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Patience, Priorities and Persistence – in Tax Season

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March 25, 2015

- April 15, Taxes Due

laptop computer with bandages - computer repair, or online healthcare conceptWhy would I think these three words, patience, priorities and persistence, have anything to do with tax season? Do you think these words might also apply to the IRS? Very recently, yes during tax season, I came back from a business meeting to find my office computer server had crashed. If you are one of my clients who had a tax appointment with me the third week of March, you know how our time was spent. Tax season time is limited and I meet with several clients every day, six days a week. Sundays, after church, I work on completing returns whose outstanding information had been received. Every day in tax season is like a week in any other job. I easily spend 90 hours a week during tax season! Usually I sit down with a client and together we build your tax return. I enter your tax data as we talk about things that apply to your unique tax situation. But after my server crashed, I was temporarily unable to access the professional software I rely on to craft your accurate return, I couldn’t even send or receive email!  YIKES! Here’s where establishing priorities comes in…. Could my server be repaired? Would my server need to be replaced?  I placed an emergency call to my trusted computer technician and he came to my office on Monday.  Computer Doctor, Patrick (not his real title), took my sick machine to what I call his ‘high tech hospital’ to diagnose the problem. Knowing I had a full calendar of appointments, and April 15th was only four weeks away, I had to make the best use of the time available. Rescheduling appointments was out of the question. Using the client tax organizer I send each of you right after Christmas, I gathered the tax information I would later enter into the computer. I had great conversations with my clients and we got to know each other even better. I leaned that even McDonald’s has to close their doors when their computers are down. Kitchen timers and cash registers are computer driven. Patrick called with good news and bad news. The good news was that my client data was safe, secure, and uncompromised. Protecting my data from breeches and doing frequent and regular backups really paid off. I did need a new server. Patrick would load my data on the new server and install it for me on Saturday. A whole week without tax software access made me think back to the early days when I used pencil and paper tax forms. Preparing returns “by hand” is not an option today. I learned how to quiet my racing mind by taking deep breaths. During my “down time” I completed some administrative work that is usually saved for after April 15th. I learned firsthand the true meaning of patience. I took a good look at what could be done and prioritized what would be done first. With the installation of the new server, it is time to practice persistence. Now I can enter that tax data I gathered during our appointments. As soon as my electronic filing cabinet (my data storage software system) is restored, I will print the tax returns everyone is waiting for. Soon these tax returns will be electronically filed to the IRS and the tax cycle will be complete.
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Tax Season 2015

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January 7, 2015

- Tax Audit, Tax Payments, Taxes Due

calendarIs there such a thing as GOOD NEWS from the Internal Revenue Service? .. Tax season used to begin with a vengeance on the second Friday of January. Tax season was delayed the last two years until the end of January. Congress waited until January to decide to extend certain deductions and tax credits.  Their delay to act caused a backlog in tax form programming at the Internal Revenue Service. … This year the IRS has announced Electronic Filing of tax returns will begin January 20th. Now that is not a Friday, it’s a Tuesday. Why Tuesday? The reason is because Monday, January 19th, 2015 is Martin Luther King Day. … The first returns to be filed are usually for people who have already received their W2 forms. Wait for all of your W2s if you worked for more than one employer. … Some tax offices still provide a way for taxpayers to get a quick advance of their refund in the form of some kind of bank product. These bank products come at a price, but most people who want this fast refund are taking advantage of what can be called some kind of ” free” money.  This free money usually comes from the Earned Income Tax Credit or the Child Tax Credit. These credits are refundable credits. Taxpayers who are able to claim these credits might have a low or even zero income tax liability. They get a refund of more than the amount of taxes they had withheld to pay their income tax. That is why they are called refundable credits. … Because these credits are like free money from the government, some taxpayers are willing to give up some of this free money to pay the cost to get their money quickly. This is not instant cash. It used to be as fast as one or two days. I am not as “up to date” on this information as I once was because my office no longer offers refund anticipation loans.  I can tell you that if you have your own bank account, you can have your refund deposited directly to that bank account. This direct deposit used to be as quick as ten days depending on which day you filed your return. The IRS is depositing refunds quickly these days. .. Electronic filing, or e-filing, has made such a difference in the processing of tax returns by the IRS. I use professional software to help me prepare accurate  tax returns. Tax returns are prepared with fewer errors. They are sent, or filed,  electronically to the IRS. The IRS is not keying in data from a paper return that was mailed in, so the IRS makes fewer errors in the processing of the tax return. All this is good news for you. … Even better news for 2015 is that the IRS will be accepting electronically tax returns for 2014, 2013 AND 2012. We can file late, or delinquent, tax returns electronically. They do not have to be mailed as in the past. Some of the more complex returns still have to be mailed. We do still have to mail in amended tax returns. We are making progress with technology. Just like the tax laws, things change.
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The 12th Month of the Tax Year

