The End is Near

October 2, 2014

The end is near, the end of the tax year that is. We just ended the third quarter and are beginning the fourth quarter of this calendar year. . What does this “quarter” stuff have to do with you, the individual income taxpayer? If you filed an extension for your personal tax return, that return is due by October 15th. . Most individuals can file that personal tax return electronically. Once in a while there is something complicated that may require you to mail your tax return to the Internal Revenue Service Center, but those cases are rare. I highly recommend e-filing whenever possible, it cuts down on processing errors and you get confirmation that your return has been filed. . If you are in business for yourself, or have other income on which you have no withholding, you may pay estimated tax payments. The third quarter payment was due September 15th. If you missed that date, send that payment now to minimize late payment penalties when you file your tax return. The payment for the fourth quarter is not due until January 15th of this coming year. Of course, you can pay it early if you want to. . If you miss the due date for your tax return, whether individual or business, file that late return as soon as you can. If you file a late, or delinquent, tax return with taxes due, don’t be surprised when you get a bill for interest and maybe penalties. The government is the biggest business there is. They want you to file and pay on time. If you don’t they will look to collect more money from you. . Are you an employer? Do you have employees? The third quarter employment tax returns are due before the last day of October. You want to be sure to file those reports before the “witching” hour on Halloween. Don’t let the Tax Goblins come knocking on your door, that knocking would come in the form of a notice in the mail. If you fail to file a return to the IRS is expecting, they will ask you for it. If you fail to send them the money they are expecting, they will ask you for it and more. . Before you get busy with your fall and winter holidays, now is a good time to start organizing the papers you’ve been collecting all year for this upcoming tax season. How can I think of this already? It’s my business. You don’t have to think about it like I do, but I get phone calls all through the year, so I know once in a while someone else is thinking taxes. Is it deductible? Can I do this or that? I want you to stay out of tax trouble! . I started this blog with “The End is Near.” I don’t see an end to the IRS, they work 24/7 closed only for an occasional federal holiday. We file a tax return every year. I want you to pay only your lowest legal tax. File on time. Pay on time. Watch your calendar. Save your receipts. Let your tax advisor help you. Welcome to the fourth quarter.

Obamacare, Affordable Care Act

By Nellie Williams on

September 24, 2014

- insurance, Medical Expenses, Obamacare

If you got your health care coverage, health insurance, from the Health Insurance Marketplace, you may need to report changes in your personal situation. Changes you should report include birth or adoption, marriage or divorce, moving to another address, changes in household income, incarceration or release from incarceration, gaining or losing heath care coverage eligibility and other changes (including becoming a citizen or a change in immigration status or tribal status) that may affect you income and household size This list looks simple, but life is complex and there are many components to each category. In most cases the special enrollment period for Marketplace coverage is open for 60 days from the date of the event. Go online to HealthCare.gov or phone them at 1-800-318-2596. With a life change, such as becoming pregnant or getting a new job, you may be eligible for Medicaid or CHIP, Children’s Health Insurance Program.

Key dates for the Health Insurance Marketplace

Are you ready for the next Health Insurance Marketplace Open Enrollment Period? Open Enrollment is the time when you can apply for a new Marketplace plan, keep your current plan, or pick a new one. 4 key dates you should know:

November 15, 2014 Open Enrollment begins. Apply for, keep, or change your coverage.
December 15, 2014 Enroll by the 15th if you want new coverage that begins on January 1, 2015. If your plan is changing or you want to change plans, enroll by the 15th to avoid a lapse in coverage.
December 31, 2014 Coverage ends for 2014 plans. Coverage for 2015 plans can start as soon as January 1st.
February 15, 2015 This is the last day you can apply for 2015 coverage before the end of Open Enrollment.

