Apr 102018
 

seen onDouglas Tax Blog. U.S.A.

The IRS website, IRS.GOV, has released its list of the new irs tax scams for 2018. Number one was Phishing scams. Tax Practitioners were hit hard in 2018 and the IRS came out with publication IR-2018-39, which gives detailed information on how to combat this type of fraud. The Tax Resolution Services industry and tax preparers are being proactive in defense of taxpayers information. Number two on the list were fake charities. Fraudsters were pretend to be a charity and solicit money are prowling phone lines and the IRS came out with publication IR-2018-47, in response to this scam.

Phone scams of all sorts seem to rampant, and come from not only the continental U.S. but also from international players, pretending to be IRS agents, demanding money to stop arrests. The scams seem to change with time, involve national disasters, fake organizations, and are quite creative, costing the American Taxpayer billions of dollars annually. The IRS put out IR-2018-40, in response to this scam.  Number four on the list of new irs tax scams was identity theft. This type of scam involves loss of data by large corporations and theft by individuals and small criminal organizations. IRS publication IR–2018-42 was issued by the IRS to help with this growing nationwide scam.

The new irs tax scams to make the list at number five is listing wrong deductions. This usually involves a crooked tax preparer, who is willing to skirt the tax law and code, to help individuals cheat Uncle Sam. Most get caught and end up losing their business license and some end up in jail. Many of the victims end up paying horrendous penalties to the IRS. The IRS came out with IR–2018-54 to help taxpayers spot these crooked tax preparers. The sixth on the list is improper business tax credits. IRS publication IR-2018-49 goes into detail about what a business can and cannot claim as a deduction, and if you have questions go get a tax professional for help.  Tax resolution services  is here to help.

 

 

  •  04/10
Mar 192018
 

Douglas Tax Blog. U.S.A. NSTP

Debt cancellation usually results in a 1099-C issued to the taxpayer for taxable income. The Mortgage Debt Forgiveness Act, which treated the debt forgiven on your primary residence as nontaxable income, expired on December 31, 2016 and has not yet been reinstated by Congress and may not be. If you had debt forgiveness from your mortgage company or had a loan modification then you may receive a notice for debt cancellation.

Taxpayers with debt cancellation can often exclude the cancellation of debt income to the extent they were insolvent immediately before the cancellation. If a cancelled debt is excluded from income, it is nontaxable. Generally, cancelled debt that is excludable from income is debt that is discharged in a bankruptcy. Cancelled debt is settlement of a debt for less that the amount owed. A debt may be cancelled by a lender voluntarily or through bankruptcy or other legal proceedings and may result in ordinary income from the sale of assets.

If your lender foreclosed on your mortgage or repossessed property as a result of a defaulted loan then each borrower will receive From 1099-A if, in full or partial satisfaction of the debt, they acquire an interest in your property. You need not be in the business of lending money to be subject to this reporting requirement. If your lender cancels or forgives a debt, it must provide the borrower with Form 1099-C, showing the amount of cancelled debt to re reported as income. Generally, individual taxpayers must include all cancelled amounts, even if less than $600.

IF, in the same calendar year, a debt is cancelled in connection with a foreclosure or abandonment of secured property, you may not receive both form 1099-A and form 1099-C, cancelled msnbcdebt, for the same debtor. You may receive form 1099-C only.

Nonbusiness credit card debt cancellation if non-business credit card debt is cancelled, the taxpayer may be able to exclude the cancelled debt from income up to the extent he or she is insolvent. Cancelled debt can also apply to a personal vehicle that is repossessed.

  •  03/19
Mar 052018
 

Douglas Tax Blog. U.S.A  NSTP

Whether a taxpayer has a tax increase tax  decrease is the new talk among tax professionals. We have heard stories of people who thought they would get a decrease the way the new legislation was being proposed, framed, and sold tot he public, only to find out after having a tax professional file their tax return, that they actually owed more tax.

On December 19, 2017, the House approved the “Tax Cuts and Jobs Act”. Although the Senate was expected to quickly follow and approve the measure immediately, there were procedural complications. The bill finally went to President Trump on December 22, 2017. The legislation includes sweeping reform of the Internal Revenue Code not seen in 31 years.

