. But you should know that they’re taxable.

Here are five important facts from the IRS about unemployment compensation:

1. You must include all unemployment compensation in your income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount paid to you and the amount of any federal income taxes withheld.

2. There are several types of unemployment compensation. They generally include any amount received under an unemployment compensation law of the U.S. or a state. For more about the various types, see Publication 525, Taxable and Nontaxable Income.

3. You must include benefits paid to you from regular union dues in your income. Different rules may apply if you contribute to a special union fund and those contributions are not deductible. In that case, only include as income any amount you get that is more than the contributions you made.

4. You can choose to have federal income tax withheld from your unemployment. You make this choice using Form W-4V, Voluntary Withholding Request. If you do not choose to have tax withheld, you may have to make estimated tax payments during the year.

5. If you are facing financial difficulties, you should visit IRS.gov. “What Ifs” for Struggling Taxpayers explains the tax effect of events such as the loss of a job. For example, if your income decreased, you may be eligible for some tax credits, such as the Earned Income Tax Credit. If you owe federal taxes and can’t pay your bill, contact the IRS as soon as possible. In many cases, the IRS can take steps to help ease your financial burden.

For more details, see IRS Publications 17, Your Federal Income Tax, or IRS Publication 525. You can download these booklets and Form W-4V at IRS.gov. You may also order them by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/5/14

 

Ten Things to Know about the Taxpayer Advocate Service

1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS and is your voice at the IRS.

2. We help taxpayers whose problems are causing financial difficulty. This includes businesses as well as individuals.

3. You may be eligible for our help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn’t working as it should.

4. As a taxpayer, you have rights that the IRS must respect. We’ll help you understand those rights and ensure that they’re protected in any contacts with the IRS.

5. If you qualify for our help, you’ll be assigned to one advocate who will be with you at every turn. And our service is always free.

6. We have at least one local taxpayer advocate office in every state, the District of Columbia and Puerto Rico. You can call your advocate, whose number is in your local directory, in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS, and on our website at www.irs.gov/advocate. You can also call us toll-free at 1-877-777-4778.

7. Our tax toolkit at www.TaxpayerAdvocate.irs.gov has basic tax information, details about tax credits (for individuals and businesses), and lots more.

8. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broader issues, please report it to us atwww.irs.gov/sams.

9. You can get updates at:

10. TAS is here to help you because when you’re dealing with a tax problem, the worst thing you can do is nothing at all!

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

3/4/14

 

Are Your Social Security Benefits Taxable?
Some people must pay taxes on part of their Social Security benefits. Others find that their benefits aren’t taxable. If you get Social Security, the IRS can help you determine if some of your benefits are taxable.
Here are seven tips about how Social Security affects your taxes:
1. If you received these benefits in 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, showing the amount.
2. If Social Security was your only source of income in 2013, your benefits may not be taxable. You also may not need to file a federal income tax return.
3. If you get income from other sources, then you may have to pay taxes on some of your benefits.
4. Your income and filing status affect whether you must pay taxes on your Social Security.
5. The best, and free, way to find out if your benefits are taxable is to use IRS Free File to prepare and e-file your tax return. If you made $58,000 or less, you can use Free File tax software. The software will figure the taxable benefits for you. If your income was more than $58,000 and you feel comfortable doing your own taxes, use Free File Fillable Forms. Free File is available only at IRS.gov/freefile.
6. If you file a paper return, visit IRS.gov and use theInteractive Tax Assistant tool to see if any of your benefits are taxable.
7. A quick way to find out if any of your benefits may be taxable is to add one-half of your Social Security benefits to all your other income, including any tax-exempt interest. Next, compare this total to the base amounts below. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:
  • $25,000 – for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year
  • $32,000 -for married couples filing jointly
  • $0 – for married persons filing separately who lived together at any time during the year

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

3/3/14

Seven Facts about Dependents and Exemptions
There are a few tax rules that affect everyone who files a federal income tax return. This includes the rules for dependents and exemptions. The IRS has seven facts on these rules to help you file your taxes.
1. Exemptions cut income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can usually deduct $3,900 for each exemption you claim on your 2013 tax return.
2. Personal exemptions.  You can usually claim an exemption for yourself. If you’re married and file a joint return you can also claim one for your spouse. If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer.
3. Exemptions for dependents.  You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative that meets certain tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for rules that apply to people who don’t have an SSN.
4. Some people don’t qualify.  You generally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.
5. Dependents may have to file.  People that you can claim as your dependent may have to file their own federal tax return. This depends on many things, including the amount of their income, their marital status and if they owe certain taxes.
6. No exemption on dependent’s return.  If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person as a dependent on your tax return. The rule applies because you have to right to claim that person.
7. Exemption phase-out.  The $3,900 per exemption is subject to income limits. This rule may reduce or eliminate the amount depending on your income. See Publication 501 for details.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

3/2/14

 

Affordable Care Act – Individuals
The Health Insurance Marketplace – Learn about Your Health Insurance Coverage Options
If you don’t have coverage or if you have it but want to find out about other options; help is available at the Health Insurance Marketplace. While no one is required to use the Marketplace, if you need insurance, it may be right for you. The Marketplace is where you can find health insurance coverage options that fit your budget and meet your needs.
The Department of Health and Human Services administers the requirements for the Marketplace and the health plans they offer.
An open enrollment period to get coverage for 2014 through the Marketplace began on October 1, 2013 and runs through March 31, 2014. The start of your coverage depends upon when you enroll.
When you visit the Marketplace, you can fill out one Marketplace application to learn if you can get lower costs based on your income, compare your coverage options side-by-side, and if you choose, you can enroll in health insurance coverage.
If you purchase coverage through the Marketplace, you may be eligible for the premium tax credit. This refundable tax credit helps people with moderate incomes afford health insurance coverage they purchase through the Marketplace.
If you are eligible for the credit, you can choose to “get it now” by having some or all of the credit paid in advance.  These payments go directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014.  Or you “get it later” by waiting to  get the credit when you file your 2014 tax return in 2015.
For more information about your coverage options, financial assistance and the Marketplace, visit HealthCare.gov. Find out more about the premium tax credit, as well as other tax-related provisions of the health care law at www.IRS.gov/aca.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

2/28/14

Deducting Medical and Dental Expenses
If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the medical and dental expense deduction:
1. AGI threshold increase.  Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of AGI in prior years.
2. Temporary exception for age 65.  The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016.
3. You must itemize.  You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.
4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.
5. Costs to include.  You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.
6. Expenses that qualify.  You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.
7. Travel costs count.  You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.
8. No double benefit.  You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

2/27/14

 

Best Ways to Get Free Tax Help from the IRS
Many of us need information when preparing our federal tax returns. We have questions about dependents, which forms to use and how to claim a credit.
Here are the best ways to get free help from the IRS:
• Visit the IRS on the Web.  The IRS.gov website is your one-stop tax shop. Start at ‘1040 Central.’ Before you go anywhere else, look here for tips and information that will help you file your federal tax return. This page has links to information about filing options, the latest news and frequently asked questions.
You will also find links to a number of online tools like theInteractive Tax Assistant and the IRS Tax Map for answers to your tax questions. Use ’Where’s My Refund?’ to check on your refund or use the EITC Assistant to see if you’re eligible for the Earned Income Tax Credit. You can also get all the forms and publications you need 24×7.
• Use IRS Free File to do your taxes.  Everyone can useIRS Free File to prepare and electronically file their federal tax return for free. IRS Free File is available exclusively on IRS.gov. The fastest way to get your refund is to combine e-file with direct deposit.
If you made $58,000 or less, you can use Free File tax software to e-file your tax return. The software is easy to use and will guide you through the steps of filing your taxes. If your income is more than $58,000 and you’re comfortable doing your own taxes, you can use Free File Fillable Forms. This program is the electronic version of IRS paper forms.
• Get tax help in your community.  The Volunteer Income Tax Assistance program helps people who make $52,000 or less prepare and file their tax returns for free. The Tax Counseling for the Elderly program offers help mainly to people 60 or older. AARP is part of the TCE program and helps taxpayers with low-to-moderate incomes.
VITA sites are located in neighborhoods all over the USA. Visit IRS.gov and enter ‘VITA’ in the search box. Then click ‘Free Tax Return Preparation for You’ to locate a VITA or TCE site near you.
If you don’t have Internet access you can call 800-TAX-FORM (800-829-3676) to order IRS forms and publications. You can check the status of your refund by calling 800-829-4477. Call the same number to hear taped messages on more than 150 tax topics. You can find the closest VITA site by calling the IRS at 800-906-9887.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/27/14

The Premium Tax Credit

The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes.  To be eligible for the credit, you generally need to satisfy three rules.

First, you need to get your health insurance coverage through the Health Insurance Marketplace. The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from October 1, 2013 through March 31, 2014.

Second, you need to have household income between one and four times the federal poverty line. For a family of four for tax year 2014, that means income from $23,550 to $94,200.

Third, you can’t be eligible for other coverage, such as Medicare, Medicaid, or sufficiently generous employer-sponsored coverage.

If a  Marketplace determines that you’re likely to qualify for the tax credit at the time you enroll, you have two choices:  You can choose to have some or all of the estimated credit paid in advance directly to your insurance company to lower what you pay out-of-pocket for your monthly premiums during 2014.  Or, you can wait to get all of the credit when you file your 2014 tax return in 2015.

If you wait to get the credit, it will either increase your refund or lower your balance due.

If you choose to receive the credit in advance, changes in your income or family size will affect the credit that you are eligible to receive.  If the credit on your tax return you file in 2015 does not match the amount you have received in advance, you will have to repay any excess advance payment, or you may get a larger refund if you are entitled to more. It is important to tell your Marketplace about changes in your income or family size as they happen during 2014 because these changes will affect the amount of your credit.