To buy Marketplace insurance outside of Open Enrollment, you must qualify for a Special Enrollment Period due to a qualifying life event like marriage, birth or adoption of a child, or loss of other health coverage. I am not your insurance sales rep, I am your tax advisor. On the 2014 tax returns to be filed In tax season 2015, one of the questions on the tax return will be, “Did you have minimum health insurance coverage for every month of the year in 2014?” And if you did not have health insurance coverage, do you qualify for an exception? Will you be flirting with a tax penalty for not sharing your responsibility for required health care coverage? If you are like me, you try to stay healthy and practice wellness, but we still have insurance – just in case. And now we have insurance because it is required. And no, we don’t wake up in the morning saying, “Gee, I haven’t used this insurance for a long time. Let me get my money’s worth and have an accident today.” NO! Buying this insurance is just one of the costs of living in this great country of ours.

Did you know that the NEW HealthCare Law (ObamaCare) can affect your taxes?

By Nellie Williams on

September 18, 2014

- Deductions, insurance, IRS Audit Process, Obamacare

What does this really mean for you?

This is such a BIG topic and it’s not possible to answer every question here. I’m not your insurance specialist, I am your Income Tax Audit Specialist. Here is the introduction to this new tax wrinkle that may impact your current and future tax returns.

The healthcare coverage you currently carry for yourself and your family may be all you need. If you have what is called Minimum Essential Coverage, you probably don’t have to do anything.

But if you go without coverage for any part of the year, there are special rules that apply. If you don’t qualify for an exemption, you may need to make a special payment called an Individual Shared Responsibility Payment.

Who qualifies for an exemption? Those who…

Do not have to file a tax return
Do not have access to affordable health care
Are a member of certain exempt groups
Are suffering a hardship.
Have other situations as shown at www.IRS.gov/aca

If you and your dependents do not have coverage and do not qualify for an exemption, then you may have to make a “shared responsibility” payment when you file your tax return.

This payment is either a percentage of your income or a flat dollar amount, whichever is greater. The payment is based on the number of months you go without coverage, or the number of months you are exempt.

If you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the Premium Tax Credit. This can help people with moderate income more easily afford the coverage.

If you meet the following requirements, there is a Premium Tax Credit:

Your income must be within certain limits
You must not be eligible for other coverage through an employer or government plan
You cannot be claimed as a dependent on someone else’s return
You cannot file your tax return using the Married Filing Separate status

When you apply for coverage through the Marketplace, you can choose to get the credit now or you can choose to get the credit later. If you choose to get the credit now, you are asking the marketplace to pay some, or pay all of the estimated credit in advance, directly to your insurance company. That will help lower your out of pocket premium costs. If you choose to get the credit later, you take that credit on your income tax return.

If you choose the advance payment, to get the credit now, be sure to report changes in your income or changes in your family size. Report these changes when they happen to ensure you are getting the correct amount of advance credit. This is important, because getting too much or getting too little credit can affect your income tax return refund or balance due.

I still get my insurance from a private insurance company. There is a lot to learn about ObamaCare and income taxes. In next week’s article, I will address the time line for getting coverage now for next year.

Got Insurance

By Nellie Williams on

September 11, 2014

- Deductions, insurance

What kind of insurance do you have? Do you have enough? Do you have too much? Is it tax deductible? Let’s begin with…What is insurance? According to Merriam-Webster, insurance is “an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies or to pay money equal to the value of something (such as a house or car) if it is damaged, lost, or stolen.” Here in Arizona we have blistering heat in the southern parts of our state. We have freezing cold in the northern parts of our state. We have had little earthquake tremors as well as devastating fires. We have had some tremendous wind storms and most recently so much rain that we had serious flooding issues. There are many type of insurance:

Life
Property
Mortgage
Auto
Road-side assistance

Health/Dental
Medicare
Long-term care
Travel insurance
Amusement location or Event insurance

Business
Worker’s compensation
Disability
Third Party insurance
Key-man insurance

Can you think of any others? Do you have insurance to cover your losses? What does your policy cover? What are the limits of coverage. Do you have a deductible that needs to be met before the policy will pay you? If you do receive proceeds from your policy, must they be included in your income? Just because you have insurance to help you cushion your loss, does not mean you will be successful when filing your claim. Just because you choose to purchase insurance does not mean it is deductible on your tax return. Do you itemize your deductions? You may be able to deduct your medical, dental and long term care insurance premiums. But they are not 100% deductible. And if your policy pays you a daily amount for being the hospital, or for loss of limb or body part, that premium is not deductible. Are you insuring items used in your business? Generally the business or business owner may be able to deduct the premiums paid. But what kind of insurance is it? What is being insured? If you are an employee, you may want to insure the tools you own and use in your work. You must itemize deductions in order to deduct your policy premiums, and then they are not 100% deductible. If you use your vehicle in your work, and you keep your log of business miles driven, you have a choice. You may choose to deduct the business percentage of your actual expenses, which may include vehicle insurance, or you may choose to take the cents-per-mile method of deduction. There are always more questions than can be answered in any article. You have particular circumstances. You need an answer based on your situation. If you want to talk about your individual question, email me, You can’t buy your answer, but you can schedule a consultation with me. Nellie@BulletProofYourTaxes.com

Election Season

By Nellie Williams on

September 5, 2014

- Charitable Giving, contribution, Deductions, IRS Audit, IRS penalties

It is election time again and everybody has their hand out. They want your money. They want your contribution. That is natural. .. We just had our primary elections to determine who will be on the ballot in November. Candidates often spend a TON of money and there is not even a guarantee of winning. (Or there shouldn’t be.) Everyone is asking for money, but you need to know this: contributions to political candidates and political campaigns are NOT deductible. Those $1000 a plate dinners are NOT deductible. .. Just what is a contribution? It is a donation or a gift made voluntarily with no expectation of receiving anything in return. It is a donation or gift to a qualifying organization or to be used by a qualifying organization. You must itemize your deductions on Schedule A of the Form 1040 Individual Income Tax Return in order to claim these deductions, but don’t let the requirement to itemize keep you from giving where you feel moved to give. .. We are a nation of givers…some are more generous than others. The INTERNAL REVENUE SERVICE knows that some of you also tell tall tales when it comes to your deductions for charitable contributions. A few bad apples have spoiled it for everyone; in other words, you need to be sure to document your deductions. Safeguard yourself with good record keeping. That might sound boring now, but how glad will you be when your return is audited and you have EVERYTHING you need to keep you from owing more tax. .. Not every contribution is deductible. But don’t let that stop you from giving to someone in need. If you want to keep it just between you and God, and don’t have the receipts to support your deduction, then keep this donation from the Internal Revenue Service, too, and leave it off your return. .. How do you know if yours is a qualifying organization? The IRS has a list of most of them in their Publication 78 found at www.irs.gov. You can search by the organization name, city and state. It is easiest to search if you know the EIN or Entity Identification Number of the organization. If they have a number, they were qualified once. If they are still on the IRS list, and you have your proof of giving, then you can safely claim that deduction. .. Don’t let the tax laws rule your life. Just let the tax laws rule your tax return. Don’t let the tax laws keep you from giving where you want to give. Just know when it can go on your income tax return and when it cannot.

Guilty!

By Nellie Williams on

August 14, 2014

- Uncategorized

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.

