January is the time of year when Americans start thinking about their tax returns. You may not do anything about it yet. But you start thinking about it. Television ads bombard us 24 hours a day.
Have you always gotten a refund? Are you going to get a refund again this year? Or will you owe taxes? Again?
One way to know for sure is to get all your tax documents together and do a “forecast” of your results. In order to have an accurate picture you’ll need to have as much of your information as you possibly can.
Getting Started
If you are a wage earner, if you take the standard deduction instead of itemizing your deductions, if you have your W2 in your hand, you may be ready to get started.
In years past we were already electronically filing tax returns by the second Friday in January. But this year NO returns will be e-filed before January 30th. Internal Revenue Service needs time to finish designing their forms and testing their e-filing programs since Congress waited so long to pass our newest tax laws with “fixes” and “patches.”
So even though you might have to wait until January 30th to e-file, do file electronically if you can. File your return as soon as you are able to do so.
If you itemize deductions, you might have to wait until into February to file your return. Those of us who file some of the more complicated forms will even have to wait until March.
Don’t think you can save time and get your refund faster by mailing you return. It can take the IRS 8-12 weeks to process a return that is mailed in.
E-Filing
I can tell you from first-hand experience that e-filing is THE way to file your return. Your return will be delayed if you choose to mail your return. This is not a negative comment about our mail delivery service. It is just that e-filing is SO much faster. PLUS you don’t have a human being key-punching data from your return into a computer. Humans can make mistakes. That is just being human, after all.
I’m not paid to promote e-filing, but I am here to tell you there are huge benefits to you when you do file your return electronically. Preparers who file more than 11 (eleven) tax returns are REQUIRED to e-file those returns. If they file a return by paper they must explain why the return was not e-filed.
Do you have to file as soon as tax season opens? No. You can choose to wait. 2012 Individual Income Tax returns are due Monday, April 15th, 2013. Calendar-year Corporation and Partnership Income tax returns are due Friday, March 15th.
Extensions
Both individuals and businesses can request an extension of TIME to file their paperwork. An extension of time does not give you more time to PAY your taxes. If you have taxes due, pay them (estimate them if necessary) before the due date of your return.
If you file an extension for more time and you wind up owing tax when you do file, you will owe both tax AND interest AND maybe penalties, too. Neither you nor I want that for you.
Always to your lowest legal tax,
Nellie T Williams, EA
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January 31 is the deadline for many of your “Important Tax Information” reports to be mailed to you. You may even have received some of them early. They truly are important for you. And they are important to the IRS.
IRS gets copies of these forms too. And if you happen to forget to include income on your return, IRS will certainly be contacting you.
W-2 is THE key form for employees. You need to report the wages you earned from each employer you worked for during the year. This form also reports the income taxes withheld from your earnings and other important information.
1099-MISC is THE key form for independent contractors or business owners. Much like the W-2 for employees, this is the form that businesses report total yearly payments of $600 or more to workers who are not considered employees. If you think you are an employee and get a 1099-Misc instead of a W-2, I’d like to consult with you. If your business has taken the steps to become a corporation or partnership, you may receive a W-2 or a K-1.
Form K-1 is used by various entities to report earnings and other tax return related information. S-Corporations, Partnerships, Trusts and Estates use this form to “pass through” income and expenses to owners, partners and heirs. Your tax return cannot be completed until this K-1 is reviewed. If the business has filed an extension of time to file the business return, you may not get this form until close to, or even after, the April filing deadline for individual returns. If this is the case for you, you will need to file an extension for your individual tax return.
1099-INT is sent to you when you earn $10 or more interest on a bank account or certificate of deposit. You should get one of these forms for each account that generated enough interest. If you have more than one account at a single branch, they may report each account separately on a single statement. Some banks show each account and provide the total earnings for all accounts. Whether or not you withdrew the interest, or had it in your hot little hands, this is taxable income that must be reported. If you earned less than $10 you are still required to report the interest earned, you just won’t get the Form 1099-INT to remind you. In this case, you’ll need to check your account statement that includes December 31st.
1099-DIV reports to you earnings of $10 or more in dividends paid on stocks, bonds and mutual funds. Like 1099-INT, you are responsible to report all earnings even if you had less that $10 and do not get this form. 1099-DIV also includes capital gains paid on these investments. These capital gains are for activity within you account, not for the sales of stocks from your account. Both ordinary dividend and capital gain dividend numbers are important in calculating your proper tax. Your tax professional will see that you don’t overpay your tax.
