Month: October 2013

Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. If this has happened to you, then it’s time to check your federal tax withholding or payments.

Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe–and avoid a tax surprise when you file your 2013 tax return next year.

Wages and Income Tax Withholding

• New Job. When you start a new job, your employer will ask you to complete a Form W-4, Employee’s Withholding Allowance Certificate. Complete it accurately to figure the amount of federal income tax to withhold from your paychecks.
• Life Event. Change your Form W-4 when certain life events take place such as a change in marital status, birth of a child, getting or losing a job, or purchasing a home. Any of these life events impact the amount of taxes you owe. Typically, you can submit a new Form W-4 at any time during the year.
• Federal Withholding Calculator. Use our handy online financial calculator to help you figure the correct amount of tax to withhold based on your situation. 

  Simply go to the “Resources” section of our website, click on the Financial Calculators, and look for Should I Adjust My Payroll Withholdings?.

Self-Employment and Other Income

• Estimated tax. This is how you pay tax on income that’s not subject to withholding. Examples include income from self-employment, interest, dividends, alimony, rent and gains from the sale of assets. You also may need to pay estimated tax if the amount of income tax withheld from your wages, pension or other income is not enough. If you expect to owe a thousand dollars or more in taxes and meet other conditions, you may need to make estimated tax payments.
• Form 1040-ES. If you think you might owe estimated taxes on a quarterly basis, use the worksheet in Form 1040-ES, Estimated Tax for Individuals. Don’t hesitate to contact us if you need help filling out Form 1040-ES, we’re happy to assist you.
• Change in Estimated Tax. After you make an estimated tax payment, some life events or financial changes may affect your future payments. Changes in your income, adjustments, deductions, credits or exemptions may make it necessary for you to refigure your estimated tax.
• Additional Medicare Tax. On January 1, 2013, a new Additional Medicare Tax went into effect. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. For additional information on the Additional Medicare Tax, please call our office.
• Net Investment Income Tax. A new Net Investment Income Tax also went into effect on January 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. Please give us a call if you need additional information about the Net Investment Income Tax.

Questions about federal tax withholding? Give us a call today. We’ve got answers.

• By Leon Clinton
• October 31, 2013

If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses, which might reduce your federal income tax. With that in mind, let’s take a closer look at miscellaneous deductions that might benefit you this tax season.

Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:

• Unreimbursed employee expenses.
• Expenses related to searching for a new job in the same profession.
• Certain work clothes and uniforms.
• Tools needed for your job.
• Union dues.
• Work-related travel and transportation.

Deductions Not Subject to the Two Percent Limit. Some deductions are not subject to the two percent of AGI limit. Some expenses on this list include:

• Certain casualty and theft losses. This deduction applies if you held the damaged or stolen property for investment. Property that you hold for investment may include assets such as stocks, bonds and works of art.
• Gambling losses up to the amount of gambling winnings.
• Losses from Ponzi-type investment schemes.

Miscellaneous deductions are reported on Schedule A, Itemized Deductions. Be sure to keep records of your deductions as a reminder when you file your taxes in 2014.

Keep in mind that many expenses are not deductible. For example, you can’t deduct personal living or family expenses. If you have questions about whether your expenses are deductible or need assistance with Schedule A, don’t hesitate to give us a call.

• By Leon Clinton
• October 28, 2013

October 1, 2013 marked the first day of the shutdown of the federal government–the first since 1995-1996. Without a clear idea of how long this “lapse in appropriations” is expected to continue, here’s a look at how taxpayers are affected.

During the shutdown, approximately 86,000 IRS employees have been furloughed and IRS operations are limited. Despite this, tax law remains in effect, and in that respect it’s “business as usual.”

Individuals and businesses should keep filing their tax returns and making deposits with the IRS, as they are required to do so by law. All other tax deadlines remain in effect, including those covering individuals, corporations, partnerships and employers. The regular payroll tax deadlines remain in effect as well.

Where’s My Refund?

Although the IRS will accept and process all tax returns with payments, it is unable to issue refunds during the shutdown. Tax refunds will not be issued until normal government operations resume. This includes the “Where’s my refund?” service.

October 15 Tax Filing Deadline

Individuals who requested an extension of time to file should file their returns by October 15, 2013. According to the IRS, more than 12 million taxpayers requested an automatic six-month extension this year, but have yet to file.

Members of the military and others serving in Afghanistan or other combat zone localities typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due. People with extensions in parts of Colorado affected by severe storms, flooding, landslides and mudslides also have more time, until Dec. 2, 2013, to file and pay.

Taxpayers are urged to file electronically, because most of these returns will be processed automatically. You can file your tax return electronically or on paper–although the processing of paper returns will be delayed until full government operations resume. Payments accompanying paper tax returns will still be accepted as the IRS receives them.

Taxpayer Assistance

Tax software companies, tax practitioners and Free File will remain available to assist with taxes and continue to accept and file tax returns.

For taxpayers seeking assistance, only the automated applications on the regular 800-829-1040 telephone line will remain open.

The IRS website, www.IRS.gov, will remain available, although some interactive features may not be available.

Tax Transcripts

Individual taxpayers are still able obtain to tax transcript using the automated process. Transcripts will be sent to their address of record within 5 to 10 calendar days. Please note however, that during the shutdown transcript requests by third parties, such as financial institutions, cannot be processed through the Return and Income Verification Services and Income Verification Express Service. These processes are not automated and require actions by IRS employees, are not available due to the current lapse in government appropriations.

Levies and Liens

During the shutdown, no levies or liens–either those generated systemically or those manually generated by employees–will be issued; however, taxpayers may still receive levy or lien correspondence with October mailing dates. These notices were printed before IRS shut down operations were fully complete. It is standard practice for these notices to be printed with a future date to allow for mailing time to reach taxpayers.

In addition, the IRS notes that other letters related to liens and levies, such as notifications that a taxpayer could potentially be subject to a lien or a levy at a future date, continue to be automatically generated by IRS systems during the appropriations lapse.

Note: These notices are not actual levies or liens; just a notification of potential future action. Please contact us if you need more information.

Enforcement Actions

During the shutdown, the only enforcement actions undertaken by the IRS for non-criminal cases involve isolated instances where immediate action is necessary to protect the government’s interest. As such, any enforcement action in this category, seizures for instance, would be extremely limited, for example, where the expiration of the statute of limitations on collection action is imminent.

For criminal issues, most IRS Criminal Investigation employees continue to work during this period, similar to other federal law-enforcement agencies, as well as undercover operations.

Tax Court

Tax Court closed at noon on Tuesday, October 1 and stopped accepting and serving documents such as petitions and motions, as well as electronic filings and hand deliveries. For those with deadlines that cannot be extended (i.e. set by statute), documents may be sent by US mail. The postmark serves as the filing date. If you have any questions relating to tax court, please contact us.

IRS – Miscellaneous

During the shutdown, all IRS audits and examinations will stop. All non-automated collection activity will also stop.

During the shutdown, the IRS will take also steps to protect ongoing bankruptcy, lien, and seizure cases and to prevent lapses in the statute of limitation.

Social Security

Social Security checks will continue to be issued and mailed out via US mail, which is not shut down as it is not funded by the federal government. Field offices are open, but assistance may be limited.

Questions?

Don’t hesitate to call us if you need assistance. We’re here to help!

• By Leon Clinton
• October 24, 2013