Harless Tax Blog
It can be hard to understand taxes. It can be much harder if English is not your first language. The IRS provides many free products and services in Spanish on IRS.gov/espanol. Here are some tips on tax help “en Español” that you can get from the IRS this summer:
- Get answers 24/7: You can access IRS.gov/espanol at any time. It offers tax help to both individuals and businesses. You can even get help in Spanish for some specific types of work. This includes tax centers for agricultural workers and truckers . If you’re facing financial difficulty, visit “Centro Tributario para Asistir a Contribuyentes Desempleados .”
- Use IRS e-file: If you still need to file your 2014 taxes, you should e-file your tax return. IRS e-file is safe, easy and the most accurate way to file. It is available until Oct. 15. Visit IRS.gov and enter “Presentación Electrónica ” in the search box to learn more.
- Other things your can do at www.irs.gov/espanol
- Get tax forms and publications.
- Check out IRS2Go. The free IRS app is available in English and Spanish. Use it with an iPhone, iPad or Android mobile device. With IRS2Go you can:
- Get your refund status.
- Watch IRS YouTube videos.
- Watch the latest pod casts
- Get tax news updates.
- Follow the IRS.
- Get health care tax information. The IRS website also has information about the Affordable Care Act tax provisions in both English and Spanish to educate individuals and businesses on how the health care law may affect them.
- Use IRS online tools.
- Check the status of your refund.
- Find out if you’re eligible for the Earned Income Tax Credit.
- Get the latest on new tax laws.
- Connect with the IRS on Twitter.
- Get tips at the Multimedia Center.
Source: IRS Newsletter, Issue Number: IRS Summertime Tax Tip 2015-07
WASHINGTON —The Internal Revenue Service on July 14, 2015 encouraged eligible small businesses that did not file certain retirement plan returns to take advantage of a low-cost penalty relief program enabling them to quickly come back into compliance.
The program is designed to help small businesses that may have been unaware of the reporting requirements that apply to their retirement plans.
Small businesses that fail to file required annual retirement plan returns, usually Form 5500-EZ, can face stiff penalties – up to $15,000 per return. However, by filing late returns under this program, eligible filers can avoid these penalties by paying only $500 for each return submitted, up to a maximum of $1,500 per plan. For that reason, program applicants are encouraged to include multiple late returns in a single submission. Find the details on how to participate in Revenue Procedure 2015-32 by calling our office or by visiting the IRS website at www.irs.gov.
The program is generally open to small businesses with plans covering a 100 percent owner or the partners in a business partnership, and the owner’s or partner’s spouse (but no other participants), and certain foreign plans. Those who have already been assessed a penalty for late filings are not eligible.
The Department of Labor offers a similar relief program for businesses with retirement plans that include employees known as the Delinquent Filer Voluntary Compliance Program.
Started as a one-year pilot, the IRS program was made permanent in May 2015. The IRS has received about 12,000 late returns since the pilot program began in June 2014.
The IRS reminds retirement plan sponsors and administrators that in most cases, a return must be filed each year for the plan by the end of the seventh month following the close of the plan year. For plans that operate on a calendar-year basis, as most do, this means the 2014 return is due on July 31, 2015. For details, visit the Form 5500 Corner on IRS.gov.
If you are in the U. S. Armed Forces, special tax breaks may apply to you. For example, some types of pay are not taxable. Certain rules apply to deductions or credits that you may be able to claim that can lower your tax. In some cases, you may get more time to file your tax return. You may also get more time to pay your income tax. Here are the top 10 IRS tax tips about these rules:
- Deadline Extensions. Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. If this applies to you, you can get automatic extensions of time to file your tax return and to pay your taxes.
- Combat Pay Exclusion. If you serve in a combat zone, certain combat pay you get is not taxable. You won’t need to show the pay on your tax return because combat pay is not part of the wages reported on your Form W-2, Wage and Tax Statement. If you serve in support of a combat zone, you may qualify for this exclusion.
- Earned Income Tax Credit or EITC. If you get nontaxable combat pay, you can include it to figure your EITC. Doing so may boost your credit. Even if you do, the combat pay stays nontaxable.
- Moving Expense Deduction. You may be able to deduct some of your unreimbursed moving costs. This applies if the move is due to a permanent change of station.
- Uniform Deduction. You can deduct the costs of certain uniforms that you can’t wear while off duty. This includes the costs of purchase and upkeep. You must reduce your deduction by any allowance you get for these costs.
- Signing Joint Returns. Both spouses normally must sign a joint income tax return. If your spouse is absent due to certain military duty or conditions, you may be able to sign for your spouse. In other cases when your spouse is absent, you may need a power of attorney to file a joint return.
