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
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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 
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.
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.
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