More Information

Find out more about the health care law and the Marketplace atwww.HealthCare.gov.

Find out more about the premium tax credit at www.IRS.gov/aca.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

02/26/14

IRS Reminds Individuals of Health Care Choices for 2014

Everyone has important decisions to make concerning health care coverage in 2014.  Starting in 2014, you must choose to either have basic health insurance coverage (known as minimum essential coverage) for yourself and everyone in your family for each month or go without health care coverage for some or all of the year.

If you don’t maintain health insurance coverage, you will need to either seek an exemption or make an individual shared responsibility payment for the period that you are not covered with the 2014 income tax return you file in 2015.

If you choose to have health care coverage, qualifying coverage includes:

  • health insurance coverage provided by your employer (including COBRA and retiree coverage),
  • health insurance coverage you purchase through a Marketplace,
  • Medicare, Medicaid or other government-sponsored health coverage including programs for veterans, or
  • coverage you buy directly from an insurance company.

If you purchase health insurance coverage through the Marketplace, you may be eligible for financial assistance including the premium tax credit, which will help lower the out-of-pocket cost of your monthly insurance premiums.

Qualifying coverage does not include certain coverage that may provide limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition.

If you choose to go without coverage or experience a gap in coverage, you may qualify for an exemption if you do not have access to affordable coverage, you have a gap of less than three consecutive months without coverage, or you qualify for one of several other exemptions.  A special hardship exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period but due to the enrollment process have a coverage gap at the beginning of 2014.

If you (or any of your dependents) do not maintain coverage and do not qualify for an exemption, you will need to make an individual shared responsibility payment with your return. In general, the payment amount is either a percentage of your household income or a flat dollar amount, whichever is greater. You will owe 1/12th of the annual payment for each month you (or your dependents) do not have coverage and are not exempt. The annual payment amount for 2014 is the greater of:

  • 1 percent of your household income that is above the tax return filing threshold for your filing status, such as Married Filing Jointly or single, or
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285.

The individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through theMarketplace in 2014. You will make the payment when you file your 2014 federal income tax return in 2015.

For more information about the individual shared responsibility provision and the premium tax credit, visit IRS.gov/aca. Visit the Department of Health and Human Services at HealthCare.gov for more information about health insurance coverage options and the Health Insurance Marketplace, financial assistance and exemptions.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/25/14

 

The Child Tax Credit May Cut Your Tax

If you have a child under age 17, the Child Tax Credit may save you money at tax time. Here are some key facts the IRS wants you to know about the credit.

• Amount.  The non-refundable Child Tax Credit may help cut your federal income tax by up to $1,000 for each qualifying child you claim on your tax return.

• Qualifications.  A child must pass seven tests to qualify for this credit:

1. Age test. The child was under age 17 at the end of 2013.

2. Relationship test. The child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child can also be a descendant of any of these persons. For example, your grandchild, niece or nephew will meet this test. Adopted children also qualify. An adopted child includes a child lawfully placed with you for legal adoption.

3. Support test. The child did not provide more than half of his or her own support for 2013.

4. Dependent test. You claim the child as a dependent on your 2013 federal income tax return.

5. Joint return test. A married child can’t file a joint return with their spouse they are filing jointly only to claim a tax refund.

6. Citizenship test. The child must be a U.S. citizen, U.S. national or U.S. resident alien. For more see Publication 519, U.S. Tax Guide for Aliens.

7. Residence test. In most cases, the child must have lived with you for more than half of 2013.

• Limitations. Your filing status and income may reduce or eliminate the credit.

• Additional Child Tax Credit.  If you get less than the full Child Tax Credit, you may qualify for the refundable Additional Child Tax Credit. This means you could get a refund even if you owe no tax.

• Schedule 8812.  If you qualify to claim the Child Tax Credit, make sure to check whether you must file Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

• Interactive Tax Assistant Tool.  You can use the ITA tool at IRS.gov to see if you can claim the credit. The tool can answer many of your tax questions.

For more on this topic see IRS Publication 972, Child Tax Credit, at IRS.gov. You can have it mailed by calling 800-TAX-FORM (800-829-3676).

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/24/14

 

Beware of Fake IRS Emails and Phone Calls

Tax scams that use email and phone calls that appear to come from the IRS are common these days. These scams often use the IRS name and logo or fake websites that look real.

Scammers often send an email or call to lure victims to give up their personal and financial information. The crooks then use this information to commit identity theft or steal your money. Some call their victims to demand payment on a pre-paid debit card or by wire transfer. But the IRS will not initiate contact with you to ask for this information by phone or email.

If you get this type of ‘phishing’ email, the IRS offers this advice:

  • Don’t reply to the message.
  • Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.
  • Don’t give out your personal or financial information.
  • Forward the email to phishing@irs.gov. Then delete it.

If you get an unexpected phone call from someone claiming to be from the IRS:

  • Ask for a call back number and an employee badge number.
  • If you think you may owe taxes, call the IRS at 800-829-1040. IRS employees can help you.
  • If you don’t owe taxes or have no reason to think that you do, call the Treasury Inspector General for Tax Administration at 800-366-4484 to report the incident.
  • You should also report it to the Federal Trade Commission by using their “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Be alert to scams that use the IRS as a lure. The IRS will not initiate contact with you through social media or text to ask for your personal or financial information.

More information on how to report phishing or phone scams is available on IRS.gov.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

02/22/14

 

Form W-2 Missing? IRS Can Help
If you worked as an employee last year, your employer must give you a Form W-2, Wage and Tax Statement. This form shows the amount of wages you received for the year and the taxes withheld from those wages. It’s important that you use this form to help make sure you file a complete and accurate tax return.
Most employers give Forms W-2 to their workers by Jan. 31. If you haven’t received yours by mid-February, here’s what you should do:
1. Contact your employer.  You should first ask your employer to give you a copy of your W-2. You’ll also need this form from any former employer you worked for during the year. If employers send the form to you, be sure they have your correct address.
2. Contact the IRS.  If you exhaust your options with your employer and you have not received your W-2, call the IRS at 800-829-1040. You’ll need the following when you call:
  • Your name, address, Social Security number and phone number;
  • Your employer’s name, address and phone number;
  • The dates you worked for the employer; and
  • An estimate of the amount of wages you were paid and federal income tax withheld in 2013. If possible, you can use your final pay stub to figure these amounts.
3. File on time.  Your tax return is due by April 15, 2014. If you don’t get your W-2 in time to file, use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Estimate your wages and withheld taxes as accurately as you can. The IRS may delay processing your return while it verifies your information.
If you need more time, you can apply for a six-month extension to file your federal tax return. The easiest way to apply is to visit IRS.gov and use IRS Free File to e-file the extension. You can also mail Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Make sure you file your request by midnight on April 15.
You may need to correct your tax return if you get your missing W-2 after you file. If the tax information on the W-2 is different from what you originally reported, you may need to file an amended tax return. Use Form 1040X, Amended U.S. Individual Income Tax Return to make the change.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/21/14

 

Don’t Fall for the Dirty Dozen Tax Scams

Every year, people fall prey to tax scams. That’s why the IRS sends a list of its annual “Dirty Dozen”. We want you to be safe and informed – and not become a victim.

Taxpayers who get involved in illegal tax scams can lose their money, or face stiff penalties, interest and even criminal prosecution. Remember, if it sounds too good to be true, it probably is. Be on the lookout for these scams.

Identity theft. Tax fraud using identity theft tops this year’s Dirty Dozen list. In many cases, an identity thief uses a taxpayer’s identity to illegally file a tax return and claim a refund. For the 2014 filing season, the IRS has expanded efforts to better protect taxpayers and help victims. Find more information on the identity protection page on IRS.gov.

Pervasive telephone scams.  The IRS has seen an increase in local phone scams across the country. Callers pretend to be from the IRS in hopes of stealing money or identities from victims. If you get a call from someone claiming to be from the IRS – and you know you owe taxes or think you might owe taxes, call the IRS at 1-800-829-1040. If you get a call from someone claiming to be from the IRS and know you don’t owe taxes or have no reason to think that you owe taxes, then call and report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484.

Phishing.  Phishing scams typically use unsolicited emails or fake websites that appear legitimate. Scammers lure in victims and prompt them to provide their personal and financial information. The fact is that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

False promises of “free money” from inflated refunds.  The bottom line is that you are legally responsible for what’s on your tax return, even if someone else prepares it. Scam artists often pose as tax preparers during tax time, luring victims in by promising large tax refunds. Taxpayers who buy into such schemes can end up penalized for filing false claims or receiving fraudulent refunds. Take care when choosing someone to do your taxes.

Return preparer fraud.  About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But some dishonest preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.  Choose carefully when hiring an individual or a company to do your return. Only use a tax preparer that will sign your return and enter their IRS Preparer Tax Identification Number (PTIN). For tips about choosing a preparer, visit www.irs.gov/chooseataxpro.

Hiding income offshore.  While there are valid reasons for maintaining financial accounts abroad, there are reporting requirements. U.S. taxpayers who maintain such accounts and do not comply with these requirements are breaking the law. They risk large penalties and fines, as well as the possibility of criminal prosecution.      The IRS has collected billions of dollars in back taxes, interest and penalties from people who participated in offshore voluntary disclosure programs since 2009. It is in the best interest of taxpayers to come forward and pay their fair share of taxes.

Impersonation of charitable organizations. Taxpayers need to be sure they donate to recognized charities. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working with the IRS to help the victims file casualty loss claims and get tax refunds.

