Tag Archives: Tax

New IRS & NYS Requirements

In order to reign in tax fraud new procedures have been imposed on taxpayers and tax professionals. Please understand that the CPA community was informed late in the process nor did they participate in the drafting of these new procedures. They are:

– IRS requires certain questions be answered in order to receive the following tax credits: Earned income credit, Child tax credits and education credits.

– New York State now requires authentication of the taxpayer by providing their drivers license’s document number, identification number, issuance date, expiration, and state of issuance or a state identification card if they do not have a valid drivers license.

Phishing: Are you the next target?

A client of ours contacted us regarding a suspicious phone call she had received. A woman claiming she was from the IRS told our client she owed the federal government money for tax payments she hadn’t payed. What makes this case especially interesting? Our client happens to be a foreign national, and was threatened with possible deportation from the Country if she didn’t pay the amount owed to the federal government.

We’ve seen these scammers target certain demographics most vulnerable to these types of tactics, and in todays world, personal information such as your address, name, social security number are going to be the pieces of information that these scammers are going to try and use to convince you of who they are. REMINDER: The IRS will NEVER call or email you, always and only through written correspondence should you owe them any sort of payment.

Should you receive one of these calls, and you are being spoken to in a threatening manner, take down their number & hang up. To help the proper authorities deal with these scammers please click the link below to report the incident. https://www.irs.gov/uac/report-phishing

Thinking of Divorce? Here’s some Advice:

Untangling the affairs of a failed marriage is full of financial & tax pitfalls. It is prudent to speak to an impartial professional before either party engages in the service of an attorney. The major items of concern are whether divorce is the only option, what do both parties really want?

8 Important things to consider when going through this process:

•Timing of the divorce

•Payment of Alimony

•Custody if minor children & child support

•Property Settlement

•Health Insurance

•Qualified Retirement plans & IRA

•Business Interests

•Filing of back, current and future tax returns

Attention to tax and financial issues helps the parties involved create certainty and avoid problems later on.

How long to keep your tax return and why

How long should I keep my tax documents for? This is a common question we encounter quite often.

We suggest that you keep copies of all of your old income tax returns as well as w2’s, as there may be many unanticipated issues such as documentation of social security wages.

However it does not seem necessary that all the supporting documentation be kept no more than 7 years.

Keeping a tax return permanently provides support if the IRS contends your client did not file a return or filed a fraudulent return. Furthermore, you may need to refer to an old return to obtain information about:

  • Home purchases and sales
  • Depreciation of a home office, rental property, or business equipment
  • Individual retirement account (IRA) contributions
  • The purchase price of stocks, bonds, and mutual funds
  • The taxability of pensions and annuities

Please note that it is recommended that you review your earnings and benefit statement on file with social security, as this will affect any Social Security benefits you may be entitled to. Also a current Earnings and Benefit Statement can be requested on the internet at www.socialsecurity.gov

 

Another filing season has come and gone

If there is one season that we observe as a whole in this nation, it’s tax season. We accountants see our clients information flooding in along with handling many frantic phone calls as to how we arrived at their tax bill. All the while trying to pay attention to the immediate and fine  details that are demanded of tax preparers.

What most taxpayers don’t understand, is the environment in which accountants must navigate their clients through. It is impossibly complex and drastically changes so much that the IRS itself can barely keep up. Another filing season has come and gone, and we still are baffled by why congress can’t devise a fairer and more logical tax scheme.

Quite a few of our clients have gotten sticker shock due to the ever-changing tax landscape and the lateness of the changes implemented by the Tax Prevention Act of 2014. Why congress took three hundred and sixty two days to enact their bill which made changes retro-active to the beginning of 2014 should concern everyone.

This year we are likely to see more of the same as they did not even have the foresight to pass 2015 tax changes before the year began. We are again working blindly. Everyone talks about fairness in the tax code but, if the rules are ever-changing and proper planning cannot be done, there will never be fairness in the system.

The changes that most affected our clients this year were the accelerated phase out of personal exemptions; the child tax credit and itemized deductions. Unfortunately, all of the aforementioned phase outs occurred at different levels of income in some cases making the marginal tax rates of fifty percent. We could not advise our clients of how to properly modify their estimated tax payments as “The Act” was passed three days before year end.

What will it take for congress to live up to their responsibility and stop using the tax code as a political pawn?

