Got mail (from IRS)? Don’t Panic…

Posted on by PM Editor
It can be a terrifying experience when you go to retrieve your mail, and among the usual bills and junk mail, there is the “dreaded” plain white envelope from the Internal Revenue Service.  Like most Americans you get this uneasy feeling in your gut and the anxiety sets in.

 

 

Don’t Panic, the IRS sends out millions of letters to taxpayers every year, most of these are automated. Notwithstanding, you should open the letter immediately as many of these notices must be addressed by specific due dates.  Ignoring these notices or putting them off could worsen the situation, especially if they are disputing money owed, they can rapidly rack up interest and penalties! However, as mentioned before these notices should not always be the cause for concern.  The IRS send out notices for a host of reasons, first thing to do is understand the reason for the notice.

Why was I notified by the IRS?

The IRS sends notices and letters for the following reasons:

    • You have a balance due.
    • You are due a larger or smaller refund.
    • We have a question about your tax return.
    • We need to verify your identity.
    • We need additional information.
    • We changed your return.
    • We need to notify you of delays in processing your return.

Once you have identified the reason for the notice maintain calm, and read it very carefully. If you are unsure how to proceed or simply prefer to have more experienced person address the IRS on your behalf, contact the professionals at TaxPM™ today!

Here are some recommended actions that the IRS advises if you’ve received a letter from them.

Read

Each notice or letter contains a lot of valuable information, so it’s very important that you read it carefully. If they changed your tax return, compare the information we provided in the notice or letter with the information in your original return.

Respond

If your notice or letter requires a response by a specific date, there are two main reasons you’ll want to comply:

  • to minimize additional interest and penalty charges.
  • to preserve your appeal rights if you don’t agree.

Pay

Pay as much as you can, even if you can’t pay the full amount you owe. You can pay online or apply for an Online Payment Agreement or Offer in Compromise. Visit IRS payments page for more information.

Keep a copy of your notice or letter

It’s important to keep a copy of all notices or letters with your tax records. You may need these documents at a later date.

Contact IRS

They provide their contact phone number on the top right-hand corner of the notice or letter. Typically, you only need to contact them if you don’t agree with the information, if they requested additional information, or if you have a balance due. You can also write them at the address in the notice or letter. If you write, allow at least 30 days for their response.

The location of the notice or letter number

You can find the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence.

When the notice or letter looks suspicious

Please visit IRS Report Phishing page if you receive a notice or letter that looks suspicious and was designed to appear as though it came from the IRS. You can also call 800-829-1040. The IRS never ask taxpayers for personal information via e-mail or social media.

 

1099 or W-2?

Posted on by PM Editor

There is always a constant misunderstanding of what forms need to be filed on a tax return when a company pays a worker to perform a service or labor under their company name. The two common forms are a W-2 or 1099-Misc. Most people who have worked for a franchise or a global named company have been given a W-2 at the end of each employment year. Because the W-2 is the most common form out of the two, business owners assume that the tax form W-2 is given to every worker but it is not always the case.

Filing a W-2

The tax form that needs to be filed can be one of the two but depends on the situation and status of the person through the eyes of the company. The tax form W-2 is for those who are an employee of the company. One of the key differences between the two tax forms is with a W-2 the business owner assumes the responsibility to deduct the taxes on the wages they are paying their employees and reports and pays the tax deducted to the Internal Revenue Service (IRS). The deductions are composed of State Income Tax, Federal Income Tax, Social Security, and Medicare; comprised these are commonly referred to as payroll taxes. There is another consideration that needs to be made if the company controls the person’s schedule and it’s providing the workers with necessary tools and training to complete a task a specific way then the worker is classified as an employee, in which the company must report this income to the IRS and furnish it’s employee(s) with a W-2 form.

Filing a 1099-Misc.

A 1099-Misc. form is furnished to workers that are considered an independent contractor. These workers are not considered employees of the business, so the worker oversees calculating their own payroll tax and submitting their own income earnings to the Internal Revenue Service (IRS) and Social Security Administration on a quarterly basis. To be considered an independent contractor, the worker contributes its own time, completes task-based projects on their own ideas and styles, the worker provides him or herself with their own tools, materials, and other supplies to complete the task. Another consideration in filing a 1099-Misc. is that the worker needs to make more than $600 in one fiscal year or it is not necessary to provide them with a 1099-Misc.

Wrong Classification

The Internal Revenue Service has developed a new form for employees who have been misclassified as independent contractors by an employer. Form 8919, Uncollected Social Security and Medicare Tax on Wages, will now be used to figure and report the employee’s share of uncollected social security and Medicare taxes due on their compensation.

IRS: Tax-related Identity Theft

Posted on by PM Editor

About 1 in every 16 people living in the United States has been a victim of identity theft. Identity theft occurs when someone uses another person’s identity information like their names, social security number (SSN), or credit card number without the other persons consent. USA today announced that “identity theft soared during 2016 and in fact, it has hit an all-time high.”

The issue of identity theft has been a focal point for the IRS(Internal Revenue Services) since tax payers have too many times been victims of tax-related identity theft and refund fraud. As you may have guessed, a tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return to benefit on a fraudulent refund. To stop these tax-related identity theft, the IRS has assigned more than 3,000 employees to work on identity theft-related issues, and provides its 35,000+ employees training on how to detect identity theft.