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December 5, 2014

- Money, Tax advisor, Taxes Due

clockIs the 12th month of the year like the 12th hour on the clock? December is the holiday month. We just had Thanksgiving, coming up is Christmas and then New Year’s.  What must you do before the clock strikes midnight? Individuals need to know about their numbers. Anyone who has a business needs to know about keeping track of their income and expenses. What is the key to tracking your income and expenses?  Do not let this word scare you, it is really just a simple activity. This word is one of only three words in the English language that have three double letters in a row. This word is bookkeeping. It just means keeping the books, keeping the numbers. Your Statement of Income is keeping the numbers for your money in.  Your Statement of Expenses is keeping the numbers for your money out.  Businesses combines the income and expenses statements into one Profit and Loss Statement. There is a very popular software program that many business owners use to help them – QuickBooks. The personal version is more of a checkbook tool called Quicken. Some of my clients use QuickBooks and many of my colleagues use QuickBooks Pro. The danger with any software is that it is just a tool. Do you know how to best use this tool?   My friend, Joe DiChiara, a CPA in New York, says that QuickBooks is a pretty good tool. He believes it has more features than most of us need to use. My friend, Barbara Starley, a CPA in Arizona, is a QuickBooks Pro Advisor. She helps people untangle their bookkeeping software missteps. For years, I used a professional accounting software to help my clients with their accounting needs. The software company was sold to another company whose professional cost priced me out of providing accounting services. That was when I began using Excel spreadsheets to track my income and expenses. The spreadsheet method might be just fine for you, but it does not create the balance sheet we need. What does the balance sheet show? What does it balance? The balance sheet is like a teeter totter. On one side you list your assets, what you own, and their values. On the other side you list your liabilities, the money you owe, and your equities, the value you hold as an owner of your company. Double entry means for every entry you have on the left side of your ledger, you have an equal entry on the right side of your ledger. When they are equal, or when they match, they balance. And that is what you want in a double entry set of books. Do not mistake double entry books with a double set of books. If you have two sets of books, you are looking for trouble. Do you have to have certified financial statements? Only if your banker requires them for a loan. But you certainly wants to stay on top of your numbers.
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Tips and Taxes

