Should You Pay Estimated Taxes?

For most people tax time only comes once year. However, for anyone who has to pay estimated taxes a large tax bill could be due several times a year. Again, most people do not have to worry about paying estimated taxes, but there are several circumstances that will put you in that category. The most common reason people need to pay estimated taxes is because they have self-employment income, but there are other reasons as well. You may need to pay estimated taxes if any of the following apply to you.

  • You or your spouse earned self-employment income.
  • If the stock market was kind and you cashed out a large portion of your gains, but you did not adjust your withholding on your W-4, then you might need to pay estimated taxes.
  • If you hire a nanny and pay her federal payroll tax for her, then you can make those in quarterly estimated taxes.
  • Any income you earned that was not subject to federal withholding on your W-4 could be subject to estimated taxes.

Not everyone who falls into one of these categories needs to pay estimated tax. So how do you decide if you should or shouldn’t pay these taxes? There are many answers to this question, but the bottom line is if you made enough income from untaxed sources that you will cause you to owe taxes when you file your return then you should make estimated tax payments. If you fail to do so, then you could pay a penalty. On the other hand if your deductions and credits will be more than the tax amount you would owe on this income then you are most likely OK in skipping these estimated payments. If you still aren’t sure whether or not you should make estimated tax payments, then contact us at GROCO for more advice. We can look at your situation and help you determine if these payments are necessary. Please contact us for help at 1-877-CPA-2006, or click here.

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IRS Finally Says Sorry for Seizing Small Businesses Bank Accounts

Small businesses face a tough battle in general, but when they have the IRS breathing down their necks it makes it that much more difficult to find success. Things are even more difficult when the IRS decides seize some of these business’s bank accounts. At least now the tax agency is apologizing for its actions. According to reports, after serious and consistent pressure from Congress, the IRS recently said sorry to several small business owners for taking control of their bank accounts. So why did the IRS takes these measures in the first place? Apparently these companies were guilty of structuring their deposits to barely avoid federal reporting requirements, even though they weren’t doing it with malicious intent. According to the law, any bank withdrawals and deposits greater than $10,000 must be reported to the IRS. It is also considered a felony to structure such transactions to avoid that law. In reality, these laws are actually in place to prevent drug dealers from transferring large sums of money to other countries. However, these seizures by the IRS reportedly cost the small companies who were affected tens of thousands of dollars to remedy. In apologizing the IRS also said that it would be changing its policy in order to protect small businesses from having their accounts seized when they obtain their money legally.

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Need Help With Your Bookkeeping?

An important part of any business is the company’s bookkeeping efforts. The type of bookkeeping system you use is really up to you as long as you keeps a detailed record of all your expenses and income. In almost all cases, there are no special requirements for keeping your records. On the other hand, every business has different kinds of records it needs to keep in regards to taxes. Obviously, one of the most important questions you need to answer is what kind of records, or documents do you need to save?

Make sure you keep track of all your gross receipts, which is any kind of income your business received during the year. You also need to keep a detailed record of all your purchases, which are the products you buy to resell to your customers. They are not the same as the products you buy for your company to use for conducting business. Those are called expenses and you need to keep track of all of those as well. Save every receipt and make sure that they show the expense was for a business purpose.

There are many other types of expenses as well, including transportation, travel, entertainment and gift expenses, which can also be used as deductions, but you need to keep all the relevant documentation to prove these expenses.

Bookkeeping is no doubt a crucial part of any business, especially when it comes to tax time. If you would like to learn more about the importance of bookkeeping and what kinds of specific documents you need to hold onto, then please click here. You can also contact us for more info by clicking here.

 

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It’s Time for a Tax Scam Refresher Course

Despite repeated warnings from the media and the IRS alike, thousands of people are conned out of money every tax season by scammers. Make sure you’re not one of them. Here is a list of some of the most common scams the IRS sees this time of year. The list is not all-inclusive, as scammers will stop at nothing to cheat both taxpayers and the IRS out of as much money as they can every year. However, it does give you good idea of what you’re up against.

  • Phone Scams – the IRS will never call you and make threats or ask for important personal information over the phone. Don’t fall for anyone impersonating the IRS with threats of deportation or other serious consequences.
  • Identity Theft – whatever you do to protect yourself from identify theft throughout the year, you should double those precautions at this time of year. Stealing your identity is one of the most common tools scammers use to steal your tax refund.
  • Shady Preparer – don’t fall for any tax preparer that promises you a huge refund, ask you to sign a blank return, or wants to charge you according to a percentage of your refund.
  • Phishing – another common attack is called phishing, wherein scammers use fake emails or websites to trick people into giving away personal information. The IRS does not employ these methods.
  • Fake Charities – another way con artists scam taxpayers is by getting them to donate funds to fake charities as they look for another way to reduce their tax bill. Consult the IRS website to be sure a charity is actually legitimate, before you donate.
  • False Credit Claims – don’t give into the temptation to falsify your income in order to receive more credits, even if your preparer tells you it’s OK.

