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The IRS today reminded taxpayers who have changed tax software that the prior IRS tax data may be outdated and they may need to update the tax software they have to complete their taxes this year.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 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
Nov 282017
 

U.S.A.

The long awaited tax reform our nation has been told to anticipate, has a gimmick.  Tax Reform is one thing, a tax reform gimmick is another.  When you hear the Republicans discuss this bill, all you hear is that the middle class will get a tax cut. What is in the fine print is alot murkier. Down the road a few years, many in the middle class will actually be paying more in income taxes.

The Tax Policy Center released estimates of the current bill, and found that the bill would reduce taxes on average for most every income group up until 2025. The biggest savings come early on, used to gain popularity with voters eager some any type of tax relief. But the further down the road you get, the less tax relief you actually get, and the realization that the increases are on the way kick in. Actually, nearly 10 percent of taxpayers would pay more by the year 2019. The increases go up from that year forward. By 2027, nearly 50 percent of all tax brackets will actually pay more in income taxes. Not much tax relief in this bill at all.

Once you get past the fluff and into the later years, this bill is really a tax reform gimmick. For the Senate to pass a bill with only a simple majority, instead of having to have 60 votes, they cannot add to the deficit in spending bills they pass over a ten year stretch. So what did they do to actual tax reform, give the savings upfront, then take them away down the road just so they could get 50 votes and give President Trump any type of victory, no matter how shallow it is.

If our government is so divided that they cannot even try to get together to pass what most americans want, an honest, fair, and balanced tax reform package, that will lower income taxes, then we have serious government problems. The idea of passing something, just to pass it is really childish.  A tax reform gimmick is not what we need.

  •  11/28
Nov 072017
 

U.S.A. Douglas Myser

2017 Tax Planning should begin now, as time is running out on this year quickly. Before the Holidays get here, with additional things to do, and time constraints, take the time to begin your tax planning now. You won’t regret it. I little bit of preparation can go a long way in making sure you don’t need to consult a Tax Resolution Services Company due to a back tax debt.

If you have never considered tax planning, prior to doing your taxes in April, a great resource to use is the IRS “Take Steps Now for Tax Filing Season” page on the IRS website, located at IRS.GOV.  The first section deals with ITINs, which are tax id numbers for tax professionals, but just below that, you can find helpful information on obtaining your refund and the process you go thru, and ways to make it simpler and less confusing. Tax Planning for your refund can be a great way to speed up the process for obtaining your refund as well.

A section exists for figuring out your AGI, or Adjusted Gross Income. This section may give you useful information on deductions that you were not aware of, lowering the total amount you owe, or actually increasing the amount of your tax refund. Tax Planning can be profitable if it adds to the check you receive from the IRS ! This section also has a link called “Where’s my refund”  that can be used to figure out what is going on with your tax refund.

The next section is called Protecting Taxpayers and gives useful tips for avoiding identify theft in obtaining IRS self help tools. And last but not least, the IRS help section, which gives useful tips on getting questions answered at the IRS, and how to obtain specific information you may be looking for.

Remember, a little planning can go a long way in preventing you from incurring a tax debt and having to hire a Tax Resolution Services Company to get yourself back to square one.

  •  11/07
Oct 302017
 

U.S.A. Douglas Myser

With nearly nine months of his Presidency over, its time for President Trump to make good on his call to make America First with tax code reform. One of the biggest obstacles to the incredible economic engine of the world, know as the United States economy, has been real tax reform. Not just for the 1%, but for the real drivers of economic growth, small business owners. To do that, President Trump will have to compromise.

If a lesson exist from the first nine months of a tumultuous start to his Presidency, President Trump should  have learned by now that compromise is a given, if you are to govern, and to lead. Our country doesn’t need another failed legislative attempt, we need something to say “That going to help us in the future.” Small business owners are the real drivers of the economy, and they should be the main beneficiaries of this tax code reform attempt.

If tax relief is needed, then the pie should be distributed with some sort of semblance of fairness, otherwise it will bring about the divided government, full of insults, and political  cajoling. Tax reform isn’t easy, but the benefits to our economy can’t be ignored. If true tax code reform is what you want, be fair about it and don’t make it so lopsided that it has no chance to pass. Compromise.

The tax code should be a permanent fixture also. We should not have temporary tax cuts, that expire and cause us to re-visit the issue over, and cause tax preparers to go back and relearn the new code, just a few years down the line. Longer term planning is much easier to business owners, and those making investments, if the tax code reform is made permanent.

It would be nice to give a tax break sufficient to jump start the economy, without bloating the deficit, but tax reform usually causes one or the other. In this case, it seems alot of people are tired with subpar growth, and think significant tax reform is worth the risk of larger deficits, if it brings higher growth rates.

  •  10/30
Oct 102017
 

U.S.A. Douglas Myser

Its been nearly three decades since any meaningful tax reform came about in Washington D.C. After suffering through one of the worst months in the history of natural disasters, America could really use tax reform.  We not only have rebuilding to do here in the continental United States, but arguably our most important territory, Puerto Rico has been devastated. Rebuilding will take years, if not decades, and the tax code is a way to supercharge the effort.

Many of the priorities of our government will have to be examined, and potentially changed, as spending priorities have changed, due to the consequences of both the Houston and Puerto Rico island’s devastation. Billions will have to be spent, that up to a month  ago was not even thought of, when determining a budget that was already bloated, filled to excess, and sure to cause consternation among both Democrats and Republicans alike. Tax reform is a nasty business, and this time around, lives are at stake is the short term.

IRS tax help, in the form of tax breaks, can be a powerful incentive for businesses to step up to the plate in the rebuilding process. Placed appropriately in the tax code, tax breaks and incentives for reconstruction projects aimed directly at both Houston and Puerto Rico, can supercharge the effort the rebuild the devastated areas. The question is, can Congress agree on meaningful irs tax help that will give those incentives to businesses to start this process.

Changing and simplifying the tax code can also put money into the pockets of ordinary citizens, adding billions to the economy, and hopefully kick starting growth beyond the meager 2 percent rate we have seen since the recession of 2008. Adding and expanding our economy seems like the only way out  of this mess, but that also entails fiscal prudence and the temperament to scale back on wasteful spending that has plagued our government for years. Both parties are to blame and both need to come together to become more fiscally sound in their habits, especially given recent national disasters and the absolute necessity to spend to clean up the mess.msnbc

  •  10/10