False income, expenses or exemptions.  Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. These taxpayes often end up repaying the refund, including penalties and interest or faces criminal prosecution.

Frivolous arguments.  Frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or ignore their responsibility to pay taxes.

Falsely claiming zero wages or using false Form 1099.  Filing false information with the IRS is an illegal way to try to lower the amount of taxes owed. Typically, fraudsters use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 as a way to improperly reduce taxable income to zero. The fraudster may also submit a false statement denying wages and taxes reported by a payer to the IRS.

Abusive tax structures. These abusive tax schemes often involve sham business entities and dishonest financial arrangements for the purpose of evading taxes. The schemes are usually complex and involve multi-layer transactions to conceal the true nature and ownership of the taxable income and assets. The schemes often use Limited Liability Companies, Limited Liability Partnerships, International Business Companies, foreign financial accounts and offshore credit/debit cards.

Misuse of trusts.  There are reasonable uses of trusts in tax and estate planning. However, questionable transactions also exist. They may promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes.  These trusts rarely deliver promised tax benefits. They primarily avoid taxes and hide assets from creditors, including the IRS.

Tax scams can take many forms beyond the “Dirty Dozen”. The best defense is to remain vigilant. Get more information on tax scams at IRS.gov.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/20/14

 

Important Reminders about Tip Income
If you get tips on the job from customers, the IRS has a few important reminders:
  • Tips are taxable.  You must pay federal income tax on any tips you receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your return.  You must include the total of all tips you received during the year on your income tax return. This includes tips directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer.  If you receive $20 or more in tips in any one month, from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit and credit card tips you receive. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips. Do not report the value of any noncash tips to your employer.
  • Keep a daily log of tips.  Use Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/18/14

 

Four Good Reasons to Direct Deposit Your Refund

Would you choose direct deposit this year if you knew it’s the most popular way to get a federal tax refund? What if you learned it’s safe and easy, and combined with e-file, the fastest way to get a tax refund? The fact is almost 84 million taxpayers chose direct deposit in 2013.

Still not sure it’s for you? Here are four good reasons to choose direct deposit:

1. Convenience.  With direct deposit, your refund goes directly into your bank account. There’s no need to make a trip to the bank to deposit a check.

2. Security.  Since your refund goes directly into your account, there’s no risk of your refund check being stolen or lost in the mail.

3. Ease.  Choosing direct deposit is easy. When you do your taxes, just follow the instructions in the tax software or with your tax forms. Be sure to enter the correct bank account and routing number.

4. Options.  You can split your refund among up to three financial accounts. Checking, savings and certain retirement, health and education accounts may qualify. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to split your refund. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.

You should deposit your refund directly into accounts that are in your own name, your spouse’s name or both. Don’t deposit it in accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

Helpful tips about direct deposit and the split refund option are available inPublication 17, Your Federal Income Tax. Publication 17 and Form 8888 are available at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

02/14/14

 

IRS Tax Help ‘en Español’
Tax information can be tough to understand, especially if it’s not in your first language. The IRS offers many free and easy-to-use products for taxpayers who speak Spanish. Here are eleven tips if you need federal tax help in Spanish.
1. Get answers 24/7.  IRS.gov/espanol has a wealth of tax information for individuals and businesses. You can check the status of your tax refund through the online tool “¿Dónde está mi reembolso?” Use the Asistente EITC tool to check if you qualify for the Earned Income Tax Credit. The credit is available to many people who earned less than $51,567 in 2013.
2. Use Free File to e-file your taxes.  IRS Free File offers free tax preparation and e-file options for all taxpayers. If your 2013 income was $58,000 or less, you qualify to use free tax software. If your income was higher or you feel comfortable preparing your own taxes, there’s Free File Fillable Forms. This program uses the electronic versions of IRS paper forms. Visit IRS.gov/freefile and select ‘En Español’ to see your options.
3. You may qualify for free tax return preparation by a volunteer.  The VITA program generally offers free tax return preparation to people who earn $52,000 or less. The TCE program offers help mainly to people age 60 or older and specializes in tax issues unique to seniors. Returns are prepared and e-filed by certified volunteers. Visit ‘Voluntarios proveen ayuda gratuita con la preparación de su declaración de impuestos.’
4. Try IRS e-file.  Whether you use Free File, purchase tax software or pay a tax preparer, you should e-file your tax return. IRS e-file is safe, easy and the most common way to file a tax return. The IRS has processed over 1.2 billion e-filed returns. If you owe taxes, you can e-file early and pay by the April 15 tax deadline. Visit IRS.gov/espanol and select ‘Opciones Electrónicas’ to use this service.
5. Get up-to-date at the Multimedia Center.  Watch YouTube video tax tips and listen to IRS podcasts in Spanish and English. Enter the keywords “Centro Multimediático” in the search box at IRS.gov.
6. Use TeleTax for refund and tax information.  TeleTax is a toll-free, automated phone service. You can track your tax refund or listen to helpful pre-recorded messages on more than 125 tax topics. If you call to check on your refund, have a copy of your tax return handy. You can find the list of TeleTax topics in Spanish and English in the instructions for Form 1040, 1040A or 1040EZ. TeleTax is available 24/7 at 800-829-4477.
7. Get tax forms and publications.  You can visit IRS.gov/espanol to get several tax forms and publications in Spanish.
8. Visit the IRS Spanish newsroom.  You’ll see the IRS’s most recent announcements, tax tips and information. Avoid missing any benefits and keep up to date by typing “Noticias en Espanol” in the search box at IRS.gov.
9. Stay connected through Twitter en Español.  Get all the latest tax information and helpful tax tips in Spanish by following the IRS Spanish Twitter Account @IRSenEspanol.
10. Call the IRS for free tax help in Spanish.  IRS.gov can help most people online with their tax needs. But if you prefer to talk with someone at the IRS, you can call toll-free. Call 800-829-1040 and then press the number 8 to talk with a representative who speaks Spanish.
11. Get multilingual help at IRS Taxpayer Assistance Centers.  If you think you need help in person, visit an IRS office. The IRS helps visitors in more than 150 languages, including Spanish, either in person or by phone through an interpreter. Go to IRS.gov to check office locations, hours and available services. Just click on ‘Help & Resources’ and then on ‘Contact Your Local IRS Office.’
Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

02/13/2014

 

IRS Tips about Taxable and Nontaxable Income
Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.
Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.
Some types of income are not taxable except under certain conditions, including:
  • Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.
  • If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.
Here are some types of income that are usually not taxable:
  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses
For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at IRS.gov or call to have it mailed at 800-TAX-FORM (800-829-3676).

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/12/14

 

IRS Commissioner YouTube Video Highlights Help Options
With tax season in full swing, IRS Commissioner John Koskinen is sending a message to the nation’s taxpayers: the IRS will do all it can to help you file your taxes. The Commissioner’s message is in a special video on the IRS YouTube channel. It offers the following tips to help make your tax filing as smooth as possible this tax season:
  • The IRS will provide the assistance you need to get your taxes filed accurately and on time.
  • The IRS will work hard to issue refunds quickly while increasing our efforts to stop tax fraud and identity thieves.
  • Due to very limited resources, IRS phone lines will be very busy. You may experience extensive wait times. We are working to limit these wait times as much as possible. But the IRS has other options for you to get the information you need.
    • Try a tool.  Use the Where’s My Refund? tool to check on the status of your tax refund. We update the information once a day so there is no need to check the tool more often. Use the EITC Assistanttool to see if you should claim the money-saving Earned Income Tax Credit. Or use the Tax Trailsand Tax Map tools to find answers to your tax questions.
    • Download the app.  You can use the newly redesigned IRS smartphone app IRS2Go to check the status of your refund, get a copy of your transcript or get the latest tax news. IRS2Go is available in English and Spanish for Apple and Android devices.
    • Watch a video.  Choose from more than 100 short instructional videos on the official IRS YouTube channel.
    • Get tax tips.  Subscribe to the daily tax tips that the IRS issues during the filing season. You’ll also receive summertime tax tips, as well as special edition tax tips year-round.
    • Go social.  You can connect to the IRS through social media. You’ll find the IRS on Twitter@IRSnews@IRSenEspanol and @IRStaxpros. The IRS is also on Facebook and Tumblr. For IRS social media links, go to IRS Social Media.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/10/2014

 

What You Should Know about AMT
Have you ever wondered if the Alternative Minimum Tax applies to you? You may have to pay this tax if your income is above a certain amount. The AMT attempts to ensure that some individuals who claim certain tax benefits pay a minimum amount of tax.
Here are some things from the IRS that you should know about AMT:
1. You may have to pay the tax if your taxable income, plus certain adjustments, is more than the AMT exemption amount for your filing status. If your income is below this amount, you usually will not owe AMT.
2. The 2013 AMT exemption amounts for each filing status are:
• Single and Head of Household = $51,900
• Married Filing Joint and Qualifying Widow(er) = $80,800
• Married Filing Separate = $40,400
3. The rules for AMT are more complex than the rules for regular income tax. The best way to make it easy on yourself is to use IRS e-file to prepare and file your tax return. E-file tax software will figure AMT for you if you owe it.
4. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.
5. If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.
Visit IRS.gov to find out more about AMT. Also, see the Form 6251 instructions. You can get it at IRS.gov too or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/07/2014

 