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October 16, 2014

- Money, Tax Payments, Taxes Due

ID-10029711The word TAX can have several meanings. At Bullet Proof Your Taxes, the talk is all about income tax…I want you to pay only your lowest legal tax and not a penny more. The definition I found online that fits is “a compulsory contribution to state revenue, levied by the government on workers’ income and business profits or added to the cost of some goods, services and transactions.”  Tax has also been defined as “a sum of money demanded by a government and a burdensome charge.” What is a TIP? This word also has several meanings. I regularly give tips, secret information and advice in my articles and on my radio show.  However, today I am talking about TIPS which is the acronym for To Insure Prompt Service.  A tip, and the amount of the tip, is given for a service performed or a service anticipated. Tips are a matter of social custom which varies between countries and settings. In some settings a tip is discouraged and considered an insult.  While in other circumstances, like law enforcement situations, tips are illegal and could be considered a bribe. In most US locations a tip has become expected, but watch your bill because if you are part of a group at a restaurant, a service charge may been added and included in the total bill. You may not want to add any additional tip because the tip will be paid through that service charge. If you add just a single penny, one lone cent to your tip,  you are telling the server that you appreciate their exceptionally good service. For you servers, tips are considered income and are subject to income tax. If your tips are paid by credit card to the establishment, your employer’s policy will determine whether you are paid them daily in cash or whether they are accumulated and included in your paycheck. Your tips may be paid by your customer directly to you as cash or gift cards or casino tokens or other cash equivalents. If you receive $20 or more in a calendar month while working for any one employer you must report the total (not just the amount over $20) to your employer by the 10th day of the following month. The amount of those tips will then be reported on your W2. There is a special box on the W2 form just for allocated tip income for workers of large food or beverage establishments. According to the IRS, at least 40% of tips to servers are not reported for taxation. The IRS has done special focus examinations on tip earners.  As a server, it is easy to pocket your cash tips and spend them on the way home for groceries, gasoline, etc.  You may not even realize you made more money than your paycheck reflects. If you think those tips are “free” money to save up for something special, think again. The IRS pays special attention to tip income. It is up to you to keep track of your own total income. Remember, all income is taxable except that which we are told is not taxable.
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Here comes the bride

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June 4, 2014

- IRS Audit, Taxes Due

10674400_s (1)Did you know that when you marry, you get to change your income tax filing status?  June has always been a popular month for weddings. Why? There are many different reasons. One is that the month of June is named for the Roman goddess, Juno. Juno is the goddess of marriage and would bring much happiness and prosperity to the marriage. The American “Tax Gods” of the Internal Revenue Service like that prosperity part. Did you know you are born with an income tax return filing status? We all start life as single. Even is you are a twin, you are a Single taxpayer. Can a baby be a taxpayer? Did you ever hear of the Gerber Baby? The answer is “Yes.” And as an American citizen, your taxable income includes your WORLDWIDE income. Your filing status is determined by your marital status on the last day of the calendar year. When you marry, and are married as of December 31st, you will generally choose Married Filing Jointly. What else could you choose? You could choose Married Filing Separately. You might qualify for Head of Household. When you file a joint tax return, your taxable income includes the worldwide income of both husband and wife. One of my clients asked, “You mean if I get married on December 31st, I am treated as I was married ALL YEAR?” And the answer to that question is YES. Maybe you want to marry on December 31st, but wait until after midnight to say “I DO!” and sign the license on January 1st. With planning, you can choose the year you begin your joint return. One thing I want you all to know is, “When you marry the person, you marry their tax troubles, too.” So be sure you know all the facts and enter into this new partnership, this new joint venture, with you eyes open. Traditional married couples, one man and one woman, file a joint return. Same-sex couples now also file a joint FEDERAL income tax return. Their state return will depend on where you were married and whether or not the state where you live recognizes same-sex couples. California recognizes same-sex marriage. Same-sex couples who are married and living in California, file both federal and California tax returns using the filing status of Married Filing Jointly. Arizona does not recognize same-sex marriage. If you live in Arizona and were married in California, or any other state that recognizes same-sex marriage, the couple will file ONE federal return as Married Filing Jointly and TWO Arizona state returns as Single. If you live in Arizona and are Registered Domestic Partners or celebrated a Civil Union ceremony, the Internal Revenue Service will still expect a separate Single income tax return from each of you. You are not married, so you cannot use Married Filing Jointly. Do you know what filing status to use? Have I generated more questions than answers? Taxes are not easy. Life if not always easy. Sometimes we get unmarried. Next time I’ll be talking about Head of Household and Qualifying Widow or Widower. Special tax rules come into play with each of these choices.
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APRIL 15th is Over – Now What? (Part Two)