Don’t Be Fooled

If you feel that someone is trying to scam you in regards to your taxes, don’t let them get away with it. Anything that sounds to good to be true or doesn’t pass the proverbial smell-test is probably a scam. Instead, trust your taxes with the experienced and knowledgeable tax professionals at GROCO. We can help you avoid scams and get the greatest refund possible. Just call us today at 1-877-CPA-2006, or connect with us online.

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Lawmakers Vote To Make Three Tax Provisions for Businesses Permanent

Late last year lawmakers in Washington extended a bill that made three important tax provisions for businesses valid through December 31, 2014. That means those provisions were good for last year’s taxes, but expired when the clock struck midnight on January 1, 2015. The extension was welcome news last year for many businesses. Now there is more good news, as Congress recently voted to make those provisions permanent with a new bill: HR 636.

The three provisions in question are Section 179, Section 1374 and Section 1367(a)(2). With the Section 179 provision taxpayers would permanently be allowed to expense up to $500,000 in qualified assets, instead of just a mere $25,000 without the provision. That is a huge break for many businesses.

Provision Section 1374 has to do with corporations and how they pay taxes. S Corporations typically don’t pay corporate–level taxes. However, C corporations do pay those taxes. When a C corporation chooses to become an S corporation it and purges its assets within a 10-year period it must pay a tax on those gains. However, with Provision 1374 in place the waiting period is cut in half to just five years.

It used to be that when an S Corporation donated appreciated property to a charity it qualified for a fair market value deduction. The shareholders were then required to reduce their basis in the S Corporation’s stock. However, under the Section 1367 provision, those shareholders simply have to reduce their basis according to their share of the adjusted basis of the property that was donated.

If these provisions are passed and become law, they would greatly benefit small businesses. By knowing these provisions are permanent year-round, businesses would be able to better plan their purchases and sales throughout the year. Hopefully this bill is passed by the Senate and signed by the president.

 

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IRS Guilty of Questionable Hiring and Rehiring Practices

How confident are you that the IRS is going to handle your tax return properly? Even if you’ve already filed, this latest news could affect you. According to new reports, the IRS apparently used some questionable hiring practices as it prepared to begin reviewing the roughly 150 million individual tax returns it expected to receive this year.

According to The Washington Times, the tax agency actually rehired hundreds of employees who have less-than-admirable records with the agency. Many of these employees’ who previously worked for the IRS had bad performance records. In fact, more than 140 employees that worked for the IRS previously had even messed up on their own personal tax returns. There were other rehires that had looked at private tax information in their previous positions.

Meanwhile, the IRS even rehired five people that they knew had purposely not filed their own tax returns in the last two years. Last, but not least, one former employee, who took an unapproved eight-week vacation, was also rehired. This occurred, despite the fact that this former employee’s supervisor actually wrote a note that stated: “do not rehire.”

Despite these questionable hiring practices, the IRS claims that it follows proper hiring guidelines and that it already has the capability to take care of these situations as it works to find, and let go of, the poor and otherwise questionable performers.

 While the IRS attempts to fix issues on its end, you need to make sure that your return is done right, which could possibly make a difference in preventing incompetent IRS employees from botching your tax refund. Therefore, you should contact us today at GROCO at 1-877-CPA-2006, or get in touch with us online by clicking here.

 

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Believe it or Not, So Far the IRS Is Refunding More Money This Year

It’s a rarity that anyone ever has anything good to say about the IRS; just as it’s a rarity that the federal tax agency has good news for taxpayers. However, according to recent reports, the IRS does have some very good news to share in regards to tax returns so far in 2015.

While earlier reports indicated that the IRS would not be able to respond to nearly as many inquiries from taxpayers this year – especially over the phone – more people are using the agency’s website tools to find help and get answers. Meantime, so far, the IRS says that it has received almost 20 percent of the total returns they expect to get this year. So what’s the good news?

It’s actually two-fold. First, the tax agency is reporting that of the roughly 27.5 million tax returns they have received have, 19.7 million of them have been issued a refund. Those refunds have been moving according to schedule, which is contrary to earlier reports, which indicated that the IRS would most likely be slower in issuing returns this year.

The other good news is that the returns have generally been larger than last year. So far the IRS has issued a total of about $66 billion in returns, with the average return coming in at $3,366. That is a little more than the average amount at this same time in 2014. Also of note, nearly 95 percent of all returns that the IRS has issued so far have been sent through direct deposit.

