Tips for Taxpayers Who Owe Taxes

IRS Special Edition Tax Tip 2017-09

The IRS offers a variety of payment options where taxpayers can pay immediately or arrange to pay in installments. Those who receive a bill from the IRS should not ignore it. A delay may cost more in the end. As more time passes, the more interest and penalties accumulate.

Here are some ways to make payments using IRS electronic payment options: 

  • Direct Pay. Pay tax bills directly from a checking or savings account free with IRS Direct Pay. Taxpayers receive instant confirmation once they’ve made a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. Change or cancel a payment two business days before the scheduled payment date.
  • Credit or Debit Cards. Taxpayers can also pay their taxes by debit or credit card online, by phone or with a mobile device. A payment processor will process payments.  The IRS does not charge a fee but convenience fees apply and vary by processor.

    Those wishing to use a mobile devise can access the IRS2Go app to pay with either Direct Pay or debit or credit card. IRS2Go is the official mobile app of the IRS. Download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.

  • Installment Agreement. Taxpayers, who are unable to pay their tax debt immediately, may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. Apply for an installment agreement with the Online Payment Agreement tool.

    Who’s eligible to apply for a monthly installment agreement online?

    • Individuals who owe $50,000 or less in combined  tax, penalties and interest and have filed all required returns
    • