As long as I can remember I have celebrated Memorial Day. I LOVE to fly my American Flag! I remember celebrating holidays during he week, not just on designated Mondays. We celebrated the holiday on what we considered was the actual or official holiday date. Things change. My memory seemed a little faded since grade school. I wanted to learn a little more so I did some research. Just like when I research tax law, I found answers to some of my questions.
I was surprised to find that Memorial Day was first celebrated after our Civil War. It was after this same Civil War that the Enrolled Agent, my professional designation, was also first recognized.
In researching this holiday I found confirmation that we really did celebrate this day on May 30th. I was surprised to see that we once celebrated this holiday on May 5th. Now that I live in Arizona, we celebrate the Mexican holiday, Cinco de Mayo, on May 5th. Things change.
My father, like his brothers and so many other great people, served our military in World War II. I remember one of my aunts talking about Decoration Day. I didn’t really understand it as a child. It was the day Americans decorated the graves of soldiers. Decoration Day is now called Memorial Day. Things change.
One Memorial Day before my father died, I thanked my father for his service. I appreciated his sacrifice. He didn’t say much. I asked him if he had ever been thanked before. He said, “No.” But his expression seemed to say, “Why would anyone thank me? This is what we did then.”
So for all who served, for all who are serving now, and for those yet to serve, I thank you for your service. My gratitude for you all will not change.
How do you serve? Who do you serve? There are many ways to serve, many organizations to serve.
What does this have to do with taxes? Taxes change every year. I am glad we still have a deduction for Gifts to Charity. This category includes organizations whose purpose is religious, charitable, educational, scientific or literary. Contributions also include organizations that work to prevent cruelty to children and to animals. Of course veteran’s groups are part of these qualified charitable organizations.
I am serious when I tell my clients, “Don’t let the tax laws rule your life.” Yes, pay attention to the tax laws. but live the way you wan to live.
You can give to whoever you want. But if you want to deduct what you give, you’ll want to be sure your organization (not an individual) can provide you with verification of their charitable status. You can check the status of your charity at www.irs.gov/charities or call the IRS Customer Service at 1-877-829-5500.
What can you deduct? Contributions can be money (cash, check, payments by credit card), property (new or used) and out-of-pocket (meaning you paid it with your own money) expenses you paid to do volunteer work for a qualifying charitable organization. Keep track of the miles you drive, parking and tolls, for your volunteer work. Don’t deduct any amount that was repaid to you.
If you want to deduct any gift of $250 or more, you need to have a statement from your organization before you file your tax return. This statement needs to show how much money you gave, or the description of the property you gave, AND whether or not you received any goods or services in return. If you did receive something back, this statement must state the value of what you received. I’ll talk about deducting non-cash contributions in another blog.
These days, so many people are listening to radio station WIIFM, What’s In It For Me? How do you give? I was a Girl Scout. I lived near Lake Michigan and got a Red Cross Life-Saver certification. I played viola in my school orchestra. I still sing in my church’s choir.
How do you contribute? How do you give back? Our most precious resource is our time. But the value of our time is not deductible.
If you have questions about what you want to deduct, post a comment. This could be a great discussion.
Always to your lowest legal tax,
Nellie T Williams, EA
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Do you remember when “Human Resources” was called “Personnel”? Maybe you didn’t even know this little bit of workplace trivia history.
If you are a business owner you may have a Human Resources Department. If you are a “solo-preneur” YOU may BE the Human Resources Department.
Whether you are employed as the HR Department Head or whether you an employee of any business, you want sound Human Resources practices to implement and follow.
I am experienced with tax audits by the Internal Revenue Service. I am dedicated to helping you both prevent and defend an IRS tax audit. I didn’t realize that we could also be audited because of vulnerable Human Resources policies.
Human Resources is directly involved in the hiring, training, development and management of their people, their personnel, their human resources.
The TOP TEN most common pitfalls are really easy to understand once you think about them.
1. Company managers represent the company to the employees. Train your managers on the basics of your business: Hire, discipline, and deliver the difficult messages when they are necessary.
2. A poor or inconsistent selection process can be costly. Who is your BEST choice for YOUR business? Can you fill your positions with the best at the start?
3. The poor or inconsistent orientation of new hires can cause confusion and misunderstandings. Have a standard method of sharing the duties and expectations with each of your employees.
4. Inconsistent compensation practices can result in negative feelings among workers. Give equal pay for equal work.
5. Employee misclassification is another common mistake. According to the Fair Labor Standards Act (FLSA) certain employees receive overtime pay for overtime work. Just like in the tax field, you must be careful in determining whether your new hire is an employee or an independent contractor. The laws in this area are so deep you are encouraged to seek local counsel.