1099-B reports your sale of stocks, bonds or mutual funds. You receive Form 1099-B from your broker or mutual fund company. This form can be one page or multiple pages depending on the size of your account. For each sale this report will tell you the name of the stock or fund account, how many shares were sold, the date of the sale and the sales price. Some brokers issue a preliminary report to meet heir February 15th deadline to issue this Form 1099-B, but they will tell you to expect a corrected or final statement later in the tax season. Provide EVERY page of this report to your tax advisor.
1099-G is issued by states when you receive a tax refund of state or local taxes. This refund may or may not be fully taxable to you. Consult with your tax advisor. A separate form of this same number will also report unemployment benefits paid to you. Unemployment benefits received are income taxable and must be reported on your tax return.
1099-R is used to report distributions paid to you from your pension plan, your retirement plan or our Individual Retirement Account or IRA. If you have a distribution that is not taxable, it must still be taken into account in filing your proper tax return.
1099-C reports Cancellation of Debt income which must be reported on your tax return. This income may or may not be taxable to you. It can be issued because you were unable to pay a debt, perhaps credit card or mortgage debt. Be sure to share this information with your trusted tax advisor.
W-2G is used to report Gambling Winnings. There are different reporting requirements depending on the type of game you won. Just because you were the WINNER does not mean are ahead “of the game.” and had a profit. It means you had a WIN. To avoid an IRS inquiry, report ALL gambling winnings, whether or not you received a W2G. See my blog on Gambling Winnings and Losses for more information.
The US Tax Code states all income is reportable except that which is specifically exempt from tax. Protect yourself from IRS audit by reporting all of your income.
Many Happy Return$,
Always to your lowest legal tax,
Nellie T Williams, EA 
FIRST: Do you use your car for business? If you have not already done so, go out right now, or as soon as safely and reasonably possible, make a note of your odometer reading.
Why? Because if you do this like I do, every New Year’s Day, you will have an accurate reading of your car miles at the very BEGINING of the year. This beginning reading is also the reading for the END of the previous year. This will allow you to prove the TOTAL number of miles driven on your car. And then each trip you drive for business purposes you will enter into your AUTO LOG, the date, where you went and the number of miles driven to get there. Remember, commuting is not deductible.
(as soon as possible). Set up your account to generate statements on the last day of each month. Keep your bank statements for EVERY MONTH so you can match your business income with your bank deposits. It will also allow you to see the debits, the checks written. You will have a clear picture of your money in and your money out.
THIRD: 
get their copy of your W2s and your 1099 forms. If you are a homeowner and pay a mortgage, you should be getting a Form 1098 showing how much interest you paid on your mortgage. Do you have interest and dividend income? If so, you’ll get a 1099INT or 1099DIV. If you bought or sold stocks, you will get a statement from your broker. Depending on the size of your portfolio, this statement can be many, many pages per account.
Your tax adviser is going to want you to bring EVERYTHING in to your appointment. If they are good, they want to save you money just like I do.
Always to your lowest legal tax,
Nellie T Williams, EA
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 TOMORROW is THE last business day of the year!
Did you ever play the game “telephone” as a child? Do you know you might still play it today? I’m not talking about gossip. I’m talking about misunderstanding.
One person hears something and shares it with someone else. That person shares what they think they heard and by the time you get to the end of the “line” the last story bears no resemblance to the original story.
Tis the season for gifts. Are you a gift giver? Is your gift giving deductible?
I have talked before about contributions on my blog in 
Did you buy a ticket? Did your ticket win? It’s all that was on the news lately!
I live in Arizona. One of the two BIG winning Powerball lottery tickets was sold right here in Fountain Hills. I’ve been past that corner many times. But the winner does not live in Arizona. He lives in Maryland. (We saw him verifying his ticket on the TV news.)
There are more than the two big winners. I don’t know how many smaller winners there are across our nation. Powerball is a multistate lottery game. It is played in 42 of our 50 states plus the US Virgin Islands.
$508 Million. FIVE HUNDRED AND EIGHT MILLION DOLLARS!!! How many hours would you stand in line to buy a ticket? Some people from California and from Nevada and stood in line over three hours just to get inside the little store on the border that sells the tickets. We play Powerball in Arizona, but they don’t offer this game in those neighboring states.
When you see that word do you smile knowing it is one of the few words with three double letters in a row? Or does it make you shudder?
Do you think, oh, “I’m not good with numbers, I’m not good at math.”? Do you realize that is just a mindset? You can change your belief about yourself and your abilities.
Numbers don’t lie. When you know your numbers you can make better decisions. You can make better business choices. Are you spending too much money on one thing and not enough money on another? Are you devoting enough money to marketing to help your business grow and thrive? Are you wasting your money on something else that is not returning enough of a benefit?
