Haste makes waste. Most of us have heard this old adage before. But I grew up with this twist on it. “The hurried-er I go, the behind-er I get.”
Why do I say this?
I don’t want you to waste time or money with costly mistakes on your tax returns in these busy last few weeks before April 15th. I am adding my slant to some of the Top Tax Time Tips offered by The Internal Revenue Service.
Three Important Steps
1. Gather your records. Round up your receipts, canceled checks and other documents that support the entries you make on your tax returns. It is always helpful to have everything close by. You don’t want to lose your place in preparing your tax return by having to stop and go look for something in the middle of this once-a-year important responsibility.
2. Report all your income. Leave nothing out. You will need ALL of your W2 forms and 1099 income statements. Income is not just wages and other compensation earned. Income is also interest and dividends, social security benefits, pension benefits, gambling winnings, sales of assets and more. What money did you receive? All income is taxable unless specifically excluded by law.
3. Review your tax return before you file. Double check your entries. Is your name spelled correctly? Is your address entered correctly? Did you include your unit number, suite number, apartment number? Is your zip code correct? Are you using the proper filing status? Are you qualified to claim the dependent you have listed? Did you leave anything blank where some kind of entry belongs?
Important Tips
Math errors are common on hand-written returns. Take your time. Check your calculations. Bookkeepers are trained to add their column of numbers twice. If you get the same answer twice, it is probably correct.
Are you due a refund? Direct deposit is faster and safer than waiting for a check mailed to your address. Just refer to the numbers on the bottom of your check for the routing number of your bank and the number of your checking account.
Do you owe the IRS? File your tax return now and pay as much as you can before April 15th. If you owe more tax after April 15th, IRS will send you a bill. That bill will also include interest. It might even include a little penalty for paying your taxes late.
Should I e-file My Return?
Is it really better to file electronically? I think so. I’ve been filing returns electronically for myself and for my clients since 1988. As a tax professional, I like the reduction in errors e-filing offers. When a taxpayer’s or dependent’s name and social security number do not match, IRS rejects the return. When an employer’s name and entity identification number do not match, IRS rejects the return. We get to fix those errors and file a correct original return.
Using a computer and reliable software to prepare the tax return has eliminated many math and calculation errors that people make when using pencil and paper. Software is just a tool. And a tool is only as good as the operator. Take advantage of all the help you can get. If you don’t have your own tax advisor to help you understand your personal tax situation, consider calling the IRS toll-free tax assistance line at 1-800-829-1040. Be prepared to wait. Ask your complete question and take notes of the answer you receive.
To your lowest legal tax,
Nellie T Williams, EA
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They are both deadlines to file tax returns with the Internal Revenue Service.
Individuals are familiar with April 15th. If you are a business owner, you must also be aware of March 15th!
Did you start a new business this past year? Did you form a corporation?
If you formed a corporation but did NOT file the paperwork to elect to be taxed as an “S” (or small) Corporation, then you are automatically considered a “C” Corporation. “C” Corporations pay tax on the profits they earn PLUS the shareholders who receive the dividends pay tax on those dividends on their individual income tax return. This is why they say “C” Corporation profits have “double taxation”.
“S” Corporations do not pay tax. The “S” Corporation gives the shareholders of that corporation a Form K-1. The K-1 is sort of like a W2. It shows each shareholder their share of income or loss, deductions and other items to include on their own individual 1040 tax return. The shareholders pay the tax for their share of the corporation’s profit.
Corporation tax returns are due on March 15th. If your “C” Corporation had a profit, the taxes on that profit must be PAID by March 15th. Corporations, like individuals, can REQUEST an extension of TIME to FILE their tax returns. There is NO extension of time to PAY the taxes due. If the taxes are not paid by March 15th, and you have requested an extension of time to file, your extension will be considered invalid, or not valid. You will incur PENALTIES and INTEREST on the taxes due.
What else is important about March 15th?
If your business has employees, you, the employer, withhold taxes from their paychecks. Withholding includes federal and most states’ income taxes, social security tax, and medicare tax. You, the employer, match the social security and medicare taxes withheld from your employees’ paychecks. All of the taxes withheld and the employer’s matching taxes must be paid to the IRS by a certain date. Sometimes that date is at the end of the quarter when filing the quarterly Form 941 report. Sometimes that date is at the middle of the month in a quarter.