The IRS is working hard to prevent identity theft and has stopped 14.6 million suspicious returns and protected over $50 billion in fraudulent returns. One of the steps they take is by calling tax payers to verify some questions they have on tax returns or refund amounts. The doing of this process is not to alarm any tax payer of fraud but to be proactive, if any fraudulent act was taken. It might sound like a simply task but it is a very effective way to find out if theft has occurred.

What can you do as Taxpayer?

If you are an e-filer, do your research. Search the internet, find out if the website you are thinking to use, has not been hacked or is a scam to get your personal information. If you are not an e-filer, and use a tax consultant, make sure files can not be easily stolen or seen. Also, keep your information hidden from others who do not need to know your personal information.

On the IRS website, it states that red flags should go up if any of the following occur:

  1. More than one tax return was filed using your SSN
  2. You owe additional taxes, or refund offsets on years you have not filed.
  3. IRS records show that you have received wages from an employer you did not work for.

If you have been a victim of tax-related identity theft, contact the IRS.

 

 

Tax Planning for Retirement: Things to Remember

Posted on by PM Editor

Many people look forward for the day they retire. This is the time when they can relax and enjoy the fruits of their labor. But, regardless of how you want to spend your retirement, having a good tax strategy and plan for retirement is a must.

It is important to understand that there are many potential tax events that can be triggered when handling your retirement assets and financial transactions. With the help of tax experts like TaxPM you should be able to optimize your tax strategy. In any case, you should take a few things into consideration.

Asset Protection

According to many experts in this area, if you want to improve your asset protection, you will have to diversify your retirement assets. Use different vehicles like investments and insurance products to keep your assets safe. You should also think about the tax laws and regulations that may eventually affect your sources of income.

Now let’s consider some of the sources of income generated by retirees.

401 (k)

As you are probably aware, a 401 (k) represent a retirement savings plan sponsored by your employer/s. (1) With its help, you can save and invest a part of your paycheck before the removal of taxes. But, you should keep in mind that 401 (k) distributions are completely taxable. This is quite logical because the contributions were made before taxation.

Roth IRA

When it comes to Roth IRA, you should know that there are no deductions for the contributions. In other words, they act as so-called after-tax funds. People are free to withdraw contributions from the plan at any point, however depending on age there are often taxes and/or penalties applied to the transaction. In other words, Roth IRAs could be a more flexible option compared to traditional IRA.

SEP IRA

SEP IRA is the ideal solution for self-employed persons who want to make sure that their retirement plan will get them significant income in the future. It’s also good for sole proprietors. Many people use a SEP IRA to create tax-deductible contributions for the last year. It’s possible to change the amount you contribute at any time of the year.

Traditional IRA

Traditional IRA has deductible contributions, but only from current income. (2) So, when there are withdrawals of contributions at retirement, they are taxable as any ordinary income. The same goes for the income. Generally speaking, those who belong to the lower tax bracket can expect significant, permanent tax savings with Traditional IRA. Keep in mind that the income is taxed equally no matter what kind of origin it has – interest, dividends or capital gains.

Proper tax planning for retirement depends on your income, goals, qualified plans and tax filing status. Use professional advice whenever you are making a plan like this. TaxPM is here to help you.

(1)  http://money.cnn.com/retirement/guide/401k_basics.moneymag/index7.htm

(2) https://www.irs.gov/retirement-plans/traditional-iras

 

 

 

 

 

Business and Personal Accounting Service

Posted on by PM Editor

Are you interested in trying personal accounting services? Or maybe you need accounting assistance for your business? Regardless of your answer, you are probably aware that there are two options that individuals and organizations are using in situations like this.

First of all, they are relying on the so-called do-it-yourself approach. This means that they are taking care of these things on their own. The main reason why they are doing this is to save money. The other option is to hire a professional accounting service provider like TaxPM. The fact is that the second option is much better because it will not only save you time, but it will also save you money in the long run. Professional accounting service providers have experience, knowledge, and expertise in this field and they are less likely to make mistakes. Ordinary people don’t have the resources to finish this task in the right way. Now let’s see what you can expect from reliable personal and business accounting service providers:

Bookkeeping (end to end service)

It’s the best idea to leave the professional to take care of your bookkeeping needs from the beginning to the end. The typical bookkeeping service includes receiving, keeping and paying vendor invoices, creating electronic payroll taxes deposits, preparing payroll tax returns and payroll in general, preparing debt service payments as we all other occasional payments and taking care of sales tax returns. (1)

IRS Communication and Negotiation

Owing the IRS is a big deal. This is the reason why it is important to communicate and negotiate with the agency in the best possible way. There are professionals that can help you with this. It turns out that this is an investment that pays off. Through this process of communication and negotiation with the IRS, these professionals can help you get the best option for tax relief. In the end, you will use the best option for tax debt relief – penalty abatement, installment plan, offer in compromise, currently not collectible etc.

Payroll and corporate tax filings

Payroll and corporate tax filings let business owners take care of their employees and their company. Instead of wasting time on this time-consuming process, business owners should leave this task in the hands of true professionals. (2) With the right service provider on your side, you can rest assured that the payroll and corporate tax filings will be accurate and reliable and completed on time. They can help you file literally all the payroll and corporate taxes you need to pay.

Tax planning and preparation

It doesn’t really matter whether you are an individual or a business owner, you will need tax planning and preparation strategy that includes tax saving tactics and strategies like insurance strategies, employee benefit plans, financing alternatives and more. All these things can be overwhelming for an ordinary person, but the experts in this field like TaxPM are doing this on a daily basis for dozens of individuals and businesses.

These are some of the reasons why individuals and business needs professional personal and business accounting service.