If you’re still looking for help with your tax return then contact the experts at GROCO today for help. Just click here or call us at 1-877-CPA-2006.

 

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Have a Tax Issue With the IRS? You Could Always Take Them to Court

What would you do if the IRS makes a decision you don’t agree with? For example, let’s say you file a tax return and send it in expecting to receive a refund of $1,500. However, a few weeks later, instead of receiving your refund, you get a letter in the mail informing you that you made a mistake and you will only be receiving $1,100. You’d be upset for sure, but most people probably figure there’s nothing they can do about it.

Actually, that’s not the case. Did you know that if you disagree with the IRS on your return you could ask them to change their decision? That sounds like a futile move, right? Why would they change their mind? There is another option, though. If you really feel that you have been treated unjustly you can take the IRS to the United States tax Court. That doesn’t sound very fun, either, but it is an option.

The good news is that the U.S. Tax Court is not affiliated with the IRS. That means the IRS is in the same boat as you if your case goes to trial. There are several reasons that people decide to challenge the IRS in court, which include:

  • The IRS assess a deficiency
  • An abatement request
  • Request relief from a joint return
  • Disagreements on worker classification
  • Summons enforcement
  • Gross income
  • Accuracy-related penalty

While most people would rather not spend any more time dealing with the IRS than they have to, if you do feel you have been treated unfairly by the tax agency, then you don’t have to just sit back and take it.

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Tax Season Got You Down? Blame Obamacare

What do you hate the most about taxes? Is it the simple fact that you have to file them? Is it the fear of being chosen for an audit? Is it all the confusing changes on tax laws and policies that drive you nuts? There are a lot of reasons people hate dealing with taxes, but this year, there could be a new number one reason for aggravation. Obamacare!

Although it’s actually called the Affordable Care Act, Obamacare, as most people know it, is sure to bring a lot of confusion and frustration this tax season. It will affect just about everyone in some way, but some more than others. Three aspects of your return in particular could feel the effects of Obamacare.

First and foremost, there is the individual penalty if you don’t have insurance. Here’s how the penalty works. If you don’t have insurance then you will pay the greater of the these two amounts:

  • 1 percent of your annual household income, or
  • $95 per person in the household for the entire year ($47.50 for those under 18).

Obamacare will also affect the Net Investment Income Tax, because as part of the plan there is a new 3.8 percent tax that will be added on to the capital gain rate. This 3.8 percent is applied to either the amount by which your adjusted gross income exceeds a certain tax threshold or to your net investment income; whichever is less.

Lastly, the Premium tax credit will also see the effects of Obamacare. Anyone who had health insurance via a Health Care Exchange could see the government subsidize his or her premiums.

So there you have it. Like it or not, Obamacare is probably going to affect you this year no matter what tax boat you’re in. Of course, we can help you get through the murky waters of the Affordable Health Care Act and ensure that you get the most from your return. Just call us at 1-877-CPA-2006 or click here.

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Could a Trust Be a Good Way for the Wealthy to Save on Taxes?

When you think of trusts, what comes to mind? While many people think of a financial account that is set up as part of an estate plan, there are a couple of little-known trusts that taxpayers, especially the wealthy, can use to help them save on their tax bill.

These trusts are perfectly legal and recognized by the IRS, but not a lot of taxpayers are aware of them. Both of these trusts revolve around the difference in ownership rules between estate tax/gift purposes and income tax purposes. So can these differences in ownership rules help taxpayers save money? Yes.

One of these trusts, know as the Intentionally Defective Grantor Trust (IDGT), is in many cases used by wealthy people in order to lessen the blow of the gift/estate tax that family members have to pay when assets are shifted from one generation to another. Essentially, it allows parents to give a gift to their children for gift/estate tax purposes, while they can still be considered as the owners of the trust as it pertains to tax purposes. This allows their children to inherit the assets at a much lower tax rate than what would otherwise be imposed at death.

 Another trust that can help you at tax time is the Incomplete-Gift Non-Grantor (ING) Trust. It actually is designed to do the opposite of an IDGT. Essentially the transfer of funds is not considered complete as far as estate tax purposes are concerned, but it is completed as far as income tax purposes are concerned. These means that the parents are no longer considered as the assets’ owners when it comes to income tax purposes. The trust becomes an actual taxpayer and has its own residence, which is actually in a state without income tax, as long as the state allows such a trust.

 Both of these trusts can be an effective away to save on your taxes, especially for people who have high value assets and who want to gift those assets to their children. If you want to learn more about these trusts and determine if one might be right for you, then give us a call at 1-877-CPA-2006, or click here to get in touch with us online.

 

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