IRS Small Business Tax Center Has Everything You Need
You don’t need to be a tax expert to run a business, but knowing the basics about taxes can help you run it better. You’ll find the basics and much more at the IRS.gov Small Business and Self-Employed Tax Center.
Whether you’re new to a business or been with it awhile, the Tax Center can help. You can apply for an Employer Identification Number, get a form or learn about employment taxes. The Center also includes these resources:
  • IRS Video Portal.  Watch helpful videos and webinars on many topics. Find out about filing and paying business taxes or about how the IRS audit process works. Under the ‘Businesses’ tab, look for the ’Small Biz Workshop.’ Watch it when you want to learn the basics about small business taxes.
  • Online Tools and Educational Products.  The list of Small Business products includes the Tax Calendar for Small Businesses and Self-Employed. Install the IRS CalendarConnector tool and access important tax dates and tips right from your smart phone or computer, even when you’re offline.
  • Small Business Events.  Find out about free IRS small business workshops and other events planned in your state.
Go to the Small Business and Self-Employed Tax Center and use the A-Z index to find whatever you need.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/04/2014

 

The Earned Income Tax Credit Gives Workers a Boost

For nearly 40 years, the Earned Income Tax Credit has been helping low- to moderate-income workers by giving them a boost to their income. Four out of five eligible workers claim EITC, but the IRS wants every eligible worker to claim and get this credit.
Here are some things the IRS wants you to know about this important credit:
Review your eligibility. If you worked and earned under $51,567, you may be eligible for EITC. If your financial or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. Workers who qualify for EITC must file a federal income tax return and specifically claim the credit to get it, even if they do not have a requirement to file a return.
Know the rules. Before claiming EITC, you need to understand the rules to be sure you qualify. It’s important to get it and get it right. There are several factors to consider:
  • Your filing status can’t be Married Filing Separately.
  • You must have a valid Social Security number for yourself, your spouse if married, and any qualifying child listed on your tax return.
  • You must have earned income. Earned income includes earnings such as wages, self-employment and farm income.
  • You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules.
  • If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.
Lower your tax or get a refund. The EITC reduces your federal tax and could result in a refund. If you qualify, the credit could be worth up to $6,044. The average credit was $2,355 last year.
Use free services. Don’t guess about your EITC eligibility. Use the EITC Assistant tool . on IRS.gov. The tool helps you find out if you qualify and will estimate the amount of your EITC. The best way to file your return to claim EITC is to use IRS Free File.  Free brand-name software will figure your taxes and EITC for you. Combining e-file with direct deposit is the fastest and safest way to get your refund. Free File is available exclusively on IRS.gov/freefile. Free help preparing and e-filing your return to claim your EITC is also available at thousands of Volunteer Income Tax Assistance sites around the country.
If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.  For more information, see IRSPublication 596, Earned Income Credit. It’s available in English and Spanish on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/03/2014

 

Which Tax Form Should You File?
Which form should you use to file your federal income taxes? These days, most people use a computer to prepare and e-file their tax forms. It’s easy, because tax software selects the right form for you. If you file on paper, you’ll need to pick the right form to use.
Before you decide, check out IRS Free File on IRS.gov. It has free tax software or a Fillable Forms option that allows you to fill in your tax forms using a computer. You can e-file the completed forms for free!
If you still prefer paper and pen, here are some tips on how to choose the best form for your situation.
You can generally use the 1040EZ if:
  • Your taxable income is below $100,000;
  • Your filing status is single or married filing jointly;
  • You are not claiming any dependents; and
  • Your interest income is $1,500 or less.
The 1040A may be best for you if:
  • Your taxable income is below $100,000;
  • You have capital gain distributions;
  • You claim certain tax credits; and
  • You claim adjustments to income for IRA contributions and student loan interest.
However, reasons you must use the 1040 include:
  • Your taxable income is $100,000 or more;
  • You claim itemized deductions;
  • You are reporting self-employment income; or
  • You are reporting income from sale of a property.
Read more about which form to use in IRS Publication 17, Your Federal Income Tax. The quickest way to get tax forms and instructions is to visit IRS.gov and click on the ‘Forms & Pubs’ tab. New tax forms often appear online well before the printed forms are available.
You can also have forms mailed to you by calling the IRS at 800-TAX-FORM (800-829-3676), or you can pick them up at a local IRS office. Some libraries and post offices also have tax forms.

 

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

01/31/2014

 

Five Great Reasons to E-file
Are you still doing your taxes on paper? If so, join the 122 million taxpayers who e-filed last year. They already know that IRS e-fileis the best way to file a federal tax return.
Here are five great reasons why you should e-file your tax return:
1. Accurate and complete.  E-file is the best way to file an accurate and complete tax return. The tax software does the math for you, and it helps you avoid mistakes.
2. Safe and secure.  IRS e-file meets strict guidelines and uses the best encryption technology. The IRS has safely and securely processed more than 1.2 billion e-filed individual tax returns since the program began.
3. Faster refunds.  E-filing usually brings a faster refund because there is nothing to mail and your return is less likely to have errors, which take longer to process. The IRS issues most refunds in less than 21 days. The fastest way to get your refund is to combine e-file with direct deposit into your bank account.
4. Payment options.  If you owe taxes, you can e-file early and set an automatic payment date anytime on or before the April 15 due date. You can pay by check or money order, or by debit or credit card. You can also transfer funds electronically from your bank account.
5. E-file’s easy.  You can e-file your federal return throughIRS Free File, the free tax preparation program available only at IRS.gov. You can also use commercial tax software or ask your tax preparer to e-file your return. If you qualify,IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly will e-file your return for free.
For more information about IRS e-file, visit IRS.gov.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

01/30/2014

 

Top 10 Tips about Free Tax Preparation
Each year millions of people have their tax returns prepared for free by volunteers. These volunteers are part of the IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs.
Here are the top 10 tips the IRS wants you to know about VITA and TCE:
1. The IRS sponsors both the VITA and TCE programs. They work with local community groups to both train and certify volunteers.
2. The VITA program generally offers free tax return preparation and e-filing to people who earn $52,000 or less.
3. The TCE program offers help mainly to people age 60 or older. Volunteers specialize in tax issues unique to seniors. AARP is part of the TCE program and helps taxpayers with low to moderate incomes.
4. VITA and TCE provide free electronic filing. An e-filed tax return is the safest and most accurate way to file. Using e-file combined with direct deposit is the fastest way to get your refund.
5. Using VITA and TCE may help ensure you get all the tax credits and deductions you’re able to claim. For example, credits that you may qualify for include the Earned Income Tax Credit, the Child Tax Credit and the Credit for the Elderly.
6. Some sites provide bilingual help for people who speak limited English.
7. VITA provides free tax assistance to military members and their families. Volunteers help with tax issues related to the military. These include special rules and tax benefits for those serving in combat zones.
8. At some VITA sites, you can also prepare your own federal and state tax returns using free web-based software. This is an option if you don’t need much help or don’t have a home computer. Volunteers are on site to guide you if you need help. The self-preparation options generally offer free tax return preparation software and e-filing to people who earn $58,000 or less.
9. For more than 40 years, the IRS has partnered with nonprofit and community organizations to offer these vital services. Thousands of VITA and TCE sites around the nation will open in late Jan. and early Feb.
10. Visit IRS.gov to find the nearest VITA site. Search the word ’VITA’ and then click on “Free Tax Return Preparation for You by Volunteers.” Site information is also available by calling the IRS at 800-906-9887. To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

1/28/2014

 

Who Should File a 2013 Tax Return?
Do you need to file a federal tax return this year? Perhaps. The amount of your income, filing status, age and other factors determine if you must file.
Even if you don’t have to file a tax return, there are times when you should. Here are five good reasons why you should file a return, even if you’re not required to do so:
1. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.
2. Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use the EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return and claim it.
3. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return.
4. American Opportunity Credit.  Are you a student or do you support a student? If so, you may be eligible for this credit. Students in their first four years of higher education may qualify for as much as $2,500. Even those who owe no tax may get up to $1,000 of the credit refunded per eligible student. You must file Form 8863, Education Credits, with your tax return to claim this credit.
5. Health Coverage Tax Credit.  Did you receive Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation? If so, you may qualify for the Health Coverage Tax Credit. The HCTC helps make health insurance more affordable for you and your family. This credit pays 72.5 percent of qualified health insurance premiums. Visit IRS.gov for more on this credit.
To sum it all up, check to see if you would benefit from filing a federal tax return. You may qualify for a tax refund even if you don’t have to file. And remember, if you do qualify for a refund, you must file a return to claim it.
The instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. You can also use the Interactive Tax Assistant tool on IRS.gov to see if you need to file. The tool is available 24/7 to answer many tax questions.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

1/24/14

IRS Warns of Tax-time Scams

It’s true: tax scams proliferate during the income tax filing season. This year’s season opens on Jan. 31. The IRS provides the following scam warnings so you can protect yourself and avoid becoming a victim of these crimes:

  • Be vigilant of any unexpected communication purportedly from the IRS at the start of tax season.
  • Don’t fall for phone and phishing email scams that use the IRS as a lure. Thieves often pose as the IRS using a bogus refund scheme or warnings to pay past-due taxes.
  • The IRS doesn’t initiate contact with taxpayers by email to request personal or financial information. This includes any type of e-communication, such as text messages and social media channels.
  • The IRS doesn’t ask for PINs, passwords or similar confidential information for credit card, bank or other accounts.
  • If you get an unexpected email, don’t open any attachments or click on any links contained in the message. Instead, forward the email to phishing@irs.gov. For more about how to report phishing scams involving the IRS visit the genuine IRS website, IRS.gov.

Here are several steps you can take to help protect yourself against scams and identity theft:

  • Don’t carry your Social Security card or any documents that include your Social Security number or Individual Taxpayer Identification Number.
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact and are sure of the recipient.
  • Be careful when you choose a tax preparer. Most preparers provide excellent service, but there are a few who are unscrupulous

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

11/07/13

IRS Warns of Phone Scam

The IRS is warning the public about a phone scam that targets people across the nation, including recent immigrants. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.

