Haste makes waste. Most of us have heard this old adage before. But I grew up with this twist on it. “The hurried-er I go, the behind-er I get.”
Why do I say this?
I don’t want you to waste time or money with costly mistakes on your tax returns in these busy last few weeks before April 15th. I am adding my slant to some of the Top Tax Time Tips offered by The Internal Revenue Service.
Three Important Steps
1. Gather your records. Round up your receipts, canceled checks and other documents that support the entries you make on your tax returns. It is always helpful to have everything close by. You don’t want to lose your place in preparing your tax return by having to stop and go look for something in the middle of this once-a-year important responsibility.
2. Report all your income. Leave nothing out. You will need ALL of your W2 forms and 1099 income statements. Income is not just wages and other compensation earned. Income is also interest and dividends, social security benefits, pension benefits, gambling winnings, sales of assets and more. What money did you receive? All income is taxable unless specifically excluded by law.
3. Review your tax return before you file. Double check your entries. Is your name spelled correctly? Is your address entered correctly? Did you include your unit number, suite number, apartment number? Is your zip code correct? Are you using the proper filing status? Are you qualified to claim the dependent you have listed? Did you leave anything blank where some kind of entry belongs?
Important Tips
Math errors are common on hand-written returns. Take your time. Check your calculations. Bookkeepers are trained to add their column of numbers twice. If you get the same answer twice, it is probably correct.
Are you due a refund? Direct deposit is faster and safer than waiting for a check mailed to your address. Just refer to the numbers on the bottom of your check for the routing number of your bank and the number of your checking account.
Do you owe the IRS? File your tax return now and pay as much as you can before April 15th. If you owe more tax after April 15th, IRS will send you a bill. That bill will also include interest. It might even include a little penalty for paying your taxes late.
Should I e-file My Return?
Is it really better to file electronically? I think so. I’ve been filing returns electronically for myself and for my clients since 1988. As a tax professional, I like the reduction in errors e-filing offers. When a taxpayer’s or dependent’s name and social security number do not match, IRS rejects the return. When an employer’s name and entity identification number do not match, IRS rejects the return. We get to fix those errors and file a correct original return.
Using a computer and reliable software to prepare the tax return has eliminated many math and calculation errors that people make when using pencil and paper. Software is just a tool. And a tool is only as good as the operator. Take advantage of all the help you can get. If you don’t have your own tax advisor to help you understand your personal tax situation, consider calling the IRS toll-free tax assistance line at 1-800-829-1040. Be prepared to wait. Ask your complete question and take notes of the answer you receive.
To your lowest legal tax,
Nellie T Williams, EA
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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 
December 31st marked the end of the fourth quarter of the calendar year. Not only do you have the fourth quarter employers reports due by January 31st. You also must give your employees their W2 forms by January 31st.
You must also give any independent contractors their Forms 1099 Miscellaneous by January 31st. Caution: Do NOT make the costly mistake of treating an employee as an independent contractor! Attention Employees – the next blog is devoted to YOU!
In addition to the W2 forms given to the employee, you must also send a copy to Social Security Administration (SSA) with the transmittal Form W3. If you withheld state taxes for the benefit of your employee, you must also send a W2 copy to your state (with your state’s W3 equivalent). Form W3 must be filed with SSA by the last day of February. I tell my employer clients there is no penalty for filing early. If you file the W3 at the same time as you issue the W2 forms, you are more likely to file it on time.
Most employers file the quarterly report Form 941 to report the taxes withheld from the employees’ paychecks. The taxes withheld include the employees’ federal income taxes, Social Security taxes and Medicare taxes. PLUS the employer matches the Social Security and Medicare taxes. If you are self-employed you are considered both employer and employee and you pay the full 15.3 percent of earnings.
IMPORTANT NOTE: The 2% “Payroll Tax Holiday” that employees enjoyed these past two years expired on December 31st. Effective January 1, 2013 the employees’ responsibility for Social Security and Medicare taxes returns to 7.65 percent of their wages. Medicare taxes are withheld on every dollar of pay, but the 2013 maximum earnings subject to Social Security tax is $110,100 for both employees and self-employed people.
According to the IRS, “Employers should start using the revised withholding tables and correct the amount of Social Security tax withheld as soon as possible in 2013, but not later than February 15, 2013. For any Social Security tax under-withheld before that date, employers should make the appropriate adjustment in workers’ pay as soon as possible, but not later than March 31, 2013.” So we have a little grace period here to “catch up” on the proper amount that should be withheld beginning January 1st.
