No One’s Sure Who Qualifies for the New Tax Law

No One’s Sure Who Qualifies for the New Tax Law

As briefly touched upon earlier this week, when it comes to the recently instated Republican tax law, one thing is clear: from business owners and CPA’s, to the IRS themselves, no one really knows who exactly qualifies for the promised deduction. Established to give small businesses an easier tax break, the general idea of the bill is to provide a 20% deduction to taxpayers with an income falling below $157,500 for single filers, or $315,000 for joint accounts. However, rise above that threshold and things get tricky – a reduced deduction only applying to certain professions, before cutting off altogether at an income of $207,500 for singles, or $415,000 for married couples. What are those certain professions? Currently, no one’s quite sure – a lax interpretation that could cost the U.S. Treasury over $415 billion in deductible tax dollars by 2025 unless more specification becomes available. While the letter of the bill disqualifies industries like law, health, financial, brokerage, athletics, and consulting, the finer details of which job falls into which category is not specified, causing many businesses to find themselves entrapped in a massive grey area. For instance, questions like if veterinarian services count as “health care”, or if a life coach can be grouped under “consulting” same as a consultant for a hedge-fund – thereby making both ineligible for the deduction – are surfacing. Another problem that has tax officials scrambling, is what the law means when it disqualifies any business where the “principle asset” is the “reputation or skill of one or more employees or owners”. According to Matt Turkstra from the Associated General Contractors of...
Don’t Miss Out on This $1.1 Billion Tax Return

Don’t Miss Out on This $1.1 Billion Tax Return

With less than a week until April 17th – the tax deadline for many individuals – time is running out for taxpayers who wish to claim their 2014 income tax returns, but still have yet to file for that year. The standard return only remaining viable for a period of three years, beginning at the original tax due date, the IRS has issued a reminder that all 2014 refunds not collected by April 17th, 2018 will go straight into the U.S. Treasury. An amount, mind you, that the IRS estimates to equal a total of $1.1 billion in as-of-yet unclaimed tax refunds – the standard midpoint for each individual claim totaling at roughly $847. “We’re trying to connect a million people with their share of $1.1 billion in unclaimed refunds for 2014,” Acting IRS Commissioner, David Kautter, says. “Time is running out for people who haven’t filed tax returns to claim their refunds. Students, part-time workers, and many others may have overlooked filing for 2014. And there’s no penalty for filing a late return if you’re due a refund.” Plus, if you’re a low or moderate-income worker, you could be missing out on a lot more than just your return by failing to file this tax period. Designed to help families and individuals with smaller incomes, the Earned Income Tax Credit (EITC) is a secondary refund that could value as high as $6,143 for taxpayers falling below the following income thresholds: $14,590 ($20,020 if filing jointly) for people without qualifying children; $38,511 ($43,941 if filing jointly) for those with one qualifying child; $43,756 ($49,186 if filing jointly) for people...
2018’s 2nd Quarter Interest Rates are Rising

2018’s 2nd Quarter Interest Rates are Rising

The IRS has announced an increase in interest rates for over-payments and under-payments falling within the 2nd quarter. This change – scheduled to take effect on April 1st, 2018 – will apply to those corporations with erroneous tax payments, while non-corporate taxpayers will continue to pay the federal short-term rate (currently 2.10%), plus 3 percentage points. This year’s 2nd quarter interest rates will be as follows: 5% for non-corporate over-payments, and 4% for corporate ones. 2.5% for any over-payment amount made by a corporation that exceeds $10,000. 5% for average under-payments (both corporate and non-corporate). 7% for large corporate under-payments that exceed $100,000. As the IRS announces over-payment and under-payment interest rates every tax quarter, some may find the constant change stressful – especially if those interest rates apply to them. Thankfully, however, according to the Internal Revenue Code, there is a method to the madness. To predict interest estimates, the first step is to understand that typically all corporate quarterly interest numbers are determined by calculating the nation’s federal short-term rates, and then adding on an additional percentage, depending on the erroneous payment amount. For corporations with an average under-payment, the interest is an extra 3% added onto the federal short-term rate, while for over-payments, it’s an additional 2%. For under-payments over $100,000, the interest rate is 5% on top of the federal short-term rate, while for over-payments exceeding $10,000, it’s only an extra 0.5%. Want help avoiding interest charges altogether? Let us handle your bookkeeping so you can rest easy knowing that you’ll never pay too much or too little for your payroll taxes! Call us during...
Understanding Offer in Compromise (OIC)

Understanding Offer in Compromise (OIC)