Some of the changes in the legislation include a new income tax rate and bracket, increasing the standard deduction, suspending personal and dependency exemptions, increasing the child tax credit, limiting the state and local tax deduction, temporarily reducing the medical expense deduction threshold, and many other changes, including a new deduction for non corporate taxpayers with Qualified Business Income from pass through entities. Even though all of these seem to lower taxes, determining whether you have a tax increase  tax decrease, still depends upon the individual situation.

The legislation’s changes to the income tax brackets will lower tax rates at many income levels. But, determining whether a specific taxpayer will see a tax increase, tax decrease will be dependent upon the impact on a specific taxpayer and on other changes such as suspending personal exemptions and suspending or limiting many itemized deductions as well as the increase in the standard deduction. So whether a taxpayer has a tax increase tax decrease will be determined on a case by case basis.

For businesses, the legislation permanently reduces the corporate tax rate to 21%, repeals the corporate alternative minimum tax, imposes new limits on business interest deductions for large businesses, and makes a number of changes involving expensing and depreciation. Whether the taxpayer sees a tax increase tax decrease will still depend on the individual return.

  •  03/05
Feb 202018
 

Douglas Tax Blog. U.S.A.  IR-2018-30

The IRS today reminded taxpayers who have changed tax software that the prior IRS tax data may be outdated and they may need to update the tax software they have to complete their taxes this year. It’s always a good idea to keep copies of tax returns that you have filed, which has prior irs tax data. That recommendation is more important this year because, for some taxpayers, certain data from the 2016 tax return-the adjusted gross income-will be required to validate their electronic signature on their 2017 tax return due April 17.

Taxpayers can avoid the rush by always keeping copies of their tax returns, generally for the past three to six years depending on the type of return filed. Alternatively, taxpayers may try to locate their 2016 tax return and prior IRS tax data from their previous year’s tax preparation software or tax return preparer. Or, they may use online tools to access their tax transcript.

The electronic signature is the way the taxpayer acknowledges that information on the tax return is true and accurate. Validating the electronic signature by using prior year adjusted gross income is one way the IRS, state tax agencies and the tax industry work to protect taxpayers from identity thieves. Generally, for returning users, the tax software product will carry over the prior year information and make for an easy, seamless validation process. However, taxpayers using a new tax software product for the first time may be required to enter the information manually.

As the IRS, state tax agencies and the tax industry have made progress against tax related identity theft as part of the Security Summit effort, cybercriminals try to steal more personal information to file fraudulent tax returns. They know that just stealing a name, address and Social Security number is not enough information to commit tax fraud. This is one reason why some states in recent years have required taxpayers to enter their driver’s license number on electronically filed tax returns. States can match taxpayers to the driver’s license database and help validate the return.

  •  02/20
Feb 192018
 

seen onDouglas Tax Blog. U.S.A.

IRS publication Topic 502 has a summary list of new medical expenses that are allowed under the new tax law recently passed. These tax deductions are subject to certain limitations, so be careful to check with your tax preparer or if you are self filing, check them out prior to filing your tax return. Most medical expenses are subject to the 7.%% limitation,

If you itemize on form 1040, you can deduct certain medical expenses, and certain dental expenses that exceed 7.5% 5 of your adjusted gross income. The amount is determined on Schedule A, or form 1040. Medical expenses include diagnosis, cure, mitigation treatment, or prevention of disease, or for treatments affecting any function of the body.

The following medical expenses are allowed expenses, payments for fees to doctors surgeons, dentists, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners. Payments for insulin and payments for drugs that you need a prescription for. Tax deductions may also be taken for transportation for essential medical care that would qualify as a medical expense, such as a taxi ride, a bus, or train, ambulance, or expenses for your personal car, including out of pocket gas and oil, parking, plus any tolls. Tax deductions for all of these expenses are generally accepted.

If you’re self employed and have a profit for the year, you can apply the self employment health deduction to offset your income. This is an adjustment to income not a itemized deduction. You will only be allowed to take a deduction for medical expenses you paid during the year. You then must reduce your total expenses for the year by any reimbursement you receive for those expenses. Your tax deductions must be carefully determined so you go over the 7.5% of income, otherwise you cannot use these expenses as tax deductions. Be careful to accurately determine the total amount of allowed expenses, and then determine if it meets the 7.5% of income test.

