It’s late February and some people are already experiencing intaxification and all the excitement (and vacation planning, shopping, paying off debt, etc.) that comes with it. If you watch television you may be experiencing intaxification envy.
Are you scratching your head wondering what this is? Well, some people have received their federal income tax refunds (intaxification) and the green bow-tie guys (you’ve seen them pushing money out the back of the airplane) are advertising how cash floats down from the sky when using their services (intaxification envy). Investopedia explains intaxification as, “The feeling of satisfaction and joy that a tax refund creates in a person.” Think about it; what are you really receiving? A refund of non-interest earning money that you paid. It’s a check for overpayment! As I say, Be Tax Advantageous, plan, prepare, and don’t pay a dollar more than you should. Notice that nothing was said about tax planning for 2015 to ensure that you had more money in every paycheck. Call Rhonda to Be Tax Advantageous.
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It’s certainly not our favorite thing to do but sometimes we must. Its been said that, “paperwork rules the world.” No, not really, but when it comes to dealing with the government and paying federal taxes the IRS is making it easier – paper checks are no longer required nor is the lengthy EFTPS registration process. IRS Direct Pay offers an online presence for paying your 1040 return. http://www.irs.gov/Payments/Direct-Pay IRS Direct Pay at a glance:
Important to know:
Updates are scheduled to include the addition of other tax forms, adding a Spanish version, registration with a login/password combination. All in all I see this as an improvement to the process. Most of my business has been comprised of word of mouth referrals. However, on occasion, I have a “cold call”. Today I was busy, but had a cold call. A woman came in, having moved from LA telling me she needed a new accountant. She had no prior year returns, and very scant current records. She gave me her paperwork and proceeded to take a phone call about a rental property she owned. After she ended her call, I asked her if she’d like to tell me more about the rental property. She told me that it wasn’t under a management company and it was a “cash deal” and, therefore, no need to report anything. I then asked her if she was asking me to file a fraudulent tax return. She quickly changed her mind, gave me a very small amount of income with many deductions. With all her deductions, her refund was barely $500. In the end, she walked because my bill was larger than the $200 she had in mind and she really expected a $2000 refund. I wished her luck. Why? Because my name is on that return and I get along well with the IRS agents I do deal with. They know that my returns are above board and generally not subject to scrutiny. Agents do talk, and I do not want to be the topic of conversation at the water cooler. Each year there are tax shoppers out there. Often they are people that either try to prepare their own returns and can’t figure out how to manipulate the costs, or they are people who go from preparer to preparer until they learn how to present their information and get the result (read as refund) they desire. Hey tax shopper—yes you! I have news for you, tax professionals talk too. After you left a memo went out to several professionals I know. Your name wasn’t mentioned, but they will be looking out for you. The opening day of filing season for 2015. Even though we are filing our 2014 taxes, we call it season 2015. First the good news—many of the tax laws which were set to expire at the end of 2014 have been extended. Now for the changes. 1. The Affordable Care Act is in full swing and ready to take a bite out of the refunds (or create liabilities) for those who did not have health insurance in 2014. I will be asking you several questions. • Did you (and your family) have insurance for the entire year? • Did you purchase your insurance on the Health Care Exchange? • If you didn’t have insurance, how many months were you uninsured? • Did you receive a subsidy? (you should receive a form 1095A from the Health Care Exchange). 2. If you had privately purchased insurance, were on Medicaid or had insurance through your employer, you are likely unaffected. My job as your accountant will end with a simple check mark in a box. This will not affect your fees. If, you have purchased insurance from the exchange and received a subsidy or did not have insurance for part of the year, several calculations and forms will be generated. You may have a tax called “Health Care Individual Responsibility” or “Health Care Credit Recovery” if you had no insurance or received too much of a subsidy for your health care. 3. BIG NEWS—There are new regulations in affect which directly impact those with Rental Property, although all returns with depreciation are affected to some degree. Without a lengthy tax law class, all those who depreciate assets on their personal or business returns will be required to file forms electing new (and in most cases) more favorable depreciation rules. I am currently being advised, that those that do not file these forms will be granted “extra attention” from the IRS along with possible line audits involving asset depreciation and repair expenses. 