The IRS’ Dirty Dozen

By Nellie Williams on

August 8, 2014

- Fraud, IRS penalties, IRS Problems, Tax Scams

The IRS’ Dirty Dozen has nothing to do with eggs or outlaw motorcycle gangs! The IRS’ Dirty Dozen has everything to do with tax scams. Taxpayers who get involved in illegal tax scams can lose their money. They can face stiff penalties, interest and even criminal prosecution. We’ve all heard, “If it sounds too good to be true, it probably is.” This time the Internal Revenue Service really is your friend. They want you to be safe and informed. A couple of weeks ago I wrote about fraudulent phone calls. Phony phone calls are just one of the rotten eggs the Internal Revenue Service wants to warn you about. Telephone scams are number two on this list. Identity Theft tops the list. An identity thief uses YOUR identity to illegally file a tax return and claim a refund. If you or someone you know has fallen victim to identity theft, contact me for further help. Phishing is a term used to describe unsolicited emails or fake websites that appear to be legitimate. Scammers will try to lure you, trick you, into providing them with your personal and financial information. Know that the IRS does not begin contact with you in this way. They will send you a letter by US Mail. Then YOU get to respond. Once you contact them, they may telephone you back because YOU will have given them your contact information. False promises of “free money” or inflated refunds is another common tax-season scam. Scam artists often pose as tax preparers during tax time. They lure their victims in by promising large refunds. Taxpayers who buy into this kind of scheme often end up paying back the refund PLUS interest PLUS penalties. Take care when you choose someone to prepare your return. Ask them questions to help you feel comfortable helping you with this important matter. The IRS has said that about 60 percent of taxpayers use professionals to prepare their tax returns. Most return preparers, like myself, provide honest service to their clients. But there are rotten eggs in the tax business. Dishonest preparers take advantage of unsuspecting taxpayers. The result can be refund fraud or identity theft. Be sure you only use a tax prepare that will sign your return. They must also enter their Prepare Tax Identification Number, or PTIN. If you pay them, they must sign as the paid preparer. If not, they are as dirty as a motorcycle outlaw. Other tax scams involve hiding income offshore, out of the country. Claiming false income, expenses or exemptions is committing tax fraud. How much money is enough to go to jail? Other tax protesting citizens claim zero wages. They take frivolous arguments in defense of a losing positon on their tax return. Sometimes they set up abusive trusts to hide their income. Of course, it is impossible to predict what the next and newest tax scam will be. Your best defense is to remain vigilant. You sign your tax returns under the penalty of perjury. What is your freedom worth to you? Mine is priceless. If you’d like to hear my radio show about this very topic, go to my “Latest Audio” . My show airs every Friday at 10amPT/11amET. Past shows can also be found on my website – just click on the Radio!

Tax Return Troubles?

By Nellie Williams on

July 30, 2014

- IRS Audit, IRS Audit Help, IRS Audit Process, IRS penalties, IRS Problems, IRS Tax Problems

Oh Boy, Oh Brother! Holy Cow! How else can I nicely say this is not good? I am always trusting my technology. I have a technology guru that I rely on. He is my go-to guy. Right now my computer is sick. That is the nicest way to say I think I have a virus. The good news is that it can be fixed. I have Patrick and Tara to help me. What happens when your tax return has a virus? We don’t usually think of tax troubles this way. But this is just one way to understand something is wrong and needs to be fixed. Our friends at the Internal Revenue Service work all year long. Their hours are not 24/7 but it can seem like it to us. They have private parties every day. Have you gotten your personal invitation? I hope not. That personal invitation is a welcome letter to a tax audit. I have talked about tax audits before and I’ll talk about them again. I want to help you avoid that audit. Today I’m talking about AMENDED TAX RETURNS. If you find you have made an error on your original return, you can head that invite off at the pass. You can stop it in its tracks before it ever gets started. If you find you have omitted income, you certainly want to “fess up” and correct your tax return. You will owe more tax, but you can minimize interest and penalties. The IRS is required by law to assess interest. They have some discretion on whether or not they assess some penalties. If you have omitted income and wait for the IRS to notice your forgetfulness, you will pay more. More time will have elapsed from the date of your original filing and the date the IRS gets around to your perhaps negligent return. How much money did you leave off? How much “too much” deduction did you take? Either way you did not pay in enough tax and IRS wants all of their share. Did you forget to claim a deduction that was allowable? Did you not realize your expense was deductible? if this is your situation, be sure to include copies of the receipt showing what you bought, when you bought it, and how much you paid. Yes there is a time frame for submitting your amended return. A safe rule of thumb is within 3 years of the original due date or the date you filed your return, whichever is later. For example, if your return was filed March 1st, the due date is April 15th. File your amendment before 3 more April 15ths go by. If your return was filed May 1st, the due date was April 15th, but you filed late. So you must submit your amended return before 3 more May 1sts go by. The IRS must have your amended tax return in their office before the amended due date (statute expiration date) arrives. Mail your returns so they are received BEFORE the statute expiration date. Don’t forget your state return, if you live in a state that has an income tax. Most state’s tax returns begin with the information from your federal return. If you make changes to the Federal return, you will want to make changes to your state return, too. Contact me if you need help.