If you are a small employer and your total 941 taxes will be $2500 or less for the first quarter of the year (January, February and March), you can pay this amount with your report which is due April 30th. If you will owe more than $2500 for the quarter, then you must make monthly deposits. These deposits are due by the 15th day of the month following the end of the month. March 15th is that date following the end of February.
Is this clear as mud to you? It took me some time and marking a calendar for me to “see” when my different important dates were. I still put a date on my calendar to keep me from missing my deadlines. I encourage you to mark your calendar, too.
Always to your lowest legal tax,
Nellie T Williams, EA 
Does the fear of paying too much tax drive you to buy more deductions?
Yes, I said “BUY” deductions. They cost you money, you know.
Did you know that our government has a FREE deduction for most of us?
That free deduction is called the STANDARD deduction. I say it’s ” free” because you don’t have to spend a dime to claim this one. The amount of your standard deduction does change from year to year and is based on your filing status. Single, Married Filing Jointly, Married Filing Separately, Head-of-Household status all have a different standard deduction.
Categories of Deductions
There are various categories of deductions that are allowable on 1040 tax return form Schedule A, Itemized Deductions. These different categories are 1) Medical and Dental Expenses, 2) Taxes You Paid, 3) Interest You Paid, 4) Gifts to Charity, 5) Casualty and Theft Losses, 6) Job Expenses and Certain Miscellaneous Deductions and 7) Other Miscellaneous Deductions.
In deciding whether to take the standard deduction or whether to itemize deductions, I ask my clients if they own their own home. And if that answer is yes, I ask if they have a mortgage on their home. Interest paid on a home mortgage is usually the largest of deductions. If you own your own home, you also pay real estate taxes. If you live in a state that has an income tax, those taxes you paid or had withheld from your paycheck are deductible. Because there are states that do NOT impose an income tax, the government allows us to choose to deduct sales taxes paid instead of income taxes paid. And if you have a car, you may also be able to deduct the license plate registration fee.
Unusually large medical expenses can also shift you from taking the standard deduction to itemizing deductions. I tell my clients that this is NOT the big deduction I want them to have. Amounts you pay for medical insurance, doctor and dentist visits, prescriptions and lab fees are the common deductions. There are costs that are deductible and there are costs that are NOT deductible. How do you know which is which? Listen to the recording of my August 10, 2012 radio program for more information on medical expenses. LINK
Charitable Contributions Count Too!
If you know you want to itemize, then you will also want to look at the gifts you gave to a qualifying charity during the year. These gifts can be money and they can be what I call “stuff.” Money does not just mean paid by cash. Money means cash, check, credit card. The important key is to get a RECEIPT for your gift. The Internal Revenue Service is paying much closer attention to this deduction because of fraudulent deductions claimed every year. Listen to the recordings of my August 31, 2012 and December 7, 2012 radio programs on contributions for more information. 
Can you really save a bundle in taxes when you work from your home?
I know many very successful business people who do work from their home. I work from my office space in my home. This blog is all about the basics of what you need to know qualify for this deduction. You will know what you need to do to protect your deduction.
For those of you that have a business, it can seem like it is never ending. Just when one deadline is met, another deadline looms ahead.
Corporation tax returns are due March 15th. Big “C” Corporations use Big Accounting firms. We used to have the “Big 8” firms. They shrank to the “Big 4”. I am a smaller service firm and work with smaller companies. Some of them have elected “S” Corporation status and file the “S” Corp return.
Companies are owned by shareholders, mostly by individuals. Your individual tax returns are due April 15th. No matter “C” or “S”, your corporate business income tax returns are due MARCH 15th. If your business is a Partnership, that income tax return is due April 15th.
You may want more time to file these important once a year accountings. You account for your income and you account for expenses. That makes your income tax return an accounting. You may handle this accounting yourself with simple lined paper, or with still popular green column paper, or with simple spreadsheets that can also do the math. Be careful – the spreadsheet results are only as good as the formula you create for your calculations. Maybe you use accounting software and maybe you engage a professional accountant. Whatever manner you choose, you need those accounting results to file your tax return.