You may be a small employer that has been given permission from the IRS to file an annual Form 944 instead of the quarterly Form 941. Form 944 is due by January 31st for the preceding calendar year wages paid.
In addition to Form 941 (or Form 944), Forms W2/W3 and state equivalent forms, you must also file (and pay) by January 31st, your 4th Quarter state income tax withholding report, file (and pay) your 4th Quarter state unemployment tax report, and file (and pay) your annual federal unemployment tax report Form 940. Unemployment tax is generally paid on the first $7000 of wages paid to a covered employee. Remember to take into account any deposits you made during the earlier quarters for federal unemployment taxes.
To recap:
By January 31, 2013:
1. File Form 941 for the 4th quarter 2012 OR Form 944 for the whole year 2012
2. File your state’s 4th Quarter 2012 income tax withholding tax reports
3. File your state’s 4th Quarter 2012 unemployment tax report
4. File Form 940 for the whole year 2012 federal unemployment tax report
5. Give Forms W2 to your employees
6. Give Forms 1099 to your independent contractors
By February 28, 2013 :
1. Send Form W3 with Copy A of all Forms W2 to Social Security Administration
2. DO not mail the W3/W2 to IRS, it goes to SSA
3. Mail Form 1096 with IRS copy of Forms 1099 to the Internal Revenue Service.
4. 1096 is the form that goes to IRS
5. I’s OKAY to file these transmittal forms in January. You don’t have to wait till February 28th.
Always to your lowest legal tax,
Nellie T Williams, EA 
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
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 
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.
Tick, Tock, Tick, Tock!
Have I ever told you about the time line that the INTERNAL REVENUE SERVICE is bound by? There are due dates. There are many of them.
Most of us are calendar-year taxpayers. That means our tax year ends December 31st. And when we file an individual income tax return, a Form 1040, that is due April 15th of the following year. At one time the 1040 was due March 15th, but so many people asked for extra time the due date was changed to April 15th. Even today, many people still ask for extensions. Not too long ago the extension gave us two additional months to file the return. And so many people asked for a second 4-month extension that the 2nd extension was eliminated and IRS now gives us one six-month extension. This means that if you REQUEST an extension of time, your April 15th due date has been extended to October 15th.
An extension of time only gives us time to file the paperwork. It does not give us any more time to pay our tax. The tax is still due by April 15th. If on April 15th you think you will owe tax with your tax return, you can make a payment with your extension and still get more time to finish your paperwork to file a correct and accurate tax return. If you wind up owing tax when you file that extended return, the extension will not be valid. Interest will be charged from April 15th until your taxes are paid in full. Penalties will also be assessed for late-filing and for late-paying your tax. This is not a pretty picture.
If you have a business and file a corporate return, whether it be a “C” Corporation or an “S” Corporation you may have a calendar-year entity or a fiscal year entity. Both “C” and “S” corporations have income and expenses. They have Income Statements and Balance Sheets. They have Schedules of Depreciation for assets like equipment and buildings. A “C” Corporation files an 1120 return, can have a tax liability on income greater than expenses, and the corporation would pay that tax. If you elect for that corporation to be treated as a small or “S” corporation, it files an 1120S return instead and the income greater than expenses, or profit, passes through to the shareholder (or shareholders) on form K1. The shareholder includes their share of the corporate profits on their 1040 tax return along with their other income. To keep it simple, if the corporation uses a calendar year, then that corporate return is due March 15th. And, like a personal 1040 return, can elect a 6-month extension that for the corporation ends September 15th.
Whether business or individual, you must request an extension. They are not automatic. And they are only good for filing the paperwork, the tax returns.. Any taxes due must be paid by the due date to avoid interest and penalties.
Have you ever heard the expression, “The shoemaker’s son goes barefoot.”? Lots of times I feel like the shoemaker’s son. My own tax returns are always on extension. Could I file them early and avoid the rush? Sure, but what would be the fun in that? I must really love the adrenaline rush. I am all about time management. But last week was truly “Just in Time! Management.” Did you ever stay up late studying for an exam? Did you ever pull an “all-nighter” where you didn’t get any sleep at all? I did. I did in college and I did last week, too. In some ways I am a lot like some of my own clients. I was busy finishing clients’ business returns and getting ready for an out-of-town business trip, and I found myself staying up all night to file my own business return before leaving for the airport for my business trip. tick, tock, tick, tock….
If you miss the extension deadline that return is just flat out delinquent. And I cannot be late and stay in business for you! So I missed a little sleep.