It’s a scary thing: to realize you owe more taxes than you can possibly pay off. But before you panic, did you know that the IRS has a policy to assist in just such cases, outside of a loan or payment plan? Known as an Offer in Compromise (OIC), if a taxpayer finds that their tax liability exceeds their funds or feel they don’t owe the amount due, they can seek to either lower or completely settle the debt with the IRS by qualifying for one of three conditions. These conditions – determined through an in-depth examination into the specifics of each case – are as follows… Doubt as to Collectability Most commonly seen in OICs, a taxpayer would file under Doubt as to Collectability if they’re unable to pay the full liability debt due to a lack of money, or if doing so would reduce them to an unsuitable living situation. To be eligible for a compromise under Collectability, an investigation by the IRS into the taxpayer’s financial situation would be had – evaluating values such as income, expenses, liabilities, and assets – before comparing the numbers to local and national standards of living, known as “allowable living expenses”, which include costs of food, clothing, housing, utilities, transportation, medical bills, and education. If it’s found improbable through this comparison that the taxpayer can pay their debt in full, the IRS is more likely to accept an OIC. Doubt as to Liability If the taxpayer has the financial capability to pay their tax due, but feel that the amount is incorrect or invalid, they can contest the debt through...
Watch Out for This New Tax Refund Scam!

Watch Out for This New Tax Refund Scam!

We’re now in the middle of tax season, and with it the IRS has released a warning about a new scam that targets tax professionals, files fake returns, and has taxpayers sending refund money straight into the scammer’s account. To help keep your accounts safe, here’s how to spot the scam and what to do should you become a victim. The Scam If you’re a tax professional, the scam starts with you. Using phishing tactics, crooks begin by collecting client account data, before filing a fake tax return using the client’s bank account number. As soon as the refund is deposited by the IRS, however, the taxpayer is then contacted by the thieves (now posing as the IRS or other officials), notified of the error, and asked to return the money to a prescribed account – sending it straight into the scammers’ wallets. As the scam involves real client data, it’s a hard scheme for the IRS detect, while should the taxpayer doublecheck the validity of the crook’s claim, the presence of an actual fraudulent refund in their account seems to corroborate the story. What to Do if You’re a Victim If you notice an erroneous tax refund in your account, and/or are contacted via phone or email by the “IRS” asking you to return the money, here’s what to do to help keep your account secure and avoid being scammed: Refund Type: Steps to Return Erroneous Refund: For Direct Deposit Refunds… Contact your bank’s ACH and schedule to have the deposit returned to the IRS. Call the IRS at +1(800) 829-4933 (business) or +1(800) 829-1040 (individual) to explain...
2018 Estimated Income Tax Refund Dates

2018 Estimated Income Tax Refund Dates

Are you expecting a tax refund for 2017? The IRS started processing returns on January 29. If you’re one of the millions of Americans who are asking, “When can I expect my income tax refund?” we have the answer. It depends on a couple of things, but the good news is that there are several tools to help find out. First of all, taxpayers who use a professional, such as a CPA or EA, can ask that professional for an estimated date. Taxpayers who’ve already filed can also go to the Internal Revenue Service’s website, which has a tool designed specifically for that called, “Where’s My Refund?” [For the latest information on deductions and tax brackets in the 2018 GOP tax reform, go to this article: www.cpapracticeadvisor.com/12387105 or our index of articles about the tax reform law: www.cpapracticeadvisor.com/12390237.] There are also apps for Apple, Android and other devices that help track refund status. Note: The IRS will not start processing returns with the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until mid-February 2018.   IRS Accepts between these dates Direct Deposit Sent Paper Check Mailed 1/29/18 – 2/2/18 Friday 2/9/18 Friday 2/9/18 2/5/18 – 2/12/18 Friday 2/16/18 Friday 2/16/18 2/10/18 – 2/15/18 Friday 2/23/18 Friday 2/23/18 2/15/18 – 2/24/18 Friday 3/2/18 Friday 3/2/18 2/24/18 – 3/3/18 Friday 3/9/18 Friday 3/9/18 3/3/18 – 3/10/18 Friday 3/16/18 Friday 3/16/18 3/10/18 – 3/17/18 Friday 3/23/18 Friday 3/23/18 3/17/18 – 3/24/18 Friday 3/30/18 Friday 3/30/18 03/24/18 – 3/31/18 Friday 4/6/18 Friday 4/06/18 03/31/18 – 4/7/18 Friday 4/14/18 Friday 4/14/18 4/7/18 – 4/14/18 Friday 4/20/18 Friday 4/20/18 4/14/18 – 4/21/18...

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