Time are a changing

There are days I wish I could relive, where people and the memories seem to be perfectly happy, living in moments of laughter and the simplicity life provided at the time. Our memories of the past are fond and life was certainly simpler but times are a changing. What some people cannot bring themselves to do, when it comes to owning a small business is to adapt to changing circumstances regardless of what their accountants advice.

Some years ago we got a new restaurant client that had a serious problem, the previous owner’s books and records were virtually non existent. Fortunately when they found themselves in the crosshairs of the Department of Labor they were prepared for them. They had listened to us and implemented an accounting system that accurately reflected their Sales and Payroll.

New York State has been actively visiting worksites unannounced and are making rather large assessments, DOL audits are particularly gruesome as their position taken are mostly intractable. But beware because the Department of Labor will send an auditor to your restaurant.Here walks in a Man and/or Woman, they are seated, given a menu and their order is taken, no problems right? WRONG. As it turns out this Man and/or Woman is an Auditor for the DOL. There they are, mentally counting heads, keeping track of every single individual they see working under your employment. They will often speak to them to determine there hours worked.

The Auditor can now go back to your NYS-45 Tax filings to figure out exactly how many employees you claim to employ, the calm before the storm. Until the day you as the business owner is made aware of a Department of Labor Audit, yeah, not exactly the news you wanted to hear.

If only you as the owner had just listened to your accountant, why oh why did I not change my ways! Well lucky for you this is just a short story illustrates how simply this could happen to you and your business and what you need to do to avoid it.

And in this case, BECAUSE we made our client aware of the imminent dangers that lay ahead, they made the correct changes and avoided a huge assessment, having had to only pay a small Unemployment Insurance assessment.

Hopefully, we have in a colorful way informed and convinced you to change for the better, if you just make some changes, the state may just decide to skip your audit or in the worst case scenario not be in a position to make a large assessment. Remember, without the adequate needs an employer is at the mercy of a DOL auditor.

REMEMBER

Be prepared, don’t keep your head in the sand and listen to your accountant as the times are a changing.

The Tax Payer Bill of Rights

Most people think that they are at the mercy of the IRS. They think they have no rights whatsoever – but they are wrong. Taxpayers have always had certain rights in dealing with the Internal Revenue Service, and recently these rights were formalized and codified. As IRS Commissioner John Koskinen noted, these rights existed for a long time in the tax code but it was never clear to most people what they were until now.

The Taxpayer Bill of Rights breaks down your rights into 10 easy-to-understand pieces. Let’s look at a summary of the 10 rights.

The Right to Be Informed

You have the right to know what you need to do to comply with tax laws. This means you are entitled to clear explanations of laws, procedures, instructions, publications and notices. You are also entitled to clear information about decisions regarding your personal case.

The Right to Quality Service

You have the right to professional service, including straightforward and courteous dealings with the IRS. You also are entitled to speak to a supervisor about inadequate service.

The Right to Pay No More than the Correct Amount of Tax

You only need to pay the actual amount you owe and never more than that amount. Furthermore, any and all payments are to be properly applied against the appropriate accounts or tax liabilities.

The Right to Challenge the IRS’ Position and Be Heard

You have the right to object to the IRS’ position and provide documentation in your defense. This means you are entitled to a timely consideration of your objections and to receive a detailed response if the IRS does not agree with your defense.

The Right to Appeal an IRS Decision in an Independent Forum

You have the right to a fair and impartial appeal process, including the right to receive a written response regarding the Office of Appeals’ decision.

The Right to Finality

You have the right to know the amount of time the IRS has to audit a tax year, collect a tax debt, and when the IRS has finished an audit.

The Right to Privacy

You have the right to expect that any IRS examination or inquiry will not be unnecessarily intrusive. You are entitled to a collection due process hearing before search and seizure of your property.

The Right to Confidentiality

Any information provided to the IRS will not be disclosed unless you authorize such disclosure. You can expect action to be taken against anyone who inappropriately uses or discloses your information.

The Right to Retain Representation

You can retain a representative of your choice to represent you in dealing with the IRS.

The Right to a Fair and Just Tax System

You can expect the tax system to fairly consider the facts and circumstances of your case. In cases of financial difficulty, taxpayers have the right to receive assistance from the Taxpayer Advocate Service.

The Taxpayer Bill of Rights will hopefully prove to be a step in the right direction of a more fair, efficient and transparent tax system for all taxpayers.
 

Please contact us if you have any questions about the information in this article.

Best regards,
James Diapoules and Marvin Feinstein