It is still September. But October is right around the corner! Like many of you, I, too, must finish my personal 1040 return before October 15th. Even though we have a deadline to meet, I encourage you to take the time you need to do a good job of getting your figures together. It is so much better and easier to file correctly to begin with. Remember, you are signing under penalty of perjury that you are filing a correct and accurate return.
If you do later find you need to amend a tax return, there’s a form for that. And the 1040X Amended Return has its due date too. Often you may file what you think is an accurate return only to get an additional form that you forgot about or didn’t even know you should have waited for. This often happens when you are the heir of someone who has passed away and you inherit something taxable. In that instance you will owe tax with that amended return. It is so much better to file that amendment than to wait for the IRS to tell you about your additional income and tax due. If you wait too long to file on your own, the IRS will start that ball rolling.
Maybe you find you left something off that is to your benefit, that would lower the tax you already paid, that would generate a refund for you. Here is where the timing is really important. You only have so much time to file that request for refund. Generally you must file the 1040X within three years of the date you filed that original return. This due date can be tricky, so be sure to consult your professional for advice on your 1040X.
Well, back to extended 1040s due October 15th. Since you and I will be getting our 2011 tax return information in order, may I suggest it is also a good time to start organizing our 2012 (this year we are in) data? Do you hear it? tick, tock, tick, tock …
To our lowest legal tax,
Nellie Williams, EA
Your Income Tax Return is More than Just 1, 2, 3…
Your Income Tax Return is also A, B, C, D…
When you start your tax return, after the heading with your name, address, Social Security Number you will eventually get to the lines that allow you to voluntarily report your income.
Ours is called a voluntary system because you voluntarily report your different sources of income. In other countries the government has an agreement with employers to withhold their required taxes. Our voluntary system does not allow you to decide to file one year and not file another year. It is not that kind of voluntary.
AND if you decide not to voluntarily report your total income, ALL of your income, the Internal Revenue Service has it’s own ways of determining you have been less than totally truthful.
Page one of your 1040 Income Tax Return shows gross wages, interest and dividend income, net business profits and other sources of income. Your net business profits come from Schedule C – another form! Your interest and dividend income come from Schedule B – another form!
Page two of your 1040 Income Tax Return has a space, a line, for you to report your total itemized deductions. Finding your total itemized deductions takes work, but it can be worth it in saving you tax! There are several categories of itemized deductions. They are reported on Schedule A – ANOTHER FORM!
Unless you are filing a 1040 EZ, the simplest of income tax returns, you will have more than one page to your tax return, more forms before you are finished. And when your tax preparer asks you questions, it is not because they are nosy (maybe they are nosy) but they want to find every tax benefit for you. Yes, a good preparer will charge you for saving you money, but I hope you believe that paying that tax preparer to help you pay your lowest legal tax is a very good investment.
Schedule A, Itemized Deductions is not for everybody. The biggest deduction is usually interest paid on a home mortgage. If you do not own your own home you may not be itemizing. But the government has special gift for you. You do not have to do anything extra to take advantage of this tax saving gift. That gift is called the Standard Deduction. The amount varies depending on your filing status (see my blog on filing status 
Did you know the Internal Revenue Service has a name for taxpayers who do not file their required income tax returns? Is that you? Do you owe the IRS a tax return? Are you a NON-FILER?
If you file your individual income tax return on or before April 15th (the usual due date for 1040 tax returns) then you have filed TIMELY. If you file a special form you can REQUEST an automatic extension. But you must ask for this extension. And when you ask for the extension you will automatically be given an additional 6 months to file the paperwork. This extension does not give you more time to pay your tax. If you owe the IRS money, you want to pay that before April 15th to avoid penalties and interest. There are a lot of rules about paying your tax, but that is a topic for another blog.
If you have a Partnership, the due date for the Form 1065 is also April 15th. If you have a corporation, that calendar-year C or S corporate return is due on or before March 15th. Partnerships and Corporations can also request an extension that will allow them up to September 15th to file their returns. If you have a business, maybe you missed filing a quarterly employment tax return.
It is perfectly acceptable to file your returns on extension. Sometimes your circumstances will dictate you file an extension. Sometimes you make the choice to file an extension. But the key word here is FILE or submit the tax return. If you have a requirement to file and you do not file that return, you are a Non-Filer. And by putting yourself in the position of Non-Filer, you are also putting yourself in position to attract special attention of the Internal Revenue Service. This special attention is not quite a