Daylight Saving Time – This year, 2015, it begins Sunday March 8th What does this have to do with taxes? Well, you’d be surprised. Here in the United States, we have four time zones:  Eastern, Central, Mountain and Pacific.  Living in Arizona, we are one of the few places that does NOT observe Daylight Saving Time. Most cities and towns in Arizona stay on Mountain Standard time all year long. In the Spring, the rest of the country “Springs Forward” and they advance their clocks one hour, changing their clocks from 8am to 9am; therefore, experiencing more daylight in the evening hours. Since the clocks in most of Arizona remain unchanged, we effectively “fall back” an hour.  We are neighbors to California and I usually explain to others that during Daylight Saving Time (DST) we are now on Pacific Time. Pacific time is three hours behind Eastern time and this makes a difference when we are trying to contact businesses located east of us. When it is 8am in Phoenix, it is already 11am in New York and Washington, DC. When it is 8am in Phoenix, it is already 10am in Chicago and St Louis. And when it is 8am in Phoenix, it is already 9am in Denver and Las Vegas. Wait a minute, Phoenix and Denver are both in the Mountain Time Zone, but when it is DST, Denver is Mountain DAYLIGHT Time and Phoenix is MOUNTAIN STANDARD Time. And now when it is 8am in Phoenix, it is 8am in Los Angeles and San Diego. The Internal Revenue Service has always been aware of the differences in our time zones. That is why their Customer Service offices are open past 5pm, but they are not open 24/7. Now that they have developed a “modernized” electronic filing process, the IRS processes our e-filed tax returns continuously around the clock, but what happens on April 15th? A return filed after midnight will be considered LATE.  AH! But which midnight do I pay attention to? My midnight or IRS midnight? March 15th is and important date for businesses returns. Corporation returns are due March 15th. Like an individual, if a corporation cannot file their return by the due date, they can request an extension of time to file. But this request must be filed before midnight on March 15th. When it comes to these time sensitive and very important deadlines, I don’t wait until the last possible minute. I want to file at least one day before. If I can’t be one day early, I want to get as much as I possibly can get done before 6pm on that deadline night. Everyone else who waits until the last possible minute is risking a bottleneck of electronic bandwidth. And it you are delayed by this bottleneck, your tax return or your request for more time could be delayed. Uncle Sam doesn’t just want you — Uncle Sam wants your money. And when you owe money and you pay that money late, Uncle Sam wants even more money. So watch that clock. Time is a-ticking and it waits for no man.

Love is in the air. People use this heart-filled time of year to profess their love, to get engaged, and to marry.

When you marry, you get to change your income tax filing status. You may also change your name. When you do change your name, be sure to include Social Security Administration in all the name-change notifications you make.

Did you know you are born with an income tax return filing status? We all start life as Single. Even is you are a twin, you are a Single taxpayer. Can a baby be a taxpayer? Well, did you ever hear of the Gerber Baby? The answer is “Yes.”

Your filing status is determined by your marital status on the last day of the calendar year. When you marry, and are married as of December 31st, you will generally choose Married Filing Jointly. What else could you choose? You could choose Married Filing Separately. You might qualify for Head of Household.

One of my clients asked, “You mean if I get married on December 31st, I am treated as I was married ALL YEAR?” And the answer to that question is YES. Maybe you want to marry on December 31st, but wait until after midnight to say “I DO!” and sign the license on January 1st. With planning, you can choose the year you begin your joint return.

One thing I want you all to know is, “When you marry the person, you marry their tax troubles, too.” So be sure you know all the facts and enter into this new partnership, this new joint venture, with your eyes open. When you file a joint tax return, your taxable income includes the worldwide income of both taxpayers.

On a tax return for two people legally married, one is the primary tax payer and the other is the secondary tax payer. This just means that the name listed first is referred to as primary and the name listed second is considered secondary. The terms husband and wife don’t always fit. The IRS may still use the terms taxpayer and spouse.

Another filing status is Qualifying Widow or Widower. Special tax rules come into play with each of these choices. Do you have a choice when choosing your filing status? What was your personal situation on December 31st?

Have you heard, “Things Change.”? How many times was Elizabeth Taylor married? Like Liz, you may find yourself returning to Single when the other filing status no longer applies to you.  Are you making changes this year?