The callers who commit this fraud often:

  • Use common names and fake IRS badge numbers.
  • Know the last four digits of the victim’s Social Security number.
  • Make caller ID appear as if the IRS is calling.
  • Send bogus IRS emails to support their scam.
  • Call a second time claiming to be the police or DMV, and caller ID again supports their claim.

The truth is the IRS usually first contacts people by mail – not by phone – about unpaid taxes. And the IRS won’t ask for payment using a pre-paid debit card or wire transfer. The agency also won’t ask for a credit card number over the phone.

If you get a call from someone claiming to be with the IRS asking for a payment, here’s what to do:

  • If you owe federal taxes, or think you might owe taxes, hang up and call the IRS at 800-829-1040. IRS workers can help you with your payment questions.
  • If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.
  • You can also file a complaint with the Federal Trade Commission at FTC.gov. Add “IRS Telephone Scam” to the comments in your complaint.

Be alert for phone and email scams that use the IRS name. The IRS will never request personal or financial information by email, texting or any social media. You should forward scam emails to phishing@irs.gov. Don’t open any attachments or click on any links in those emails.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

08/28/13

Give Withholding and Payments a Check-up to Avoid a Tax Surprise

Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. When this happens, it’s a good idea to check your federal tax withholding or payments. Doing so now can help avoid a tax surprise when you file your 2013 tax return next year.

Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe.

Wages and Income Tax Withholding

  • New Job.   Your employer will ask you to complete a Form W-4, Employee’s Withholding Allowance Certificate. Complete it accurately to figure the amount of federal income tax to withhold from your paychecks.
  • Life Event.  Change your Form W-4 when certain life events take place. A change in marital status, birth of a child, getting or losing a job, or purchasing a home, for example, can all change the amount of taxes you owe. You can typically submit a new Form W–4 anytime.
  • IRS Withholding Calculator.  This handy online tool will help you figure the correct amount of tax to withhold based on your situation. If a change is necessary, the tool will help you complete a new Form W-4.

Self-Employment and Other Income

  • Estimated tax.  This is how you pay tax on income that’s not subject to withholding. Examples include income from self-employment, interest, dividends, alimony, rent and gains from the sale of assets. You also may need to pay estimated tax if the amount of income tax withheld from your wages, pension or other income is not enough. If you expect to owe a thousand dollars or more in taxes and meet other conditions, you may need to make estimated tax payments.
  • Form 1040-ES.  Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you need to pay estimated taxes on a quarterly basis.
  • Change in Estimated Tax.  After you make an estimated tax payment, some life events or financial changes may affect your future payments. Changes in your income, adjustments, deductions, credits or exemptions may make it necessary for you to refigure your estimated tax.
  • Additional Medicare Tax.  A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status.
  • • Net Investment Income Tax.  A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/26/13

Ten Things to Know about Farm Income and Deductions

If you earn money managing or working on a farm, you are in the farming business. Farms include plantations, ranches, ranges and orchards. Farmers may raise livestock, poultry or fish, or grow fruits or vegetables. Here are 10 things about farm income and expenses that the IRS wants you to know.

1. Crop insurance proceeds.  Insurance payments from crop damage count as income. They should generally be reported the year they are received.

2. Deductible farm expenses.  Farmers can deduct ordinary and necessary expenses as business expenses. An ordinary farming expense is one that is common and accepted in the farming business. A necessary expense is one that is appropriate for that business.

3. Employees and hired help.  You can deduct reasonable wages you paid to your farm’s full and part-time workers. You must withhold Social Security, Medicare and income taxes from your employees’ wages.

4. Items purchased for resale.  If you purchased livestock and other items for resale, you may be able to deduct their cost in the year of the sale. This includes freight charges for transporting livestock to your farm.

5. Repayment of loans. You can only deduct the interest you paid on a loan if the loan proceeds are used for your farming business. You cannot deduct interest on a loan used for personal expenses.

6. Weather-related sales.  Bad weather may force you to sell more livestock or poultry than you normally would. If so, you may be able to postpone reporting a gain from the sale of the additional animals.

7. Net operating losses.  If deductible expenses are more than income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid for past years, or you may be able to reduce your tax in future years.

8. Farm income averaging.  You may be able to average some or all of the current year’s farm income by spreading it out over the past three years. This may lower your taxes if your farm income is high in the current year and low in one or more of the past three years. This method does not change your prior year tax. It only uses the prior year information to figure your current year tax.

9. Fuel and road use.  You may be able to claim a tax credit or refund of federal excise taxes on fuel used on your farm for farm work.

10. Farmers Tax Guide.  More information about farm income and deductions is in Publication 225, Farmer’s Tax Guide

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

03/23/13

Time is Running Short to Claim Your 2009 Refund

If you haven’t filed your 2009 federal tax return, you may still have time to claim your tax refund. The IRS has $917 million in unclaimed refunds from an estimated 984,000 tax returns that people didn’t file for the 2009 tax year. The IRS estimates that half the potential refunds for 2009 are more than $500.

Here are some things the IRS wants you to know about unclaimed refunds:

1. Not required to file.  You may not have filed a 2009 tax return because you didn’t earn enough income to have a filing requirement. If you had taxes withheld from your wages or made quarterly estimated payments, you can still file a return and claim your refund.

2. Three-year window.  You have three years to claim a refund. If you don’t claim your refund within three years, the money becomes property of the U.S. Treasury. For 2009 returns, the window closes on April 15, 2013. You must properly address, postmark and mail your return by that date. There is no penalty for filing a late return if you are due a refund.

3. Don’t miss the EITC.  By not filing a return, you may miss an important credit — the Earned Income Tax Credit. For 2009, the credit is worth as much as $5,657. The EITC can put extra money in the pockets of individuals and families with low and moderate incomes. If you are eligible for the EITC, you must file a federal income tax return to claim the credit. This is true even if you are not otherwise required to file.

4. Some refunds applied.  The IRS may hold your refund if you have not filed tax returns for 2010 and 2011. The law allows the use of your federal tax refund to pay any amounts still owed to the IRS or your state tax agency. If you have unpaid debts, such as overdue child support or student loans, your refund may be applied to pay that debt.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/21/13

Tax Rules for Children Who Have Investment Income

Some children receive investment income and are required to file a federal tax return. If a child cannot file his or her own tax return for any reason, such as age, the child’s parent or guardian is responsible for filing a return on the child’s behalf.

There are special tax rules that affect how parents report a child’s investment income. Some parents can include their child’s investment income on their tax return. Other children may have to file their own tax return.

Here are four facts from the IRS about the taxability of your child’s investment income.

1. Investment income normally includes interest, dividends, capital gains and other unearned income, such as from a trust.

2. Special rules apply if your child’s total investment income is more than $1,900. The parent’s tax rate may apply to part of that income instead of the child’s tax rate.

3. If your child’s total interest and dividend income is less than $9,500, you may be able to include the income on your tax return. See Form 8814, Parents’ Election to Report Child’s Interest and Dividends. If you make this choice, the child does not file a return.

4. Your child must file their own tax return if they received investment income of $9,500 or more. File Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, with the child’s federal tax return

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/19/13

Home Office Deduction: a Tax Break for Those Who Work from Home

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/18/13

Tax Rules on Early Withdrawals from Retirement Plans

Taking money out early from your retirement plan can cost you an extra 10 percent in taxes. Here are five things you should know about early withdrawals from retirement plans.

1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.

2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10 percent tax on your withdrawal.

3. The additional 10 percent tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10 percent tax also does not apply to a rollover.

5. There are several other exceptions to the additional 10 percent tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/15/13

Claiming the Child and Dependent Care Tax Credit

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.

1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.

2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.

3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.

5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.

6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.

7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.

8. You must include the Social Security number on your tax return for each qualifying individual.

9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.

10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/14/13

Five Tax Credits that Can Reduce Your Taxes

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify.

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans.

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516  Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

03/12/13

Important Facts about Mortgage Debt Forgiveness

If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.

Here are 10 key facts from the IRS about mortgage debt forgiveness:

1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.

7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.

8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.

9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/08/13

Four Things You Should Know if You Barter

Small businesses sometimes barter to get products or services they need. Bartering is the trading of one product or service for another. Usually there is no exchange of cash. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services.

The IRS reminds all taxpayers that the fair market value of property or services received through a barter is taxable income. Both parties must report as income the value of the goods and services received in the exchange.

Here are four facts about bartering:

1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually. The exchange must give a copy of the form to its members and file a copy with the IRS.

2. Bartering income. Barter and trade dollars are the same as real dollars for tax reporting purposes. If you barter, you must report on your tax return the fair market value of the products or services you received.

3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

4. Reporting rules. How you report bartering varies depending on which form of bartering takes place. Generally, if you are in a trade or business you report bartering income on Form 1040, Schedule C, Profit or Loss from Business. You may be able to deduct certain costs you incurred to perform the bartering

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

03/07/13

Ten Facts about Capital Gains and Losses

The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.

Here are 10 facts from the IRS on capital gains and losses:

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.

2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income.

4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.

5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a ‘net capital gain.’

7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains.

8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.

10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/06/13

Take Credit for Your Retirement

Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver’s Credit.

Here are seven points the IRS would like you to know about the Saver’s Credit:

1. The Saver’s Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.

2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:

  • Single, married filing separately or qualifying widow or widower, with income up to $28,750
  • Head of Household with income up to $43,125
  • Married Filing Jointly, with income up to $57,500

3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else’s tax return.

4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.

5. The Saver’s Credit reduces the tax you owe.

6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.