To determine the legitimacy  of tax deductions, see the “Can I Deduct My Medical and Dental Expenses?” publication or Publication 502 on the IRS website, IRS.GOV

 

  •  02/19
Feb 062018
 

Douglas Tax Blog. U.S.A.

Having been in the Tax Resolution Services business for a tad over 28 years, when only two tax resolution companies existed, I have seen alot of change in this industry. Some good and some bad. But all the while, we have kept our noses to the grindstone and continued to work hard on behalf of our clients knowing their financial futures were hanging in the balance. The story of this Offer in Compromise shows what Federal Tax Resolution stands for, our clients well being.

Case in point, a client in the State of Oregon. This particular client had a tax debt in excess of $102,000. They were in pretty good financial shape in years gone by, both spouses worked hard and they made income in excess of $100,000. Raising two kids, they seemed like an average american family trying to achieve the american dream. Then two things happened that put them in rough waters.

First off, the husband’s industry took a downturn after the 2008-09 recession and took nearly a decade, like many industries, to recover from the devastation of the great recession. Second of all, grandma got severely ill, and the wife decided to stop working full time to take care of her. A story many tax resolution companies have heard hundreds of times over the years.

After hearing this story, we went through the process of determining the tax relief options available for this family, and determined that they qualified for a $18,000 Offer in Compromise.  Now that may sound like a heck of a deal, owing over six figures to the IRS and settling for $18,000, but the problem with this Offer in Compromise was the back end payment. They could not come up with the money at the point that the wife was working part time, caring for a sick grandmother.

28 years ago, the company I started with, would have told her, well then we will put you on uncollectible status, sweep it under the rug, and a year down the road you will have to deal with them again. We waited for over 8 months, until they were able to move forward with the Offer in Compromise, because we are a company that cares about our clients. Ultimately the Offer in Compromise was accepted.

National Society of Tax Professionals

  •  02/06
Jan 292018
 

msnbcDouglas Blog. U.S.A.

The recently passed tax bill is a real mixed review when it comes to constituencies trying to figure out if they are winners or losers under the bill. Once the bill was thoroughly analyzed it became apparent that not every group was going to be happy, and some might be quite upset. Some would actually owe more in tax, and possibly need tax help as a result.

Four individual changes to the individual rate start this year, but then expire in 2025. They are the individual tax cuts, the increase in the exemption for the alternative minimum tax, the increase for the child tax credit, and a larger estate taxes exemption. A deduction for medical expenses takes effect, going retroactive back to 2017 and again for one year in 2018. In 2019 the Obamacare repeal of the individual mandate happens.

The tax bill also impacts business taxes. The tax rate drops to 21 percent, from the existing rate of 35 percent. Also,  businesses can fully deduct business expenses used to purchase equipment immediately. Companies that want to repatriate money form overseas will have an 8 year window to do so, with a 9 percent rate applied to the money brought back into the U.S. The tax help The anti abuse tax goes into effect in 2018, in an attempt to prevent companies form parking any additional money offshore, making it harder and more costly to do so.

The tax bill  gives a $61 billion tax cut to the middle class by the year 2019, which represents about 24% pf the total in tax cuts in the tax bill. The tax help given to the middle class, scorned by some, but welcomed by others, is now law and we will have to wait and see how it impacts the economy in the long run. The tax bill gives nearly $61 billion to the top 1% in the first year alone. Whether that gets invested back into the economy, only time will tell. Then we will truly be able to gauge whether this tax bill gave real tax help to the American people

  •  01/29
Jan 162018
 

seen onDouglas Tax Blog. U.S.A.

The new tax law passed by Congress and signed into law by President Trump, is going to have a very negative impact on the amount charities collect. Many people are unaware of this, and the timing could not be worse. With increased numbers of Americans in homelessness and without health care, the need to charitable giving has never been greater. So this happened at this point in our history is something worth reflecting on.

During the campaign trail, President Trump spoke about “making America first”. Of putting the needs of our fellow citizens front and center, before any decisions were made, and then making decisions based on whether those policies would be good or bad for the citizens of America. Of course when the government puts a budget together, it has to prioritize its agenda, and then divide the pie accordingly.  That oftentimes leads to tough choices. How those choices are eventually made, defines the mindset of the current government, and may or may not also define the mindset of the populace.