- Reservists’ Travel Deduction. If you’re a member of the U.S. Armed Forces Reserves, you may deduct certain costs of travel on your tax return. This applies to the unreimbursed costs of travel to perform your reserve duties that are more than 100 miles away from home.
ROTC Allowances. Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
- Civilian Life. If you leave the military and look for work, you may be able to deduct some job search expenses. You may be able to include the costs of travel, preparing a resume and job placement agency fees. Moving expenses may also qualify for a tax deduction.
- Tax Help. Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after April 15.
Source: IRS Publication 3.
Original Article: www.washingtonpost.com. 5/26/15. "Hackers Stole Personal Information from 104,000 Taxpayers IRS says". Lisa Rein and Jonelle Marte
On Tuesday, May 26, 2015, IRS Commissioner John Koskinen announced a security breach of IRS computers and that nearly 104,000 taxpayers have become victims of a new, sophisticated identity theft scheme involving the IRS’s online "Get Transcript" application. The breach was discovered earlier in May while IRS was investigating a suspected denial-of-service attack on the application. Their investigation revealed that a large number of suspicious domains had been used to access an unexpectedly high volume of tax transcripts. It was ultimately determined by the IRS that organized criminals had been successful in accessing the transcripts of an estimated 104,000 out of approximately 200,000 attempts. Consequently, the IRS has disabled the online application and is taking aggressive steps to warn the affected taxpayers.
"We have detected and determined that there was unauthorized access to our Get Transcript application that ran from February to May," Koskinen told reporters. "To try to get through to get that transcription, the criminals had to already have stolen Social Security numbers, names, addresses and other personal identifiers available. Then they had to have enough personal information for each taxpayer to get through the so-called personal related questions―the so-called auto-wallet questions."
The 104,000 downloads represents only a small fraction of the 23 million successful downloads through the Get Transcript application that occurred during the 2015 filing season. Furthermore, Mr. Koskinen estimated that the 104,000 downloads would result in about 15,000 false tax return filings and that no money had been paid out in fraudulent refunds. According to Mr. Koskinen, IRS would release the actual figures as soon as it discovers them. Additionally, Mr. Koskinen stressed that the data breach had affected the Get Transcript application only and that the basic tax filing system used by 150-million taxpayers was unaffected.
Informing the 200,000 taxpayers whose transcripts were downloaded (or nearly downloaded) and that identity theft criminals have uncovered a large volume of their personal information is a top priority at the moment. The highly sensitive information obtained would include Social Security numbers, names, current and past addresses, car ownership histories, high school mascots, places of marriage and other information commonly used to authenticate identity. In addition to sending letters to these taxpayers, the IRS will provide free credit monitoring services to the 104,000 taxpayers whose accounts were actually accessed, Koskinen promised. "We greatly regret that this additional information is available to criminals," he said.
Recent tornadoes and massive flooding in the western United States have caused not only major property damage to personal possessions but to many businesses as well. Additionally, June 1st marks the beginning of Hurricane season; therefore, having a plan for business and personal data and record access is an important part of being prepared. Below are some simple steps that can help taxpayers and businesses protect financial and tax records in case of disasters. The IRS also offers a video on their website www.irs.gov “Preparing for a Disaster”
- Take Advantage of Paperless Record keeping for Financial and Tax Records
Don’t rely on your tax preparer to have your current documents. If you are not already receiving bank statements and documents by e-mail, you want to sign up for this service. Electronic format is an excellent method of securing financial documents. Other important tax records such as W-2s, tax returns and other paper documents should be scanned onto an electronic format and saved on a thumb (or jump) drive for portability. Many software companies offer excellent scanning and record retention software.
Be sure to keep a backup copy of your data and store it in a save place such as a safety deposit box or on the cloud. You want this data to be stored away from your home or office because in the advent of a natural disaster, backup data would be destroyed if the office or home were destroyed; therefore, convenience of access to the data is NOT of primary importance.
- Document Valuables and Business Equipment
Avail yourself of other IRS resources such as their disaster loss workbooks for individuals ( Publication 584, Casualty, Disaster, and Theft Loss Workbook) and businesses ( Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook) that will help you gather a detailed listing of belongings and also calculate their fair market value (FMV). It is also important to write the serial numbers of items as well as taking a photo. The list and photos will help with any potential insurance claim. Once again, store this information away from your home or business.
- Check on Fiduciary Bonds
If you are an employer that uses a payroll service provider you should ask if the provider has a fiduciary bond in place that could help you as the employer if the provider defaults on a payroll.
- Continuity of Operations Planning for Businesses
The planning done today will determine how quickly your company can get back to business after a disaster. It is never too early to start planning so you can improve the likelihood that your company will survive and recover. Review your emergency plans annually and update them as needed because your business preparedness needs change over time just as your business changes over time.