7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/05/13

Four Tax Tips about Your Unemployment Benefits

If you received unemployment benefits this year, you must report the payments on your federal income tax return.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you received in your total income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount you were paid and the amount of any federal income taxes withheld from your payments.

2. Types of unemployment benefits include:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability payments from a government program paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

3. You must include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

4. You can choose to have federal income tax withheld from your unemployment benefits. You make this choice using Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

 

03/04/13

Seven Important Tax Facts about Medical and Dental Expenses

If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.

1. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.

2. Deduction is limited.  You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.

3. Expenses paid in 2012.  You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.

4. Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply.

5. Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.

6. Travel is included.  You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.

7. No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

03/01/13

Social Security Benefits and Your Taxes

Some people must pay taxes on their Social Security benefits. If you get Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, by early February. The form shows the amount of benefits you received in 2012.

Here are five tips from the IRS to help you determine if your benefits are taxable:

1. The amount of your income and your filing status affect whether you must pay taxes on your Social Security.

2. If Social Security was your only income in 2012, your benefits are probably not taxable. You also may not need to file a federal income tax return.

3. If you received income from other sources, then you may have to pay taxes on your benefits.

4. You can follow these two quick steps to see if your benefits are taxable:

• Add one-half of the Social Security benefits you received to all your other income, including tax-exempt interest. Tax-exempt interest includes interest from state and municipal bonds.

• Next, compare this total to the ‘base amount’ for your filing status. If the total is more than your base amount, then some of your benefits may be taxable.

The three 2012 base amounts are:

$25,000 for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year;

$32,000 for married couples filing jointly; and

$0 for married persons filing separately who lived together at any time during the year.

5. If you use IRS e-file to prepare and file your tax return, the tax software will figure your taxable benefits for you. If you file a paper return, you can use the Interactive Tax Assistant tool on the IRS website to check if your benefits are taxable. The ITA is a resource that can help answer tax law questions. There also is a worksheet in the instructions for Form 1040 or 1040A that you can use to figure your taxable benefits.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/26/13

Taxable and Nontaxable Income

Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:

  • Child support payments;
  • Gifts, bequests and inheritances;
  • Welfare benefits;
  • Damage awards for physical injury or sickness;
  • Cash rebates from a dealer or manufacturer for an item you buy; and
  • Reimbursements for qualified adoption expenses.

Some income is not taxable except under certain conditions. Examples include:

  • Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.

All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering – the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/25/13

How You Can Get Prior Year Tax Information from the IRS

The IRS offers several different ways to get tax return information or a copy of your own tax return for prior years. Here are options to help you get the information you need.

  • Tax Return Transcript. This shows most line items from your tax return as originally filed, along with any forms and schedules from your return.  This transcript does not reflect any changes made to the return after you filed it. Tax return transcripts are free. After the IRS has processed a return, transcripts are available for the current tax year and the past three tax years.
  • Tax Account Transcript. This shows any adjustments made by you or the IRS after filing your return. This transcript shows basic data, like marital status, type of return filed, adjusted gross income and taxable income. Tax account transcripts are free, and are available after the IRS has processed the return for the current tax year and the past three tax years.
  • Order a Transcript. You can request both transcript types online, by phone or by mail. To place your order online, go to IRS.gov and use the “Order a Transcript” tool. Order a transcript by phone at 800-908-9946 . A recorded message will guide you through the process. You can also request your tax return transcript by mail by completing Form 4506T-EZ. Use Form 4506T to mail a request for your tax account transcript. You can get both forms online at IRS.gov.
  • Tax Return Copies.  Actual copies of your tax returns are generally available for the current tax year and as far back as six years. The fee for each copy you order is $57. To request a copy of your tax return, complete Form 4506, available on IRS.gov. Mail your request to the IRS office listed on the form for your area.
  • Delivery Times.  The turnaround time for online and phone orders is typically 5 to 10 days from the time the IRS receives the request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T-EZ or Form 4506T, and allow 60 days when ordering actual copies of your tax return by mail.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

02/24/13

Missing Your W-2? Here’s What to Do

It’s a good idea to have all your tax documents together before preparing your 2012 tax return. You will need your W-2, Wage and Tax Statement, which employers should send by the end of January. Give it two weeks to arrive by mail.

If you have not received your W-2, follow these three steps:

1. Contact your employer first.  Ask your employer – or former employer – to send your W-2 if it has not already been sent. Make sure your employer has your correct address.

2. Contact the IRS. After February 14, you may call the IRS at 800-829-1040 if you have not yet received your W-2. Be prepared to provide your name, address, Social Security number and phone number. You should also have the following information when you call:

• Your employer’s name, address and phone number;

• Your employment dates; and

• An estimate of your wages and federal income tax withheld in 2012, based upon your final pay stub or leave-and-earnings statement, if available.

3. File your return on time. You should still file your tax return on or before April 15, 2013, even if you have not yet received your W-2. File Form 4852, Substitute for Form W-2, Wage and Tax Statement, in place of the W-2. Use the form to estimate your income and withholding taxes as accurately as possible. The IRS may delay processing your return while it verifies your information.

If you need more time to file you can get a six-month extension of time. File Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return.  If you are requesting an extension, you must file this form on or before April 15, 2013.

If you receive the missing W-2 after filing your tax return and the information on the W-2 is different from what you reported using Form 4852, then you must correct your tax return. File Form 1040X, Amended U.S. Individual Income Tax Return to amend your tax return.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/23/13

Determining Your Correct Filing Status

It’s important to use the correct filing status when filing your income tax return. It can impact the tax benefits you receive, the amount of your standard deduction and the amount of taxes you pay. It may even impact whether you must file a federal income tax return.

Are you single, married or the head of your household? There are five filing statuses on a federal tax return. The most common are “Single,” “Married Filing Jointly” and “Head of Household.” The Head of Household status may be the one most often claimed in error.

The IRS offers these seven facts to help you choose the best filing status for you.

1. Marital Status.  Your marital status on the last day of the year is your marital status for the entire year.

2. If You Have a Choice.  If more than one filing status fits you, choose the one that allows you to pay the lowest taxes.

3. Single Filing Status. Single filing status generally applies if you are not married, divorced or legally separated according to state law.

4. Married Filing Jointly.  A married couple may file a return together using the Married Filing Jointly status. If your spouse died during 2012, you usually may still file a joint return for that year.

5. Married Filing Separately.  If a married couple decides to file their returns separately, each person’s filing status would generally be Married Filing Separately.

6. Head of Household.  The Head of Household status generally applies if you are not married and have paid more than half the cost of maintaining a home for yourself and a qualifying person.

7. Qualifying Widow(er) with Dependent Child. This status may apply if your spouse died during 2010 or 2011, you have a dependent child and you meet certain other conditions

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax Internet Based Tax Returns

 

02/22/13

Beware of Bogus IRS Emails

The IRS receives thousands of reports every year from taxpayers who receive emails out-of-the-blue claiming to be from the IRS. Scammers use the IRS name or logo to make the message appear authentic so you will respond to it. In reality, it’s a scam known as “phishing,” attempting to trick you into revealing your personal and financial information. The criminals then use this information to commit identity theft or steal your money.

The IRS has this advice for anyone who receives an email claiming to be from the IRS or directing you to an IRS site:

  • Do not reply to the message;
  • Do not open any attachments. Attachments may contain malicious code that will infect your computer; and
  • Do not click on any links in a suspicious email or phishing website and do not enter confidential information. Visit the IRS website and click on ‘Identity Theft’ at the bottom of the page for more information.

Here are five other key points the IRS wants you to know about phishing scams.

1. The IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information;

2. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts;

3. The address of the official IRS website is www.irs.gov. Do not be misled by sites claiming to be the IRS but ending in .com, .net, .org or anything other than .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on their site and report it to the IRS;

4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 begin_of_the_skype_highlighting              1-800-829-1040     end_of_the_skype_highlighting to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. Forward a suspicious email to phishing@irs.gov;

5. You can help the IRS and other law enforcement agencies shut down these schemes. Visit the IRS.gov website to get details on how to report scams and helpful resources if you are the victim of a scam. Click on “Reporting Phishing” at the bottom of the page.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

02/21/13

Save Money with the Child Tax Credit

If you have a child under age 17, the Child Tax Credit may save you money at tax-time. Here are some facts the IRS wants you to know about the credit.

  • Amount.  The non-refundable Child Tax Credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return.
  • Qualifications.  For this credit, a qualifying child must pass seven tests:

1. Age test.  The child must have been under age 17 at the end of 2012.

2. Relationship test.  The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child may also be a descendant of any of these individuals, including your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

3. Support test. The child must not have provided more than half of their own support for the year.

4. Dependent test. You must claim the child as a dependent on your federal tax return.

5. Joint return test.  The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.

6. Citizenship test.  The child must be a U.S. citizen, U.S. national or U.S. resident alien.

7. Residence test. In most cases, the child must have lived with you for more than half of 2012.

  • Limitations. The Child Tax Credit is subject to income limitations, and may be reduced or eliminated depending on your filing status and income.
  • Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the refundable Additional Child Tax Credit.
  • Schedule 8812.  If you qualify to claim the Child Tax Credit make sure to check whether you must complete and attach the new Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

02/20/13

Five Facts to Know about AMT

The Alternative Minimum Tax may apply to you if your income is above a certain amount. Here are five facts the IRS wants you to know about the AMT:

1. You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.

2. The 2012 AMT exemption amounts for each filing status are:

  • Single and Head of Household = $50,600;
  • Married Filing Joint and Qualifying Widow(er) = $78,750; and
  • Married Filing Separate = $39,375.