The last thing we need are more people with financial difficulties, who end up on welfare or with tax problems, then needing to go to charities who have nothing to offer. Could that be a recipe for increased crime ?  So in analyzing many of these decisions, the greater good of our society needs to be taken into account, in the decision making process. How can the greater good be served by lowering the amount of contributions going to charities ?  Its not like you have heard any argument that charities are ripping anyone off. So how can the greater good be served ?

Mr. Cardinalli, head of Independent Sector, recently stated, “The tax law will now de-incentivize the heart of civic action in the United States.” Those who fall backwards financially may have tax issues also, and need tax resolution services. They will certainly not benefit from this tax law. I am not talking about those who will get a small tax cut, but those destitute individuals who are on the brink of going into homelessness, that many of these charities service.

  •  01/16
Jan 082018
 

National Society of Tax Professionals

Douglas Tax Blog. U.S.A.

With the recently passed  tax bill, alot of work stands in front of the IRS and tax resolution industry.  Changing the Internal Revenue Code involves more than just changing some forms. It involves changes to IRS computer programs, changes to tax tables, and deductions, along with expenses to figure out what is owed. It is also a daunting task for the tax preparation industry, in trying to figure out all the changes in time to prepare the 2017 tax returns, which begin in earnest in January.

It also impacts the tax resolution industry, as many of the changes in tax preparation can alter how tax resolution is determined by the IRS. Making sense of all of these changes takes time, and in some cases it takes clarification in any grey areas, or guidance from the IRS, so that the rule changes are crystal clear to both the tax preparation and tax resolution services industries. Getting guidance from the IRS in January will be crucial to this effort.

Some changes in the tax bill are retroactive to 2017, such as a lower amount needed for a medical expense deduction. The IRS will have to put these changes into the new forms for this next tax filing season. Many of the new changes will start in 2018, which will allow the tax preparation and tax resolution industry to wade thru the Internal Revenue Code to determine what those changes are, and obtain guidance when needed.

It seems the area that will be hardest to digest and will need the most attention moving forward is regarding pass thru income and entities, such as partnerships where income comes from pass thru, taxed thru the individual rate. The new law creates a 20% deduction for pass thru income and includes changes to prevent people from wiggling out under false circumstances. The regulations are extensive and will certainly need guidance for clarification. Expect cases that go to court over differing opinions as well. A new tax bill may be difficult at first, but with effort , it can be managed just as the prior tax act was.

 

  •  01/08
Dec 102017
 

Douglas Tax Blog. Wash. D.C.

Tax records are vital if you want to recover from a Natural Disaster. I know, as I have spoken to dozens of victims of natural disasters over 28 years in the Tax Resolution Services industry. One common denominator among all of those victims is this, the taxpayers who planned ahead, and kept their records in a safe and secure place, recovered financially much quicker than those that didn’t. We have worked with both business owners and individuals on trying to find, reconstruct, and figure out tax returns, based on lost, or destroyed tax records, and it can be a virtual nightmare.

Tax records should be stored in a dry place, above ground, in a plastic (don’t ever use cardboard boxes) or other waterproof container. They can be stored as well on cd disk, and it is wise to keep a backup copy in the cloud for safekeeping. Even though it takes some work and planning to do this, the time you will save in the event of a disaster could save you untold hundreds of hours trying to reconstruct destroyed records. It might even save you from having to hire a Tax Resolution Services company.

The IRS website is a great place for information on this subject. The publication “Reconstructing Tax Records after a natural disaster or Casualty Loss”, FS-2017-11, September 2017, is full of informative information regarding forms, publications and other useful information that you can use to prepare, and if needed file a claim for any type of loss in the Internal Revenue Code. A large section entitled “Reconstructing Records” goes thru the entire process of what you need to do to file acceptable records after a Natural Disaster. Remember, a right and wrong way exist for doing this. If you have questions about doing any of this, feel free to call us at 1-888-689-7861 for a free Tax Resolution Consultation.

Two sections highlight the different sections used for figuring records for either business or personal losses. Each section goes into detail about what you can claim, how to do it, and how tax records are used to reconstruct your tax returns.

 

 

  •  12/10