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April 23, 2014

- Deductions, Tax advisor, Taxes Due, Uncategorized

dollar and Donation BoxThis year is almost ONE THIRD OVER! What can you do now to  be in top shape for next April 15th? Last time I covered the basic thought that Organization is the key. Do you use the “jumble” method of keeping your receipts?  Is your jumble kept in a box or a bag or an envelope? YOU are the one to sort these papers into categories. Why wait until tax day? Get a jump and do your sorting all year long. If you haven’t already started a simple way of collecting your important tax papers, begin that new habit today. Use a table, the bed or even the floor to make little piles of receipts by category. Then you can put that now neat stack of receipts into the container of your choice. This will make for easy reference come tax time. You will see how convenient it is to put things were they belong so you can find that certain document when you want to, when you need to. When a new client comes to my office with their own jumble of records, I tell them the same thing I’ve just told you. YOU know how you spent your money. I need to know how you spent your money. There are different pages to a tax return and the deductions that belong on one page usually do not also appear on another page. My job is to prepare your proper and accurate tax return. I need your help to do this. Last time I promised to talk contributions. Do you get a receipt for every contribution you make? When you make an offering to your house of worship, do you write a check? Do you just put cash in the offering plate or basket? Do you use their gift envelope system? Internal Revenue Service wants to see evidence of what you claim as your deduction or expense. I remember hearing from a fellow auditor that a taxpayer being audited was claiming substantial cash contributions. When asked for his documentation, he said that was a matter between him and God. The auditor agreed and said that his deduction would also be a matter between him and God. The auditor determined that his deduction was disallowed. That is a favorite term at the IRS. His deduction was NOT allowed. He owed tax as a result of that audit. Records are your defense in a tax audit. Not just your best defense, they are your ONLY defense. Whether this audit is by the IRS or your state department of revenue or treasury, or by the sales tax division or by the unemployment division, PROOF is what they want to see. Timely (at the time of the contribution) records are necessary and your best friend. SO many reports can be audited. Even if you do not file a report you are required to file, the agency expecting that report can file one for you. Lack of knowledge is no defense. My objective is to help you increase your knowledge and increase your defense. I want you to avoid that audit. Keep a list of personal items you donate to a qualified charity (not the corner collection box) from your closet or home. Next time I’ll spend more time discussing this favorite deduction.
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APRIL 15th: THE BIG TAX DAY OF THE YEAR!

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April 10, 2014

- April 15, Tax advisor, Taxes Due

april 15Holy 1040, Tax Man! If you have already filed your 2013 tax return, you have nothing to worry about. While some of your friends are burning the midnight oil trying to finish up their tax returns, you can relax.  Next week’s blog is just for you. But, if you haven’t filed your tax return yet, the deadline is just a few short days away. What do you do first? First, find all of your income documents for 2013. These types of papers include  your W2 form from your employer, your bank statement showing interest income earned on your account, unemployment benefits received, alimony from your ex-spouse. All income is taxable unless it is specifically excluded. Child support you received is not taxable income and it is also not deductible by the person who pays it. What if you don’t have the papers you need?  Or what if  you can’t find, all of the papers you need?  Is filing an extension a good choice for you? What you need to know about extensions is this. An extension will only allow you more time to file your paperwork. An extension will not allow you more time to pay the taxes that are due on April 15th. If you usually get a refund, and if your income and withholding are the same this year as they were  last year, it may be safe for you to request an extension. But if you wind up owing taxes when you do file your tax return, your return will be considered filed late. Your taxes will be considered paid late. You could owe a penalty for filing late and you could owe another penalty for paying your taxes late. Plus, you will also owe interest on taxes that are not paid on time. If you think you might owe tax, are you able to make a payment with your request for extension? If you wind up having paid in more than was needed to cover your tax bill, you can request that overpayment be refunded to you. You can also request an overpayment be applied to next year’s tax. If you are having trouble getting your paperwork together, you will want to be sure to go to my website, www.BulletProofYourTaxes, next week. Check out the blog posts. I’ll be writing another article specifically on how to organize your important tax documents throughout the year. Some people thrive on the adrenalin rush. But if you are practicing “just in time” management, you may not even know the bliss in surrendering to the peaceful flow of life. Like many of my colleagues, I am deadline driven. April 15th is certainly another of those deadlines. I invite you to remember the nursery rhyme “Row, Row, Row Your Boat.” It encourages us to row our boat, but also to row it gently down the stream. Not upstream. Not against the current. And row your boat merrily. Enjoy life. We only have this moment. And we will never have it again.
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