3. AMT attempts to ensure that some individuals and corporations who claim certain exclusions, tax deductions and tax credits pay a minimum amount of tax.

4. You should use IRS e-file to prepare and file your tax return. You figure AMT using different rules than those you use to figure your regular income tax. IRS e-file software will determine if you owe AMT, and if you do, it will figure the tax for you.

5. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

02/19/13

Important Reminders about Tip Income

If your pay from your job includes tips, the IRS has a few important reminders about tip income:

  • Tips are taxable. Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your return. You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
  • Keep a daily log of tips. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

Michael B. Welch, CPA  149 S. Briggs Street Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

04/17/12

Failure to File or Pay Penalties: Eight Facts

The number of electronic filing and payment options increases every year, which helps reduce your burden and also improves the timeliness and accuracy of tax returns. When it comes to filing your tax return, however, the law provides that the IRS can assess a penalty if you fail to file, fail to pay or both.

Here are eight important points about the two different penalties you may face if you file or pay late.

1. If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty.

2. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return on time and pay as much as you can, then explore other payment options. The IRS will work with you.

3. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.

4. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

5. If you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.

6. If you request an extension of time to file by the tax deadline and you paid at least 90 percent of your actual tax liability by the original due date, you will not face a failure-to-pay penalty if the remaining balance is paid by the extended due date.

7. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

8. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

04/12/12

Managing Your Tax Records After You Have Filed

Keeping good records after you file your taxes is a good idea, as they will help you with documentation and substantiation if the IRS selects your return for an audit. Here are five tips from the IRS about keeping good records.

1. Normally, tax records should be kept for three years.

2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

3. n most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.

4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.

5. or more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available on the IRS website at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

04/04/12

Six Tips for People Who Pay Estimated Taxes

You may need to pay estimated taxes to the IRS during the year if you have income that is not subject to withholding. This depends on what you do for a living and the types of income you receive.

These six tips from the IRS explain estimated taxes and how to pay them.

1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.

2. As a general rule, you must pay estimated taxes in 2012 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and 2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2012 taxes or 100 percent of the tax on your 2011 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.

3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.

4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.

5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15 of the next or following year.

6. Form 1040-ES, Estimated Tax for Individuals, has everything you need to pay estimated taxes. It includes instructions, worksheets, schedules and payment vouchers. However, the easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, at www.irs.gov. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

04/03/12

Tips for Taxpayers Who Can’t Pay Their Taxes on Time

If you owe tax with your federal tax return, but can’t afford to pay it all when you file, the IRS wants you to know your options and help you keep interest and penalties to a minimum.

Here are five tips:

1. File your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. For electronic and credit card options for paying see IRS.gov.  You may also mail a check payable to the United States Treasury

2. Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code.

3. Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include: • Using the Online Payment Agreement application  and • Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.

4. Request an extension of time to pay. For tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.

5. If you receive a bill from the IRS, please contact us immediately to discuss these and other payment options. Ignoring the bill will only compound your problem and could lead to IRS collection action.

If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

03/30/12

Eight Tips to Determine if Your Gift is Taxable

If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.

2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.

3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.

4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts: • Gifts that are do not exceed the annual exclusion for the calendar year, • Tuition or medical expenses you pay directly to a medical or educational institution for someone, • Gifts to your spouse, • Gifts to a political organization for its use, and • Gifts to charities.

6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.

7. You must file a gift tax return on Form 709, if any of the following apply:

• You gave gifts to at least one person (other than your spouse) that are more  than the annual exclusion for the year. • You and your spouse are splitting a gift.

• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.

• You gave your spouse an interest in property that will terminate due to a future event.

8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Tax

 

03/16/12

Tax Rules May Affect Your Child’s Investment Income

Parents may not realize that there are tax rules that may affect their child’s investment income. The IRS offers the following four facts to help parents determine whether their child’s investment income will be taxed at the parents’ rate or the child’s rate.

1. Investment income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income.

2. Age requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meets one of three age requirements for 2011:

  • Was under age 18 at the end of the year,
  • Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or
  • Was a full-time student over age 18 and under age 24 at the end of the year and did not have earned income that was more than half of his or her support.

3. Form 8615 To figure the child’s tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child’s federal income tax return.

4. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents’ Election To Report Child’s Interest and Dividends.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

 

 

03/13/12

Tax Credits Available for Certain Energy-Efficient Home Improvements

Item #2, Residential Energy Efficient Property Credit has been corrected to replace an erroneous reference that geothermal heat pumps qualify only when installed on or in connection with a taxpayer’s main home located in the United States. The error was in limiting the credit to the taxpayer’s main home. Qualified geothermal heat pumps that are installed on or in a taxpayer’s home (including a taxpayer’s second home) located in the United States may qualify for the credit. Only qualified fuel cell property is subject to the main home installation requirement under the Residential Energy Efficient Property Credit rules.

The IRS would like you to get some credit for qualified home energy improvements this year. Perhaps you installed solar equipment or recently insulated your home? Here are two tax credits that may be available to you:

1. The Non-business Energy Property Credit Homeowners who install energy-efficient improvements may qualify for this credit. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements includeadding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. If you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. Qualifying improvements must have been placed into service in the taxpayer’s principal residence located in the United States before Jan. 1, 2012.

2. Residential Energy Efficient Property Credit This tax credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines. The credit, which runs through 2016, is 30 percent of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. Generally, you may include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; fuel cell property qualifies only when installed on or in connection with your main home located in the United States.

Not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement, which can usually be found on the manufacturer’s website or with the product packaging. If you’re eligible, you can claim both of these credits on Form 5695, Residential Energy Credits when you file your 2011 federal income tax return. Also, note these are tax credits and not deductions, so they will generally reduce the amount of tax owed dollar for dollar. Finally, you may claim these credits regardless of whether you itemize deductions on IRS Schedule A.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

03/09/12

Six Facts About the Alternative Minimum Tax

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.

Here are six facts the Internal Revenue Service wants you to know about the AMT and changes for 2011.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes, plus any adjustments and preference items that apply to you, are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2011, Congress raised the AMT exemption amounts to the following levels

  • $74,450 for a married couple filing a joint return and qualifying widows and widowers;
  • $48,450 for singles and heads of household;
  • $37,225 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,800 for 2011

 

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

03/08/12

Ten Tips on a Tax Credit for Child and Dependent Care Expenses

If you paid someone to care for your child, spouse, or dependent last year, you may qualify to claim the Child and Dependent Care Credit when you file your federal income tax return. Below are 10 things the IRS wants you to know about claiming the credit for child and dependent care expenses.

1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.

2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

3. You – and your spouse if you file jointly – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or were physically or mentally unable to care for themselves.

4. The payments for care cannot be paid to your spouse, to the parent of your qualifying person, to someone you can claim as your dependent on your return, or to your child who will not be age 19 or older by the end of the year even if he or she is not your dependent. You must identify the care provider(s) on your tax return.

5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child.

6. The qualifying person must have lived with you for more than half of 2011. There are exceptions for the birth or death of a qualifying person, or a child of divorced or separated parents. See Publication 503, Child and Dependent Care Expenses.

7. The credit can be up to 35 percent of your qualifying expenses, depending upon your adjusted gross income.

8. For 2011, you may use up to $3,000 of expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

The qualifying expenses must be reduced by the amount of any dependent 9. care benefits provided by your employer that you deduct or exclude from your income, such as a flexible spending account for daycare expenses.

10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer’s Tax Guide.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

 

 

03/07/12

Tax Credits Available for Certain Energy-Efficient Home Improvements

The IRS would like you to get some credit for qualified home energy improvements this year. Perhaps you installed solar equipment or recently insulated your home? Here are two tax credits that may be available to you:

1. The Non-business Energy Property Credit  Homeowners who install energy-efficient improvements may qualify for this credit. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements includeadding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. If you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. Qualifying improvements must have been placed into service in the taxpayer’s principal residence located in the United States before Jan. 1, 2012.

2. Residential Energy Efficient Property Credit This tax credit helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines. The credit, which runs through 2016, is 30 percent of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. Generally, you may include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; geothermal heat pumps qualify only when installed on or in connection with your main home located in the United States.

Not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement, which can usually be found on the manufacturer’s website or with the product packaging. If you’re eligible, you can claim both of these credits on Form 5695, Residential Energy Credits when you file your 2011 federal income tax return. Also, note these are tax credits and not deductions, so they will generally reduce the amount of tax owed dollar for dollar. Finally, you may claim these credits regardless of whether you itemize deductions on IRS Schedule A.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

03/06/12

What Employers Need to Know About Claiming the Small Business Health Care Tax Credit

If you are a small employer with fewer than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and you pay at least half of employee health insurance premiums…then there is a tax credit that may put money in your pocket.

The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.

Here is what small employers need to know so they don’t miss out on the credit for tax year 2011:

  • Qualifying businesses calculate the small business health care credit on Form 8941, Credit for Small Employer Health Insurance Premiums, and claim it as part of the general business credit on Form 3800, General Business Credit, which they would include with their tax return.
  • Tax-exempt organizations can use Form 8941 to calculate the credit and then claim the credit on Form 990-T, Exempt Organization Business Income Tax Return, Line 44f.
  • Businesses that couldn’t use the credit in 2011 may be eligible to claim it in future years. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

For tax years 2010 to 2013, the maximum credit for eligible small business employers is 35 percent of premiums paid and for eligible tax-exempt employers the maximum credit is 25 percent of premiums paid.  Beginning in 2014, the maximum credit will go up to 50 percent of qualifying premiums paid by eligible small business employers and 35 percent of qualifying premiums paid by eligible tax-exempt organizations.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

03/05/12

Standard Deduction vs. Itemizing: Seven Facts to Help You Choose

Each year, millions of taxpayers choose whether to take the standard deduction or to itemize their deductions. The following seven facts from the IRS can help you choose the method that gives you the lowest tax.