You are required to attach your W2 to your tax return when you file this important once-a-year tax form. Every year you have the chance to  “look yourself in the eye” and sign your tax return under penalty of perjury that it is correct and accurate. .. If you don’t already have your W2 for 2014, you should be getting this important form very soon. Employers are required to issue their W2 forms by January 31st. Since 1/31 fell on a Saturday, that gave employers until the next business day, or February 2nd. .. Did you move since you were first employed? Does your employer have your correct current address? .. Did your employer go out of business during the year? Did they pay their accountant in advance to issue the year-end W2 forms? They probably did not. On payday did you get a paystub showing the cumulative, or year-to-date income earned and taxes withheld? Did you keep track of these numbers yourself? Most people won’t but it is a good idea. Did you have more than one job during the year? Do you have a W2 from EACH of your jobs? You must report your total income from all taxable sources. What can you do if you don’t have this required for filing form? If you have not received your W2 by February 17th (because 2/14 is on Saturday and 2/16 is a holiday) , you can call the IRS for assistance. When you dial 1-800-829-1040, be prepared to wait on hold. It could be a VERY long wait. This is a toll-free number, the IRS gets a lot of callers AND they have had budget cuts that limit the number of assistors and hours available to work. (Really government?!). The  assistor at the Internal Revenue Service will ask you for your name, your address with zip code and your social security number. Remember YOU called them. Do NOT EVER (NEVER!) give this confidential information to any one who calls you. Protect your identity.  IRS will also ask for your employer’s name, complete address, phone number and your dates of employment. IRS will contact your employer for you (if that is possible) and will request the missing form for you. Form 4852, Substitute for W2, was designed for just this purpose. When you call the IRS to request their help, they will send you this form. There are blanks for you to fill in your wages and withholdings. It will ask you how you determined the amounts you are entering. It will also ask you to describe what you did to try to obtain your W2. But, you cannot file a return using this form until after April 15th. If you did receive a W2, was it correct? If you think it was not correct, contact your employer and request a corrected W2, a W2-C. If you filed your tax return using Form 4852 and then received a W2 or W2-C showing different amounts, then you must file Form 1040X to amend your return. This amendment may result in you owing more tax or it may result in you getting a refund. Consult your tax professional for help filing this more complicated form.

The end is near – the end of the calendar year, that is. What does the IRS say? What does Nellie, “The IRS Insider” say?      ‘Twas the day after Christmas and all through the shop,             Busy workers were working with no time to stop.             The New Year is coming! There’s so much to do.             Sorting and filing and shredding paperwork, too. © The point of that little poem is to help you understand you cannot toss paperwork too soon. When it comes to your tax returns, the IRS has certain requirements. .. My Top 5 Tips are simple:

1. Keep your copies of your tax returns FOREVER. Yes, every year that you filed. You never know when you (or your heirs) will need to look back.

2. The Internal Revenue Service has THREE YEARS time to examine your tax records. This is called the Statute of Limitations for examination or audit. This 3-year clock runs from the date your tax return was filed, or the date your return was due, whichever is later. …. If you filed your tax return on February 14th, and it wasn’t  due until April 15th, the later of the two dates is April 15th. If your tax return was due on April 15th, but you didn’t file your return until August 15th (it may have been on extension so you avoided late-filing penalties) the 3-year “statute” clock doesn’t start running until August 15th, the later of the two dates.

3. Your state has MORE time. Arizona has One more year. California has TWO more years. Which state are you in? How much longer do they have to look at your tax records? … We are just finishing 2014. We will file the 2014 tax returns in calendar year 2015. Three years from 2015 is 2018. Four years from 2015 is 2019. But the records are from 2014. And the 2019 is FIVE years later than 2014.

4. So how long must you keep your records? For calendar-year tax return items, you need to keep your records AT LEAST five years. But some records need to be kept even longer. … Take a deep breath. It’s not too difficult to understand. And it is not too difficult to do. Keep cancelled checks and paperwork related to stocks, or other investments you buy and sell, until 5 years after the date of sale. Keep documents related to the purchase, improvement, refinance of your home and other real property, until 5 years after the sale of each property.

5. Don’t be in too big a hurry to get rid of the paperwork. Keep the original documents. Scan them. Technology is great, but things change over time and anything can fail. Don’t just toss or recycle sensitive information. Use a cross-cut shredder to really destroy the no-longer needed documents. .. Debbye Cannon of SmartCut Solutions shared an easy way to corral the clutter. She recommended using a  plastic multi-drawer cabinet you can find in any office supply store.

When it comes to the Internal Revenue Service, they do NOT have a presumption of innocence. Yes, they want to help you, help you pay your correct and proper tax. .. Preparing your tax return starts way before you “Do It Yourselfers” open your tax software. It begins way before you make your appointment with your trusted tax adviser.  It begins every time you make a bank deposit and with every check you write, or with every debit you authorize.  If you have been careful in keeping track of your numbers. you stand a better chance of coming out of an audit “clean.” If you have been careless in keeping your receipts, you stand a better chance of having to pay the tax man. .. I was in the Audit Division. We examined tax returns and taxpayer documentation. PAPERWORK is they key to saving your backside. When you spend your money on something that is deductible, you want to keep that receipt. It will show what you bought, when you bought it, who you bought it from and how much you paid. It will not have ‘TAX DEDUCTIBLE” stamped all over it. The seller does not know if what they sold you is a tax deduction for you.  However, if you don’t keep the paperwork and you deduct that item on your tax return, the IRS will take a bite out your wallet again when you are audited and cannot present the paperwork. .. Elliott Ness, the great “Untouchable” was an IRS Revenue Agent. He was one of the first to say “Show Me the Money.” Okay, not in those exact words. He did, however, follow “the paper trail.” Al Capone, the famous Chicago gangster, did not go to jail for selling dope or making bathtub gin. He did not go to jail for running illegal gambling rooms or any of the other criminal activity he was known for. He went to jail for committing another crime – tax evasion. .. It is okay to arrange your tax affairs to pay your lowest legal tax. Bullet Proof Your Taxes is all about helping you save taxes. It is okay to legally avoid paying tax by raking full advantage of deductions and credits. It is NOT okay to evade tax. When you cheat on your taxes, you will pay more than tax. You will also pay interest and penalties or even go to jail. .. My job at the IRS was in the Examination Division.  I do have colleagues that worked in the Collection Division, they were called Revenue Officers. It was their job to gather your financial information and collect the tax that you owed after I finished the examination and made my determination. .. If you need help with a collection matter today, I will recommend a specialist retired from the IRS collection side. They will know how best to help you. Sometimes it is not what you know, but who you know.