If you need more time to file your returns, you can request additional time by filing a form for extension. These extensions can be filed for your individual return and they can be filed for your business returns. The most important thing to remember here is that this is an extension of TIME to FILE. It is not an extension of time to PAY.
When you do complete your tax return and you learn you owe tax, will you be able to pay the tax before the date the return is due to be filed? if this tax is not paid by the due date of your return. the Internal Revenue Service will charge you interest and one or more of several penalties. And if there is tax due, then the extension you had asked for is considered invalid or not valid. And now your return is considered late. Late is not just tardy. Late is delinquent. There is no corner to sit in. There is no detention to attend. You just write another check for these “additions” to tax that IRS will assess.
How can you avoid these penalties for filing late and for paying late? You have two ways to avoid these penalties. First, understand that while “C” Corporations may have an income tax to pay with their Form 1120 tax return, “S” Corporations and Partnerships do not. Both “S” Corps and Partnerships use a Form K-1 to notify each shareholder or partner of their share of the business profit or loss. These profits (or losses) pass through to the individual and are included on their individual Form 1040 tax return.
Employees have taxes withheld from their paychecks. Shareholders can avoid these penalties by making what are called Estimated Tax Payments. When you do a good job of “estimating” what you expect your taxes might be next year, you make four payments to the United States Treasury during the year. And if you pay your estimated taxes on time (not late) you can avoid the late-payment penalty.
Always to you lowest legal tax,
Nellie T Williams, EA 
I hope this never happens to you!
Before we began filing tax returns electronically in 1985, nobody talked much about Identity Theft. E-filed tax returns reject if the names and social security numbers on the tax return do not match the information that the Social Security Administration shares with the Internal Revenue Service.
When I first entered the e-filing workplace, in the first years of electronic tax filing, I spent a LOT of time “perfecting” my client database. A name and SSN match is applied against the primary taxpayer (first name on the tax return), applied against the spouse and each dependent claimed on that tax return.
Mismatches
When a tax return is rejected for a name and SSN mismatch, I first look to make sure I entered the information correctly. Did I spell a new client’s name correctly? Did I accidentally transpose a number? If the name is a woman’s, I ask if she has married. Did she forget to notify SSA of her new last name? If the name is Hispanic, I look at the actual Social Security Card and try to see if there was a confusion between a middle name and a last name.
If everything looks good from my perspective, only then do I suspect that someone else used my client’s information. Did someone else mis-key their own social security number? Did someone need a job, dream up a SSN and did it just happen to be yours? Did someone else “borrow” your ID card for any reason? Was your wallet or purse stolen? Did you even know that someone else was using your identity?
A Growing Problem
Nina Olson, Taxpayer Advocate at the Internal Revenue Service, admits that identity theft is a growing problem every year. In 2012 she reported to Congress that ID theft has become a BIG business. Organized criminals are getting lists of information from hospitals and schools. She was surprised to learn that information about people who have died is available on the internet. Criminals are using this information to file bogus tax returns early in the filing season. When the real owner of the SSN gets around to filing their return it is rejected. This begins the battle to prove it is YOUR social security number.
If you have been a victim of identity theft, you are going to have to wait for the refund that is due you. Most taxpayers have to contact the IRS multiple times. At the end of 2012 IRS had about 650,000 ID theft cases in its inventory. The Taxpayer Advocate Service (TAS) got about 55,000 of these cases that were not already resolved by IRS. Can you believe it takes an average of 6 months to prove to the IRS that YOU really are who you say you are?
What to Do?
What should you do if you are the victim of identity theft? First, file a police report. If you receive a notice from the IRS about your tax return, call the phone number on the notice. If you have not received a notice, contact the IRS Identity Protection Special Unit IPSU) at 800-908-4490. Their hours are Mon-Fri 7am-7pm your local time. Alaska and Hawaii follow Pacific Time.
Fill out and submit IRS Form 14039, Identity Theft Affidavit. It is a simple 2-page form.