1. Qualifying expenses – Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. If the total amount you spent on qualifying medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions is more than your standard deduction, you can usually benefit by itemizing.

2. Standard deduction amounts -Your standard deduction is based on your filing status and is subject to inflation adjustments each year. For 2011, the amounts are:         Single     $5,800         Married Filing Jointly   $11,600         Head of Household   $8,500         Married Filing Separately  $5,800         Qualifying Widow(er)  $11,600

3. Some taxpayers have different standard deductions – The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether another taxpayer can claim an exemption for you. If any of these apply, use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.

4. Limited itemized deductions – Your itemized deductions are no longer limited because of your adjusted gross income.

5. Married filing separately – When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.

6. Some taxpayers are not eligible for the standard deduction – They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.

7. Forms to use – The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

03/02/12

Four Tax Credits that Can Boost your Refund

A tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are refundable meaning if you are eligible and claim one, you can get the rest of it in the form of a tax refund even after your tax liability has been reduced to zero.

Here are four refundable tax credits you should consider to increase your refund on your 2011 federal income tax return:

1. The Earned Income Tax Credit is for people earning less than $49,078 from wages, self-employment or farming. Millions of workers who saw their earnings drop in 2011 may qualify for the first time. Income, age and the number of qualifying children determine the amount of the credit, which can be up to $5,751. Workers without children also may qualify. For more information, see IRS Publication 596, Earned Income Credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3. The Child Tax Credit is for people who have a qualifying child. The maximum credit is $1,000 for each qualifying child. You can claim this credit in addition to the Child and Dependent Care Credit. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

02/28/12

 

 

Mortgage Debt Forgiveness: 10 Key Points

Canceled debt is normally taxable to you, but there are exceptions. One of those exceptions is available to homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012.

The IRS would like you to know these 10 facts about Mortgage Debt Forgiveness:

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

 

02/22/12

Ten Things to Know About Capital Gains and Losses

Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is a capital gain or capital loss.

Here are 10 facts from the IRS about how gains and losses can affect your federal income tax return.

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

3. You must report all capital gains.

4. You may only deduct capital losses on investment property, not on personal-use property.

5. Capital gains and losses are classified as long-term or short-term. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

6. If you have long-term gains in excess of your long-term losses, the difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.

7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2011, the maximum capital gains rate for most people is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.

8. If your capital losses exceed your capital gains, you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.

10. This year, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses. Use Form 8949 to list all capital gain and loss transactions. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated

02/17/12

Four Things to Know About Bartering

In today’s economy, small business owners sometimes save money through bartering to get products or services they need. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.

Bartering is the trading of one product or service for another. Usually there is no exchange of cash. However, the fair market value of the goods and services exchanged must be reported as income by both parties.

Here are four facts on bartering :

1. Organized barter exchanges A barter exchange functions primarily as the organizer of a marketplace where members buy and sell products and services among themselves. Whether this activity operates out of a physical office or is internet-based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.

2. Barter income Barter dollars or trade dollars are identical to real dollars for tax reporting purposes. If you conduct any direct barter – barter for another’s products or services – you must report the fair market value of the products or services you received on your tax return.

3. Tax implications of bartering Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.

4. How to report The rules for reporting barter transactions may vary depending on which form of bartering takes place. Generally, you report this type of business income on Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations or Form 1120-S for Small Business Corporations.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

02/15/12

IRS Offers Four Tips on Unemployment Benefits

Unemployment can be stressful enough without having to figure out the tax treatment of the unemployment benefits you receive.

Unemployment compensation generally includes, among other forms, state unemployment compensation benefits, but the tax implications depend on the type of program paying the benefits. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you receive in your total income for the year. You should receive a Form 1099-G, with the total unemployment compensation paid to you shown in box 1.

2. Other types of unemployment benefits include:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
  • Railroad unemployment compensation benefits
  • Disability payments from a government program paid as a substitute for unemployment compensation
  • Trade readjustment allowances under the Trade Act of 1974
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

For complete information on each of the benefits listed, see chapter 12 in IRS Publication 17, Your Federal Income Tax, or Publication 525, Taxable and Nontaxable Income.

3. You must report benefits paid to you as an unemployed member of a union from regular union dues. However, if you contribute to a special union fund and your payments to the fund are not deductible, you only need to include in your income the unemployment benefits that exceed the amount of your contributions.

4. You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Tax will be withheld at 10 percent of your payment. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

02/14/12

Eight Things to Know about Medical and Dental Expenses and Your Taxes

If you, your spouse or dependents had significant medical or dental costs in 2011, you may be able to deduct those expenses when you file your tax return. Here are eight things the IRS wants you to know about medical and dental expenses and other benefits.

1. You must itemize You deduct qualifying medical and dental expenses if you itemize on Form 1040, Schedule A.

2. Deduction is limited You can deduct total medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You figure this on Form 1040, Schedule A.

3. Expenses must have been paid in 2011 You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. You’ll need to have good receipts or records to substantiate your expenses.

4. You can’t deduct reimbursed expenses Your total medical expenses for the year must be reduced by any reimbursement. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. Whose expenses qualify You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.

6. Types of expenses that qualify You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.

7. Transportation costs may qualify You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.

8. Tax-favored saving for medical expenses Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

02/13/12

The Child Tax Credit: 11 Key Points

The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the child tax credit.

1. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17.

2. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence.

3. Age test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011.

4. Relationship test To claim a child for purposes of the Child Tax Credit, the child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

5. Support test In order to claim a child for this credit, the child must not have provided more than half of his/her own support.

6. Dependent test You must claim the child as a dependent on your federal tax return.

7. Joint return test The qualifying child can not file a joint return for the year (or files it only as a claim for refund).

8. Citizenship test To meet the citizenship test, the child must be a U.S. citizen, U.S. national or U.S. resident alien.

9. Residence test The child must have lived with you for more than half of 2011. There are some exceptions to the residence test, found in IRS Publication 972, Child Tax Credit.

10. Limitations The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies by filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax and any alternative minimum tax you owe.

11. Additional Child Tax Credit If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

 

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

02/08/12

 

Six Tips to Help You Determine if Your Social Security Benefits are Taxable

Many people may not realize the Social Security benefits they received in 2011 may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable. Here are seven tips from the IRS to help you:

1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.

2. Generally, if Social Security benefits were your only income for 2011, your benefits are not taxable and you probably do not need to file a federal income tax return.

3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status (see below).

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.

5. You can do the following quick computation to determine whether some of your benefits may be taxable:

  • First, add one-half of the total Social Security benefits you received to all your other income, including any tax-exempt interest and other exclusions from income.
  • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

6. The 2011 base amounts are:

  • $32,000 for married couples filing jointly.
  • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year.
  • $0 for married persons filing separately who lived together during the year.

 

Michael B. Welch, CPA  Erie, CO  80516   Tax Returns  Accountant  Accounting  CPA Taxes

 

Check your Eligibility for Earned Income Tax Credit

The Earned Income Tax Credit is a financial boost for workers earning $49,078 or less in 2011. Four of five eligible taxpayers filed for and received their EITC last year. The IRS wants you to get what you earned also, if you are eligible.

Here are the top 10 things the IRS wants you to know about this valuable credit, which has been making the lives of working people a little easier since 1975.

1. As your financial, marital or parental situations change from year to year, you should review the EITC eligibility rules to determine whether you qualify. Just because you didn’t qualify last year doesn’t mean you won’t this year.

2. If you qualify, the credit could be worth up to $5,751. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on your earned income and whether or not there are qualifying children in your household. The average credit was around $2,240 last year.

3. If you are eligible for EITC, you must file a federal income tax return and specifically claim the credit – even if you are not otherwise required to file. Remember to include Schedule EIC, Earned Income Credit when you file your Form 1040 or, if you file Form 1040A, use and retain the EIC worksheet.

4. You do not qualify for EITC if your filing status is Married Filing Separately.

5. You must have a valid Social Security number for yourself, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC.

6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.

7. Married couples and single people without children may qualify. If you do not have qualifying children, you must also meet the age and residency requirements, as well as dependency rules.

8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on the IRS website, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

 

Michael B. Welch, CPA   Erie, CO 80516  Taxes  Accounting CPA Tax Returns

 

Tax Tips for the Self-employed

There are many benefits that come from being your own boss. If you work for yourself, as an independent contractor, or you carry on a trade or business as a sole proprietor, you are generally considered to be self-employed.

Here are six key points the IRS would like you to know about self-employment and self- employment taxes:

1. Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

2. If you are self-employed you generally have to pay self-employment tax as well as income tax. Self-employment tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. You figure self-employment tax using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.

3. You file an IRS Schedule C, Profit or Loss from Business, or C-EZ, Net Profit from Business, with your Form 1040.

4. If you are self-employed you may have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you fail to make quarterly payments you may be penalized for underpayment at the end of the tax year.

5. You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.

6. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

Michael B. Welch, CPA      Erie, CO 80516     CPA    Tax      Accountant  Taxes

 

 

IRS Reminds Parents of Ten Tax Benefits

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent.

 

Michael B. Welch, CPA    Erie CO Accounting

 

Six Important Facts about Dependents and Exemptions

Even though each individual tax return is different, some tax rules affect every person who may have to file a federal income tax return. These rules include dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2011 tax return.

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return.

2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption.

4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe.

5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.

6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

 

Michael B. Welch, CPA

Certified Public Accountant

Tax Returns

Erie, CO 80516