If you already filed your return, relax.  If your return has not yet been filed, you want to file as soon as you can.  This year is almost ONE THIRD OVER!  What can you do now to  be in top shape for next April 15th?  If you haven’t already started a simple way of collecting your important tax papers, begin that new habit today. I started my first job after college working in an office with file folders and filing cabinets. I learned how convenient it was to put things were they belong so you can find them when you want to, when you need a certain document.  Whether you are in business or not, all of us who file an income tax return every year need to keep track of only two things. The first of those two things is money in.  Can you guess what the second thing is? Yep, it’s money out. In tax return language this means income and deductions.   Organization is the key. I have had clients bring me a jumble of receipts. Whether that jumble is in a box or a bag or an envelope, YOU are the one that gets to sort these papers into categories. Why wait until tax day? Get a jump and do your sorting all year long. If you get a paycheck, do you also get a paystub? Every payday put your new paystub on top of last week’s paystub. Then you’ll have your full year’s worth of paystubs in date order. The last stub of the year might be the most important one of them all, but something important could be found sometime during the year, too. Keep them all until after your tax return is prepared just in case your preparer needs to look at them. They could hold a wealth of information for your tax return. If you have pre-tax deductions (mostly medical-related), they have already been deducted before the taxable part of your paycheck was calculated. You don’t get to deduct them again. But you may have other expenses that will be important to your tax return. Do you go to the doctor regularly? Do you have to pay each time you visit? Whether you have a co-pay or you have to pay the full fee for the visit, you will want to keep that receipt. Keep those medical receipts for doctor and dentist visits, prescriptions, eyeglasses, and more, in a file folder or envelope just for medical deductions. Do you own a car? If so, you renew your license plates every year. You may be able to pay for more than one year at a time. Keep that expired registration receipt for the tax year in which you paid that fee. You claim the deduction in the year you pay it, not divided over the number of years to which it applies. And no, your car insurance is necessary, but not deductible. And speeding or parking tickets  are not deductible either. What about contributions? I’ll talk about them next week.

THIS is the end of the year, not the end of the world. I thank my God every morning I awake. Before we rush away from this festive season, I hope you all had a very Merry Christmas, a happy holiday, and I wish you all a very happy New Year! Time marches on whether we plan for it or not. And we only have a couple of business days left in this year! What is THE most important thing you still need to do before the clock turns from 2013 to 2014? Did you know that the Affordable Care Act, commonly known as “Obamacare”, requires we are all covered by minimum essential health insurance? And if you are not, you can be assessed a penalty? For 2014 will you (and the people in your family household) have healthcare coverage for the WHOLE YEAR? Coverage can be a combination of Medicare Part A, Medicaid (ACCHS in Arizona), Military Health Insurance (Tricare) an employer sponsored plan or insurance you buy on your own. This helps meet the “Shared Responsibility” part of the plan. If you do not have healthcare coverage for the entire year, you could be assessed a penalty. The penalty calculation formula is complicated. If I say there is a minimum penalty, will you realize that is the LOWEST it can be and that it is likely to be even higher?  The lowest 2014 penalty for a single person s $95. The penalty for a married couple starts at $190. As the size of the family grows, the penalty grows. And it gets bigger every year. If you are a low-income taxpayer, you may qualify for healthcare insurance premium assistance. Meaning that you could find the cost of your premium lowered by the assistance amount you qualify for. There are more complicated formulas in calculating the amount of credit that can be applied to your premium costs. And who is in charge of keeping tabs on all of this? IRS, of course. They have been granted the privilege, the responsibility, to make sure we are paying our fair share. Not only must we pay our fair share of income tax. We must also pay our fair share of healthcare insurance premiums. I am not a healthcare insurance provider. I am a tax return preparer. And now the insurance exchange agents will want to see your tax returns to determine how much premium assistance you might qualify for. Lower-income taxpayers might not have an INCOME TAX return requirement to file. BUT they may NOW have to file a return to prove they have paid their fair share of medical insurance premiums. So much is new. We are all learning. If you are under 65 years old (the minimum age for Medicare), you will want to check your health insurance coverage to avoid the penalty for not having shared enough of this new required program.   Always to your lowest legal tax,   Nellie T Williams, EA