- The following is a list of preparedness strategies that can be applied to all types of disasters.
- Get informed about hazards and emergencies and learn what to do for specific hazards.
- Develop an emergency plan.
- Learn where to seek shelter from all types of hazards.
- Back up your computer data systems regularly.
- Decide how you will communicate with employees, customers and others.
- Use cell phones, walkie-talkies, or other devices that do not rely on electricity as a backup to your telecommunications system.
- Collect and assemble a disaster supplies kit. Include a portable generator.
- Identify the community warning systems and evacuation routes.
- Include required information from community and school plans.
- Practice and maintain your plan.
- Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it.
- Additional resources available from IRS
Immediately after a casualty, you can request a copy of a return and all attachments (including Form W-2) by using Form 4506, Request for Copy of Tax Return (PDF).
If you just need information from your return, you can order a transcript by calling (800) 829-1040 or using Form 4506-T, Request for Transcript of Tax Return (PDF). There is no fee for a transcript. Transcripts are available for the current year and returns processed in the three prior years. IRS.gov is an indispensable resource as you prepare for and recover from disaster.
Q. I just read an article that said I should report a major life change to the Health Insurance Marketplace. What qualifies as a major life change and how do I report it?
A. Take a close look at the list below:
If you answered yes to any of these questions, you are expecting or have had a major life change and these changes should be reported as soon as possible to the Health Insurance Marketplace because any and all of these changes will impact the amount of coverage or savings you are qualified to receive.
You can report the changes in one of two ways, either by phone or online. To report a change by phone call 1-800-318-2596 and to make the change online, visit www.healthcare.gov and log into your existing account and use the menu list on the left side of the page. You can even upload documents, if necessary. DO NOT REPORT THE CHANGE BY MAIL.
Have another question or need clarification on a different tax topic? Contact us via email and one of our CPAs will respond to you within 24 hours.
Do you have foreign assets or foreign earned income? If so, you may have a tax liability to the United States, regardless of whether or not you are a US citizen, a resident alien, maintain dual citizenship, or lived and worked overseas all or part of last year.
U. S. citizens and resident aliens are required to report income from ALL world-wide sources to the Internal Revenue Service including income from foreign trusts, banks and securities accounts; although, only part or perhaps none of the income is taxable.
Additionally, the Financial Crimes Enforcement Network (FINCEN) requires any taxpayer with signature authority or other authority over a foreign bank account(s) that total more than $10,000 (USD) ON ANY GIVEN DAY to file form 114 which reports these assets. The deadline to file this form is June 30th and the form must be filed electronically.
If you would like more information regarding the filing requirements concerning foreign assets, foreign earned income, or foreign income exclusion, please contact us and one of our CPAs will respond to you within 24 hours.
by Kathy Nelson
Breaking News!On April 29, 2015, the Senate Finance Committee approved three changes that improve and extend 529 College Savings Plans. The House of Representatives approved a similar bill on February 25, 2015.
- Computers are now considered qualified expenses.
- Distributions-To-Date Calculations are no longer required of Plan Administrators.
- Refunds from a college or university to a student that arise because the student had to withdraw from school because of illness or other reasons are no longer taxable nor are they subject to a 10% penalty as they were in the past.
The top-earning 1 percent of Americans will pay nearly half of the federal income taxes for 2014, the largest share in at least three years, according to a study.
According to a projection from the non-partisan Tax Policy Center, the top 1 percent of Americans will pay 45.7 percent of the individual income taxes in 2014—up from 43 percent in 2013 and 40 percent in 2012 (the oldest period available).
The bottom 80 percent of Americans are expected to pay 15 percent of all federal income taxes in 2014, according to the study. The bottom 60 percent are expected to pay less than 2 percent of federal income taxes.
While the top 1 percent pay a larger share of taxes, they also earn an outsized share of income. According to the Tax Policy Center, they earned 17 percent of expanded cash income in 2014. (Some studies have given higher estimates for this group's share of income depending on their different definitions of income.)
The high share of taxes paid by one-percenters is due partly to their share of income, but also to the progressive tax code, in which higher earners generally pay higher rates. The one percenters' share of taxes is 2.7 times their share of income in taxes.
There is no comparable historical data for the one-percenter tax payments prior to 2012. Yet the Congressional Budget Office, using a different calculation than the Tax Policy Center, found that the share of federal taxes paid by the top 1 percent of earners has increased dramatically since 1979 as the one-percenter's share of earnings has also gone up.
In 1979, the top one percenters earned 8.9 percent of pretax income and paid 18 percent of federal income taxes. In 2011, the top 1 percent earned 14.6 percent of income and paid 25.4 percent in 2011 of federal income taxes.
