IRS Audit, IRS Audit Help, Tax Audit

Time Marches On

December 27, 2012 - IRS Audit, IRS Audit Help, Tax Audit

  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!   The Most Important Thing What is THE most important thing you still need to do before the clock turns from 2012 to 2013? If you don’t make any decision, you have just made a decision. Has our Congress come back from their happy holiday to deal with what we’ve all been hearing about? Are they going to do anything to save us from our “fiscal cliff”? If Washington does nothing, then temporary “band-aid” fixes put in place over the past several years will expire. We may lose some deductions. We may have smaller exemptions. Credits may be reduced. Expect to pay more tax. PLUS, while most of us see the IRS as the bad guy, they are just what I call the “Tax Police”. The job of the Internal Revenue service is to enforce the laws that Congress has put in place. Forms designers at the IRS must first know what Congress has passed before they can finish the forms that we all need in order to prepare our tax returns. If you file a simple tax return with only wages and take the standard deduction, you will be able to file sooner than someone who itemizes deductions. But IRS told us back in November that NO ONE will be able to electronically file ANY tax return until January 22nd! And some of us will have to wait longer than that for forms to be released from the government.   Get to the Point I am known to “cut to the chase”. I get “to the point”. I have to remind myself to slow down and tell the whole story before I give away the punch line. So if you ever feel I have jumped to the conclusion too quickly, feel free to let me know you want more. Leave a comment to any blog and your comment will let me know how to better help you. What is important to know at the end of the tax year? What questions do I hear from my clients? Every year, any year, you want to know that you have paid in enough tax to cover your anticipated liability. Have you had enough withheld from your paycheck? If you are self-employed, have you had a profit? Have you paid enough in estimated tax payments? The fourth estimated tax payment for 2012 is due January 15th, 2013.   Use It or Lose It Have you used all of your “use it or lose it” benefits through your work? Have you met your medical deductible so that now every penny for prescriptions or office visits qualify for reimbursement? Can you refill that Rx and put it in this year’s covered expenses? In Arizona we have tax credits for specific charitable contributions that may be available to you. These state credits will reduce your state income tax dollar-for-dollar. These contributions may also qualify for a federal tax deduction. A deduction is not dollar-for-dollar, but may help you lower your tax bill. Does your state offer a credit you can “purchase” in the next few days? You will want to know if you have a tax liability to reduce before you make this contribution. No credit is free. No deduction is free. They first will take money out of your pocket before they put money back into your pocket. Are you being tempted with a “last minute” business investment because of some accelerated depreciation benefit? Stop! Ask yourself if you really need that piece of equipment. Do you need to spend that money? Is it truly better to write that investment off in this year of purchase? Or is it better to save some of that equipment expense for next year and for the next year and for the year after that one? Depreciation is designed to spread the deduction out over the expected life of the asset.   The Bottom Line The bottom line for me is always this: I want you to know the basics. I want you to know the general rules so you are not caught off-guard and have to write a bigger check than you expected at your tax appointment. To your lowest legal tax, Nellie T Williams, EA