All of these questions can make your head spin. But I have some great news. And in line with Bullet Proof Your Taxes, good bookkeeping can help you Bullet Proof Your Business, too. I heard it said that building a business is a lot like building a house. You need planning. And planning to set up your bookkeeping system for profits can help you protect against a tax audit, too.
I am a baby boomer. I remember my dad building our “secret” bomb shelter in our basement during the Cuban missile crisis. There were six of us in the family. And this was meant to protect US only. It was a matter of life and death. We did have canned food, paper plates, paper towels, toilet paper, diapers for the new baby, a change of clothes for everyone, some games and books to keep us busy, candles, matches, batteries, first aid kit and a bottle of liquor for medicinal purposes only. Thinking back, we probably would not have survived in that little basement hide-away.
But what am I talking about today? What is an evacuation box. In a time of looming disaster you may be forced to leave your home or business for some undetermined period of time. You leave your place. You leave your stuff.
What can you do NOW to protect yourself and your family? Imagine having only five minutes to get what you need. What can you take with you? Do you know what you should take? Do you know where it is? Can you get it all in those fleeting five minutes?
I extend my sincere sympathies to people right now suffering and facing current losses. There are no words to comfort you. For the rest of you, if you want to protect yourself and your family, create your own Evacuation Box right away.
What is an Evacuation Box?
It is like having your own personal insurance for your essential documents. This box has to be something you can easily take with you. It can be a briefcase. It can be a white box. You don’t want it to be accidentally thrown away! I think if I am ever going to have to carry this, I’d rather it be a backpack so I can have my arms and hands free. Whatever you choose, it must safeguard your most important and often irreplaceable documents.
What goes into your Evacuation Box?
Just think about some of the essential documents you have collected over your lifetime. Birth certificate. Social Security card. Health insurance card. Medical records. School records and college transcripts. Driver’s license. Car titles. Boat registrations. Library card. Marriage certificate. Passport. Visa. Immigration documents. Deed to your house. Mortgage to your house.
Who so you still owe? What are those loan numbers? Include a list of your doctor’s names and current prescriptions. (And tuck in that favorite photo of your loved ones if you have room.)
Make a copy of BOTH sides of your credit cards. When one card expires, make a copy of the new one. Make a list of your utility providers, their names and your account numbers. Make a copy of your insurance policies, at least the page with your policy number and coverage details. Record the Vehicle Identification Numbers (VIN) for your cars, trucks, boats, etc. Have duplicates made of your keys, all of them, for your vehicles, homes, safety deposit boxes. etc.
Photograph your home, it’s contents. Make as detailed an inventory as possible. Keep it updated as you add things or remove things. Inventory the contents of your vehicles. Estimate the age and value of each item on your list. Consider using a computer and software for this. Keep a print out as well as a flash drive of these files.
Make a copy of the original documents. Include a copy of your most recent tax return. That’s always a good starting point for your next return. Put the duplicate copies in your evacuation box. Safeguard your original documents in your safety deposit box at the bank, or in a fireproof safe permanently secured in your home.
Where are you going to keep this Evacuation Box?
Do not keep this box in your car. Keep it near a doorway until any evacuation is ordered. If you go on vacation or away from your home for any period of time, take this box to a trusted relative or friend.
When are you going to make this Evacuation Box?
The sooner the better. Don’t you want insurance before your need it? Some of these documents are irreplaceable. Those that can be replaced take time. And if a lot of people are making the same request for replacements at the same time, you might have to wait longer than you want to for your copy. Do this now while it is less difficult to accomplish. You never know when disaster might strike.
When are you going to use this Evacuation Box?
I hope you never need this box. But if you do, I hope you make this box soon. You need it ready for that in-a-moment’s notice.
Always to your lowest tax,
Nellie T Williams, EA 
The thoughts and prayers of our nation are with those of you who are suffering because of this horrific storm. If you want to help, consider giving to one of the many charities responding to those in need.
If you have been affected by a CASUALTY or DISASTER loss, you may feel like it is the end of the world. You just want things the way they were. All over our country, year after year, we experience all sorts of heart-wrenching losses. You want to know: Is your loss TAX DEDUCTIBLE?
Internal Revenue Service defines a casualty as “damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual”. Sudden means swift, not gradual or progressive. Unexpected is not anticipated, not expected. Unusual is not a typical day-to-day occurrence.
Not every mishap is deductible. General wear and tear, lost property, damage due to accidental breakage, and similar events are not deductible.
When you’re in the midst of the storm, it is too late. Here is what you want to do now before you find yourself suffering from a casualty.