4. GOOD NEWS—Many of you with rental property will be afforded larger depreciation deductions under the new regulations. So there you have, it—-the Good, the Bad and the Ugly…for 2015 tax season. Please feel free to quote me, use whatever information I post or e-mail me with questions. All I ask is that my words receive proper credit. PLEASE READ MY COMMENTS AT THE END OF THIS ARTICLE. During an audit which concluded earlier than expected this past summer, an IRS agent and myself found ourselves with some extra time on our hands. We began to discuss areas of audit. I am always interested in hearing what the IRS is interested in, and so I was quite eager to engage this agent in such a discussion. One of the newer areas the IRS targets is cell phone usage. I was pretty surprised, but the agent went on to explain that when cell phones first appeared they were quite expensive, and almost always used for business, so a complete or partial deduction was not an issue. Fast forward 20 years or so and cell phones are the norm. In fact, most people have cell phones and some have even forgone their land lines. The IRS has now taken the same position that they have with respect to land lines. The first cell phone line is not allowed. The second can be considered a business line. Generally the first line is the more expensive. The agent then went on to share some case law. The bottom line was that in order to deduct fees for a cell phone, the taxpayer would have had to establish that they would have not had a cell phone at all were it not for the business activity they were engaged in. However, I am not a person to back down. This seemed a bit excessive. I could understand the fees for cell phone usage, but the other fees…you know…the ones that create a bill of several pages. Certainly some of of those were deductible! I cited a case of real estate professionals who traveled extensively and needed a smart phone for special applications which often were not free and might require data usage. There was a silence….and the agent agreed I was correct. Text messages, data plans, and applications fees are deductible provided they are used for business. So, while the burden of proof remains with the taxpayer, the ability for a partial deduction is available. Dear readers, fellow professionals and friends. The above incident occurred, as I mentioned, during an audit this past summer. I have always been happy to share findings. However, if you quote me, or replay my information, at least (1) be accurate and (2) quote me–as opposed to plagiarizing. This post is not written so much out of anger (although I am pretty indignant as this is not the first time this person has done this to me). The incorrect article is scheduled to appear in the February 2015 issue of the NATP TaxPro Monthly. Not only is is a mere replay of the e-mails, and a cut and paste of the tax regulations I provided, it is incorrect as it omits the final debate with the agent. I’m wondering if she can run back and get them to correct the article before it hits the presses. In response to the e-mail this individual sent me, “no I am not kinda sort of famous—I AM famous”. Photo Credit: https://pixabay.com/en/using-device-phone-mobile-using-1577035/ Years ago a mentor in my business life told me, as I struggled with my first smart phone that in no time I’d be tweeting, text messaging and blogging. She was right! Unfortunately, what she didn’t tell me was, that social media can take a photo and utilize it to present a picture that is not fact. I’ve never been a fan of having my picture taken. However, last year I did allow a photo of myself to be taken at a business mixer. I had forgotten all about it. Sometime after the business mixer I severed ties with the organization I was photographed with. I had met some good people in the organization but it wasn’t the right fit for me. This morning I received an e-mail advertising the business mixer. In the photos on the invitation was my photo with the CEO of the organization I was formerly associated with! After an e-mail, a call to a friend dealing with Internet security and a call to a social media expert I came to the realization—the rude awakening if you will, that your have few rights in a public venue as to whether your picture can me taken. Additionally, I posed for this picture. Finally, the question is, who took the picture? The person advertising the event, or the organization I posed with? This was quite a learning experience for me. While I can’t change past events, I will take steps to prevent my likeness being used without my consent and in a manner which does not accurately reflect current facts in the future. Please do not ask to take my picture. The answer will be a polite no. If you take a scan of the room or a group shot which I believe captures me in the background I will ask you nicely but firmly to remove that picture or video from your device. Wow…who would have thought social media could be so interesting and educational. Several months ago I was asked to write an article discussing things accountants wished people knew. Here you have it:
So you want to know what I, a Certified Public Accountant (more commonly known as a CPA) wished people knew about their taxes? I really could write a book, but here are my top ten: 1. When you sign your return you are swearing that you have been truthful. Lying on your tax return is against the law! The IRS takes a dim view of less than truthful taxpayers, imposing hefty penalties, interest on unpaid taxes and in some cases prison time. 2. When you ask a licensed tax professional to prepare your tax return they are swearing that to the best of their knowledge their client has told them the truth. Our signature on your tax return is our testimony to that fact. Please do not ask us to lie for you! The IRS will impose penalties and in some cases bar us from preparing tax returns in the future. This is our livelihood, and we are not willing to risk it. 3. An extension of time to file is not an extension of time to pay. If you expect to owe money, you must attempt to estimate your tax liability and submit it with your extension. If you wind up owing taxes after you have filed your extension you will likely be assessed for interest and underpayment penalties. 4. Do not neglect to file your tax return. If you do not file, and you have a tax liability due, you will be assessed a non filing penalty, possible underpayment penalties in addition to interest which is compounded monthly. 5. If your tax professional recommends making estimated payments, by all means either make them or adjust the number of exemptions you claim on your earnings. Either making estimated payments or having more federal taxes withheld from each paycheck will lighten your tax burden on April 15th avoiding underpayment penalties and interest. 6. Your tax professional did not get you that big refund. You are merely receiving the repayment of an interest free loan you gave the government. By adjusting the number of exemptions you claim on your earnings you can have more money in your pocket each payday. You might even be able to invest these funds and actually see returns on your money. 7. Tax laws are constantly changing. Each year your tax professional attends (or should) classes to stay abreast of the most current tax laws. To those that attempt to prepare their own taxes, I generally ask them if they intend to take out their own appendix or represent themselves in court. There are some things that you should hire a professional to do. Preparing your taxes is one of them. For those that insist on going it alone, I do give them my card and let them know I am also licensed to represent them before the IRS at a later date. 8. Preparing your taxes doesn’t end with filing. You should sit down with your tax professional during the year to review your tax situation, especially if you’ve had a substantial change in income, increased or lost a dependent (child born or child leaves the nest), change jobs, or change marital status. 9. Don’t commingle funds. If you own a business, do not pay personal funds from that business bank account. This is especially true, if you are seeking to limit your liability through the formation of a legal business entity such as an Limited Liability Company, or corporate entity. Commingling funds can nullify the legality of the protection afforded by such entities and cause the corporate veil to be pierced. 10. Do not ignore IRS correspondence. The IRS will not go away or forget about you. Taking care of correspondence at the outset will avoid additional grief later and possibly save you money in the long run. Please feel free to contact me with any questions or comments. Hello all…so a slow start to my blogging…but I see so much, I think other than by Tweets and Facebook posts and newsletters…here is a way to continue to stay in touch. Recently a came across an article which reported Robert Redford was suing New York over a $1.6 million dollar tax tab for selling the Sundance Channel. You can read the entire article at: http://www.accountingtoday.com/news/celebrity-tax-news/robert-redford-sues-new-york-tax-tab-selling-sundance-channel-71617-1.html As a diligent accountant, I read this matter with great interest. Now for my response: Dear Mr. Redford: I am sure you are hopping mad at the tax bill you received. However, your anger is misplaced. Please head to your powder room and look into your mirror. Then, please ask yourself if you had discussion with your accountants, brokers and other advisers responsible for preparing your tax return. New York State, as do many other states which impose state income taxes, access taxes on your income in that state regardless of your residency. Now, my advice here is free—-so you can take it for what it’s worth, BUT I highly doubt you will prevail in your lawsuit. No matter where this error in reporting your income originated, it is, regardless, an error. Your accountant, should amend your returns to correct your Utah State income tax (removing the portion of income resulting from the sale of the New York asset) and prepare a New York State income tax return to include the income from the sale of the asset. You should then request abatement of penalties and understand you will be responsible for interest on unpaid taxes. So, Mr. Redford, I am sorry to hear of your situation, but attorneys and lawsuits are not always the answer. Sincerely, Rhonda Mannes Certified Public Accountant. PS….I am currently accepting new clients. Photo Credit: Robert Redford at an event at the US Embassy in London. Date: 25 April 2012, 19:13:55 Source: https://www.flickr.com/photos/usembassylondon/7115289955/in/set-72157629539238726 Author: U.S. Embassy photographer JP Evans public domain
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