You’ve worked hard your whole life and now you’re ready to retire. You’ve saved, invested, and put money in your 401K. You’re set; ready to enjoy the good life. Before you get too comfortable, there are a few things you may not have considered. [More]
The amount for the Earned Income Credit has increased and it is sure to result in larger refunds at RHODES-MURPHY Income Tax Service. If you qualify, it could increase your Federal Refund by $5,891 if you have 3 or more qualifying children, $5,236 if you have 2 qualifying children, and $3,169 with one qualifying child. [More]
Many people don’t realize who they may be able to claim on their tax return. It can be quite confusing at times but knowing who you can claim can save you tax dollars.
Did you know that you can possibly claim your parent, grandparent, nephew, niece, or other qualified relative that didn’t live with you? In addition, you can possibly claim someone who is not related to you but has lived with you all year long.
There are other conditions that need to be met but keep these important tips in the back of your mind and let our tax specialist answer any questions you may have. Knowing who you can claim can save you $3,700 in taxable income per qualified dependent.
When I talk to our tax preparers here at Rhodes Murphy record keeping is commonly mentioned as one of the biggest pitfalls their clients face. Many things require good record keeping such as business use of home, charitable donations, medical receipts, and childcare expenses. Just because it’s not “tax time” doesn’t mean that you shouldn’t be keeping these records together so that when the time does roll around you are ready to go. If you question whether records should be kept regarding a certain scenario it is better to file it away just in case…you can always throw them away if you DON’T need them but you will have them handy if you DO.
While many of us mark April 15th on our calendars as the deadline for filing tax returns. The IRS however does not close efile until mid-October before turning things over to the next filing season, this year that efile deadline is October 17th. The majority of tax payers will still be subject to this deadline and any returns filed after that point will have to be mailed.
If you filed an extension earlier in the year, or haven’t done anything yet, now is the time to get in to a Rhodes Murphy location. We can make sure that everything is ready to go and submitted to the IRS before October 17th. Make sure that you bring all of your documentation and are ready to go when you come in. We are ready to help you!
The IRS recognizes several different filing statuses when it comes to taxes. These include single, married filing separate, married filing joint, and head of household. Things can get somewhat complicated when it comes to a married couple or the separation of a married couple.
People can apply for the innocent spouse relief if they feel that their spouse (or former spouse) had reported numbers that are unfair. If items are improperly reported on a tax return, the innocent spouse relief takes care of the responsibility of paying tax, interest, and penalties. Usually, the tax, interest, and penalties can only be collected from your spouse (or former spouse).
In order to get innocent spouse relief, you must fill out Form 8857. The IRS will then calculate the tax that you are responsible for. If you want to calculate it yourself, refer to Publication 971 in the IRS.
There are 4 requirements to meet in order to receive innocent spouse relief. They are listed below:
1. There was an understatement of a joint return due to erroneous items of your spouse (or former spouse).
2. You must establish that you did not know there was an understatement of tax at the time you signed the joint return.
3. Once you consider all of the factors, you must prove that it would be unfair for you to be held liable for the understatement of tax.
4. If you and your spouse (or former spouse) transferred property to one another as a fraudulent scheme, the innocent spouse relief will not be granted.
Even tough life events happen, taxes are still there. The innocent spouse relief can be of great benefit, but there are many variables to consider. If you plan on applying for this complicated process, you may need some guidance. At Rhodes-Murphy, we understand the importance of filing tax returns properly. If you have any discretion on how to file your taxes, please contact us soon.
There is no doubt that people are suffering from the poor economy. Unemployment has been its highest in a long time. The number is actually higher because the numbers now only include people who “are actively looking for a job.”
Given the hard times, there are questions and answers about jobs related to federal and state taxes. There is a list of important questions below:
What if I lose my job?
Job loss may create new tax issues for you and your family. If you receive severance pay after your job, this amount is taxable. Unfortunately, payments for vacation time and sick time are also subject to taxes. To ensure a big payment after filing taxes, you should ensure that an adequate amount of taxes are withheld from your income. You can talk to your employer about this. A helpful IRS publication is Publication 4128, Tax Impact of Job Loss.
What if my income declines?
Although the short term decrease ay cause more struggles, there are tax benefits depending on certain income. You may be eligible with some credits and deductions with a lower income. The Earned Income Tax Credit is helpful for working families and individuals. Qualifications depend on your income and family size.
What if I receive unemployment compensation?
Unemployment compensation is considered taxable income. If you receive unemployment compensation, you should receive a From 1099-G that shows the amount you received and any tax that was withheld. Rhodes-Murphy can provide great assistance that makes filing this form very easy.
What if I am searching for a new job?
It’s expensive to look for a new job. Costs include travel, entertainment, new clothes, and office supplies. You may be able to deduct these expenses while searching for that new job. If you do find a job, moving costs for the new job at least 50 miles away from your home may also be deductible For more information, see Publication 529, Miscellaneous Deductions.
Do you keep track of your miles for work? If you don’t you should for several reasons. It is especially important if you receive a 1099-Misc for payment. In hard economic times, some companies are looking to hire part-time workers so they are not responsible for providing full benefits. This also means that you have to pay self-employment taxes. However, there are many benefits to filing a 1099-Misc as well.