The CBO said that the average federal income tax rate paid by the top 1 percent has also dropped since 1979—falling from 22.7 percent in 1979 to 20.3 percent in 2011.
Steering clear of the audit trail
For many a taxpayer, an IRS audit conjures up images of the accused being grilled under hot lights by an angry government official. In reality, it's usually not that bad, but it's still something to be avoided at all costs if possible. [Source: CNBC]
Fortunately, the IRS audit process—highly exaggerated to begin with—clearly became more benign following a 1998 reform that emphasized taxpayer rights. Audits declined after 1998, then climbed a bit before the financial crisis.
In any event, no one wants to be challenged to justify an obscure line in the 1040 that can be so confusing even the most honest taxpayer can get something wrong. And taxpayers often face unfamiliar issues that raise their audit risk. For example, for the first time this year, millions will have to take into account subsidies they received under the Affordable Care Act, or Obamacare.
So with the April 15 filing deadline bearing down on us, here are eight keys to avoiding an audit.
1. Do the math, carefully.
While you may have heard of the perils of claiming a home office or deducting expenses on a rental property, most audits involve mundane matters.
"Math errors are always on top of the list," said Cindy Hockenberry, manager of the Tax Knowledge Center of the National Association of Tax Professionals. Another common audit trigger is a space on the return that was mistakenly left blank, she said.
2. Get that goodwill receipt—and keep it.
Charitable donations are a frequent IRS concern, according to tax experts, because many people fail to obtain the required documentation furnished by the charity.
"Regardless of the amount of the charitable contribution—it could be a dollar in a red bucket last Christmastime—you need to have some sort of receipt" for any contribution that is claimed, Hockenberry said.
3. Double-check the most obvious numbers (think SS#).
"The most common things [triggering IRS inquiries] are simple mistakes, like a Social Security number that doesn't match the name in the Social Security database, or a column of numbers that simply doesn't add up," said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting US.
Another common audit trigger is a figure in the return that does not match one on a form the IRS received from another source, like the W-2 income form from the employer or a 1099 from the bank, brokerage or mutual fund company, said Greg Rosica, one of the authors of "The Ernst & Young Tax Guide for 2015." Even casino winnings are reported to the IRS, he noted.
Rosica urges filers to reduce the chance of errors by leaving plenty of time to fill out the return, including a day or so to set it aside before taking a fresh look prior to filing.
4. Expect to be more closely watched if you've got a big income.
People with big incomes are more likely to be audited than people with small ones, Luscombe said. The IRS is likely to inquire if a taxpayer claims as a dependent someone who is not eligible. They also often check to see if the taxpayer files a return, if required, for the alternative minimum tax.
That said, you might have another unexpected friend in the government (Congress), and you probably aren't the one with the really big income: that would be a corporation.
"Now we're in a period where Congress is sort of mad at the IRS over various things and is restricting their budget, causing audit rates to somewhat decline again," Luscombe said.
Hockenberry said that as a result, the agency has concluded it "gets more bang for the buck going after businesses."
5. Dont forget: Life-changing events can also change your tax status.
Errors creep into returns after taxpayers have a life-changing event that alters their filing status. "Whether you had a baby, got married or divorced or bought a house, all those things have implications for the tax return," Rosica said.
6. Don't think the IRS will be too busy to miss Obamacare scofflaws.
Because 2014 was the first year for Obamacare, many taxpayers may find the filing requirements confusing. While a federal health insurance subsidy may not be taxable, some large subsidies must be paid back. The numbers must be properly reported on Form 8962, said Jackie Perlman, principal tax research analyst at H&R Block's Tax Institute.
"You do need to do it, and if
you try to send your return in without that form, you will hear from the
IRS and your return will be held up," she said. Another new form, 8965,
is used to claim an exemption from the health insurance mandate.
7. Never rely on logic when making claims.
Because tax rules are often the product of haggling in Congress, it's dangerous to rely on logic when filling out the return. Since many business expenses are deductible, for instance, it may seem logical to claim commuting expenses, Perlman said. But for ordinary taxpayers, commuting costs are not deductible.
8. Don't think you'll get away with fudging "little" numbers.
Aside from the Obamacare requirements, ordinary individual taxpayers face no dramatic changes in filing requirements this year, experts say, and the odds of being audited are small. "I would say, on the whole it's a minor worry, unless you have something very unusual" in the return, Luscombe said.
But tax experts still advise against any attempt to fudge your numbers thinking the risk of an audit is small. "Sometimes that's called 'playing the audit lottery game,' and it's not a good game to play," Perlman said.
Keep in mind that the following will always attract the attention of the IRS:
- Failing to report all income.
- Failing to report payments to household help.
- Failing to report large gifts.
- Exaggerating business expenses.
- Not paying tax on income earned abroad.