Once you are able to prove that YOU are the lawful owner of this SSN, you will be given in IP Pin (Identity Protection Personal Identification Number) to use on your tax return. You will be given a new IP PIN to use every year. Protect it like you would protect anything else of value.
If you would like to talk to me about how you can protect yourself from Identity Theft, send an email to 
Attention Employees: This is the blog I promised you.
Here is a list of the important forms you need to know when you’re an employee. Always check with your tax adviser before filing!
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 2012, you should be getting this important form very soon. Employers are required to issue their W2 forms by January 31st.
Common Issues
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?
What if the W2 Doesn’t Arrive?
If you have not received your W2 by February 14th, you can call the IRS for assistance. When you dial 1-800-829-1040, be prepared to wait on hold. It could be a long wait. This is a toll-free number and they get a lot of callers.
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 (NEVER!) give this confidential information to any one who calls 
December 31st marked the end of the fourth quarter of the calendar year. Not only do you have the fourth quarter employers reports due by January 31st. You also must give your employees their W2 forms by January 31st.
You must also give any independent contractors their Forms 1099 Miscellaneous by January 31st. Caution: Do NOT make the costly mistake of treating an employee as an independent contractor! Attention Employees – the next blog is devoted to YOU!
In addition to the W2 forms given to the employee, you must also send a copy to Social Security Administration (SSA) with the transmittal Form W3. If you withheld state taxes for the benefit of your employee, you must also send a W2 copy to your state (with your state’s W3 equivalent). Form W3 must be filed with SSA by the last day of February. I tell my employer clients there is no penalty for filing early. If you file the W3 at the same time as you issue the W2 forms, you are more likely to file it on time.
Most employers file the quarterly report Form 941 to report the taxes withheld from the employees’ paychecks. The taxes withheld include the employees’ federal income taxes, Social Security taxes and Medicare taxes. PLUS the employer matches the Social Security and Medicare taxes. If you are self-employed you are considered both employer and employee and you pay the full 15.3 percent of earnings.
IMPORTANT NOTE: The 2% “Payroll Tax Holiday” that employees enjoyed these past two years expired on December 31st. Effective January 1, 2013 the employees’ responsibility for Social Security and Medicare taxes returns to 7.65 percent of their wages. Medicare taxes are withheld on every dollar of pay, but the 2013 maximum earnings subject to Social Security tax is $110,100 for both employees and self-employed people.
According to the IRS, “Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2013, but not later than February 15, 2013. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers’ pay as soon as possible, but not later than March 31, 2013.” So we have a little grace period here to “catch up” on the proper amount that should be withheld beginning January 1st.
You may be a small employer that has been given permission from the IRS to file an annual Form 944 instead of the quarterly Form 941. Form 944 is due by January 31st for the preceding calendar year wages paid.
In addition to Form 941 (or Form 944), Forms W2/W3 and state equivalent forms, you must also file (and pay) by January 31st, your 4th Quarter state income tax withholding report, file (and pay) your 4th Quarter state unemployment tax report, and file (and pay) your annual federal unemployment tax report Form 940. Unemployment tax is generally paid on the first $7000 of wages paid to a covered employee. Remember to take into account any deposits you made during the earlier quarters for federal unemployment taxes.
To recap:
By January 31, 2013:
1. File Form 941 for the 4th quarter 2012 OR Form 944 for the whole year 2012
2. File your state’s 4th Quarter 2012 income tax withholding tax reports
3. File your state’s 4th Quarter 2012 unemployment tax report
4. File Form 940 for the whole year 2012 federal unemployment tax report
5. Give Forms W2 to your employees
6. Give Forms 1099 to your independent contractors
By February 28, 2013 :
1. Send Form W3 with Copy A of all Forms W2 to Social Security Administration
2. DO not mail the W3/W2 to IRS, it goes to SSA
3. Mail Form 1096 with IRS copy of Forms 1099 to the Internal Revenue Service.
4. 1096 is the form that goes to IRS
5. I’s OKAY to file these transmittal forms in January. You don’t have to wait till February 28th.
Always to your lowest legal tax,
Nellie T Williams, EA