I just got a call from the IRS!

By Nellie Williams on

July 16, 2014

- Fraud, IRS Problems, IRS Tax Problems, Tax Audit

When I, Nellie, get a phone call from the IRS, it really IS the IRS. Income taxes are my job, after all. If a phone call is the first contact YOU get from the IRS know this…IT IS PROBABLY NOT THE IRS! The first contact you will get from the IRS is usually a letter. If the IRS wants to talk to you, they will contact you by regular “snail” mail. They will NOT contact you by email. That email is phony, too. There are SO many ways people commit fraud. I have spent my life learning how to do things right. It boggles my mind that other people spend their lives trying to figure out how to scam the system. Most of those people are in jail or are on their way to jail. Personally, I like my own bed and my own cooking better than the bread and water jail diet. The IRS wants you to beware of these types of scams. The callers pretend to be from the IRS. They hope to be able to steal money from you. They also hope to steal your identity. The phone scams include many variations, such as…

Sometimes they say you owe money.
Sometimes they say you are entitled to a huge refund.
Some calls threaten arrest.
Some calls threaten your driver’s license revocation.
Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

According to IRS.gov, the phony scams can include some of these characteristics:

“Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.

“Scammers may be able to recite the last four digits of a victim’s Social Security Number.

“Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.

“Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.

“Victims hear background noise of other calls being conducted to mimic a call site.

“After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.”

“If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

“If you know you don’t owe taxes or have no reason to think that you owe any taxes, then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484”

Next week I’ll discuss some of the other IRS’ “Dirty Dozen” scams for you to guard against.

Meals and Incidental Expenses While Traveling for Business

By Nellie Williams on

July 9, 2014

- Deductions

Are you paying for your own meals while you are out of town for business? What is the purpose of your business travel? Is it to see a client? You may have an expense for your own meals and you may have an expense for wining and dining a client. Other blogs have addressed the deduction of meals while entertaining a client. Is the cost of your meals included in your seminar registration? Understand that you must keep a record of how you are determining your deduction. You can keep the restaurant receipt showing what you paid. It will often show what you ordered and whether there was more than one guest on this ticket. Business entertainment is not part of this discussion. Think about the meals you eat in a day. Breakfast? Lunch? Dinner? How much will you be spending? The cost of your meal PLUS the tip (an incidental expense) you leave your server for their good service is what you want to deduct. Remember, lavish and extravagant are not deductible. Ordinary and necessary can be deductible. You can decide if you want to track and deduct the actual cost of your meals. Or, instead of actual expenses, you can use the standard allowance for the CITY you are in. The IRS posts this every year. The standard per diem (per day) rate for meals and incidental expenses for Phoenix, Arizona is $71. The standard per diem rate for Tucson, Arizona is $56. Smaller cities around the state of Arizona can claim $46 per day. On the days your travel TO and then back FROM your temporary business location you can claim 75% of the day’s per diem rate. So, on the day I leave for my training meeting in Tucson, I can claim 75% of $56 which is $42.00. The government is thinking I’ll have breakfast at home before I leave. They would be correct in my case. On the day I return home, I can claim another $42.00. Would I have spent the full $42 for meals and tips those days? Maybe yes, maybe no. Whether I spend more or less, I will deduct the full $42. One more thing – your meal deduction is limited to 50%. So I will only deduct $21. Do you need to keep receipts? The most recent tax laws state that you MUST have receipts for lodging. For other travel and entertainment expenses less than $75.00 you do not need to have the receipt. You MUST, however, keep a record showing the time, place, business purpose and amount of each separate expense. The IRS will match up the expenses you are claiming with your hotel receipt and other travel expenses, like airfare, in their verification process. Do you receive reimbursement for your expenses? If you are reimbursed in full, then you are repaid for your expenses and really have nothing left to deduct. If your reimbursement is included in your W2 income, then of course you will have income in the amount of the reimbursement you received. You will certainly want to claim the expenses if you itemize your deductions. Have I raised more questions than I answered here? The tax laws can be confusing. Email your questions to Nellie@BulletProofYourTaxes.com.

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