You must complete a Schedule C for any payment received for work where taxes are not taken out. The Schedule C is a form for owning your own business, and many expenses can be written off that are pertinent to your line of work. Just a few deductions include supplies, marketing, use of your home, and mileage.
Luckily, the IRS recognizes that transportation is a vital element to any job. On July 1st, they increased the mileage rate by 4.5 cents to 55.5 cents per mile. For any mileage driven for business during the first six months of the year, the rate is still 51 cents per mile. Depending on your mode of transportation this can make a huge difference.
Even if you do pay taxes through your employment, you can deduct mileage for the use of your car. Some companies even want you to track mileage so they can deduct it from their total taxes they must pay. When you are ready to file your federal and state taxes, Rhodes-Murphy has all the necessary tools to make sure you get the biggest refund.
The new legislation is not just for business use. More improvements are included in moving expenses. The IRS will increase 4.5 cents to 23.5 cents per mile. In all cases where you use your car, keep a log of your mileage on trips that you think can be deducted for filing taxes. Please contact Rhodes-Murphy if you have questions about mileage deduction eligibility.
Most everybody knows the phrase, “No taxation without representation.” Although this Revolutionary call for rights is somewhat outdated, the IRS has actually established a list of rights that you have as a taxpayer in the United States. Knowledge is power, and it is important to know your rights as a taxpayer so you can protect yourself and your family when it comes to federal taxes.
Publication 1 on the IRS website makes it clear that you are guaranteed certain rights when it comes to federal taxes. First, IRS employees “will explain and protect your rights as a taxpayer throughout your contact with us.” During the huge rush of tax season, some people may have had a bad experience when talking with the IRS. The best thing to consider is the size and scale of responsibility within the IRS. They are in charge of taking care of the whole country regarding federal taxes. This includes all individuals, businesses, non-profits and many more organizations. The best advice for dealing with the IRS is to have patience. We know this is easier said than done sometimes.
Secondly, the IRS emphasizes your rights of privacy and confidentiality. The IRS will not disclose information that you give them, except as authorized by law. This small section about authorization by law may raise questions, and that is important because you have the additional right to know why they are asking for any information, how they will use it, and what happens if you do not provide the information requested.
In cases that get more complicated regarding federal taxes, you may need representation. You can either represent yourself or have someone else represent you through written authorization. Make sure that your representative is an attorney, certified public accountant, or enrolled agent. If you have to proceed with an interview you may even record the conversations as long as you provide writing 10 days before the scheduled meeting.
Also, you can utilize the Taxpayer Advocate Service. This is an option if your direct dealings with the IRS have been unsuccessful. There should be a local Taxpayer Advocate that can help with your situation. For more information call 1–877–777–4778 or write to the Taxpayer Advocate at the IRS office that you were contacted by last.
These are some of the major rights you have as a taxpayer, but there are more. You can find a full list here. This also includes the examination, appeal, collection, and refund processes. Good luck on the upcoming year, and we want you to be aware of your rights as a taxpayer.
Why do we take our taxes to professionals? It’s a question everybody tries to answer when the clock is ticking with filing taxes. Scenarios include limited time, complicated forms, and guaranteed results. But did you ever consider your security to be of most importance? The IRS is very aware of tax scams and so are we. Don’t get fooled and give away your hard earned money. There are three main types of scams that the IRS has identified, and it important to be savvy when it comes to your finances. First, there is the refund scam. This is the most frequent one of all scams out there. Mostly, they come in the form of an email that states that you are eligible for a refund from the IRS for your federal taxes. The email will claim that you will receive an exact amount if you follow the directions. A common phrase includes, “last annual calculations of your fiscal activity.” In order to claim your refund, you are instructed to click a link or open an attachment. These downloaded forms require the disclosure of personal and financial information. This includes social security numbers and bank account numbers. The emails can even go to the extent of claiming to be affiliated with the IRS or be signed by an false IRS employee. There is no need to fill out these bogus forms because the IRS makes refunds based on when it is submitted to the IRS. The second type of scam is lottery winnings or cash consignment. These emails usually come from the Treasury Department. In the message, it says that you can obtain millions of dollars in leftover cash from lottery winnings. These emails may also ask for personal information. Sometimes, this is a multi-step scam. The scammers may further contact you by phone to ask for more personal information. There have even been cases where you are instructed to deposit taxes on your “winnings”, or you can receive a phony check but be instructed to pay a fee. The IRS wants to be clear on these cases, and they state, “In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.” Finally, there is a fax-based scam called beneficial owner form. This scam is intended for foreign nationals, and it is based on the actual IRS form, W-8BEN. This form is for Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. This scam asked for passport numbers or account security information. The real forms are actually completed by banks, not individuals. Rhodes-Murphy is keenly aware of tax scams. If you have any doubt about an email or fax related to one of the taxes mentioned above, please contact us for tax help. We are professionals that guarantee the security of your information. Check back to the blog frequently to find out more information regarding taxes.