6. Insufficient documentation of poor performance issues can be very costly.
7. Failure to have a performance management system is a mistake. You need a system that improves communication, that rewards and pays employees based on what they deliver. Be sure to document your decisions.
8. Have job descriptions that are accurate and complete. Do not underestimate the importance of job descriptions that cover not only essential work but also any other work the job requires.
9. Management that fails to follow published policies invites trouble. Create, implement and evaluate your workplace policies.
10. Failure to train your management team on dealing with and preventing harassment puts your company at risk. Every two years conduct and document your training. Whether attended online or in person, DOCUMENT participant names, dates and location of trainings.
BONUS: PROTECT yourself from risk. Here are three tips you need to help you avoid lawsuits, audits and fines.
1. Develop a training plan for legal compliance. This includes necessary training on dealing with sexual harassment, discrimination and a hostile work environment.
2. Choose the most effective way to deliver this training.
3. Conduct an effective training session.
Finally, when creating your employee manual, be aware of your state’s laws. Make your manual a policy and not a contract. Train your supervisors in the use of your employee manual. Coordinate the employee manual with other company manuals. And lastly, KEEP the manual UP TO DATE.
Always to your lowest legal tax,
Nellie T. Williams, EA 
I am a solo-preneur. Williams Audit Specialists of Arizona is a single owner corporation. Bullet Proof Your Taxes is one division of Audit Specialists.
Yes, I am a brick and mortar business. Yes, I have employees. There was a time when I had several employees. I still do have one employee. I am my number one employee.
Now that our annual 1040 Marathon has finished, I’ll admit that I am tired. Tax season may have critical dates, but it is never really ever over. Most of us in this business will tell you we love it when tax season begins. And we love it when it ends.
Between April 15th and April 30th employment tax returns for my own firm and for my clients must be prepared, filed, and paid. After-season “Post Mortem” professional meetings are held to share stories of the good, the bad and they ugly of our recent months.
Office hours are adjusted. I may have worked evenings and Saturdays before April 15th. Now that our days are getting longer and warmer, my office hours are getting shorter.
I do taxes all year long. And now I am also adding more services. Now I can attend the seminars I want and need to maintain my various certifications. It is important to me to stay up-to-date in the tax laws, policies and procedures for YOU.
Certain activities that were put on the “back-burner” during income tax season are moved to the forefront. Soon I will begin mid-year tax planning for those of you who want to or who need to adjust your tax withholding. And now I can resume my coaching services.
Did you see vacation on that list? I didn’t. When I was an employee it was mandatory that we take our annual leave every year. I remember “use it or lose it.” It is important to take a break to re-charge your energy, to renew your spirit. It is also good business that every company require employees to be away from their job for some time every year. If you have someone refusing to take time off, ask yourself, “What do they NOT want you to know about what goes on at their desk?”
Most years I include an extra personal day at the beginning or at the end of a business trip. There is work involved, but there is also a free day for me and for my husband, Steve, if he comes with me. A hotel room costs the same for one or for two in a room.
I can deduct my travel expense and my meals while away from home on business. And while Steve is very important to me, he is not an integral part of my business so his personal expenses are just that. His expenses are personal and are not tax deductible. I can deduct the cost of my travel and meals. I cannot deduct the cost of Steve’s travel and meals. I am deducting the cost of my hotel room. I just choose to share that room with Steve. There is no extra cost for the second person in the room.
Sometimes I will share the room with another woman attending the same seminar. When we share the room, we share the hotel bill. Of course there are extras that can be added to the room. If you choose to buy from their in-room mini bar that expense is usually not deductible. If you choose to order a movie, it is probably not business-related and would not be deductible. When the hotel adds taxes and a resort fee to your room bill, those are part of your deductible hotel cost.
When I am away from the office my attention is not on the office. My attention is on my seminar or on enjoying my day off. You can still leave me a voice mail message. You can send me an email message. When I return I will give my full attention to you and your needs.
Always to your lowest legal tax,
Nellie T Williams, EA 
OMG! It’s almost April 15th. I’m not ready. What do I do now?
Relax. Breathe. Take inventory. Do you have all your W2 forms? Do you have all of your interest and dividend 1099 forms? Do you have your other income records? Gambling? Alimony? Hobby? Small Business? More?
What about deductions? Is this your challenge? Your papers are all over the place. Some are in this box over here, some are in that file over there. Oh, where IS that receipt? It’s not too late to start getting organized for THIS year. But what do you do now about last year’s information? It is the 2012 tax return we file in 2013. And the 2013 tax return will be filed in 2014.
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. 
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 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 
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.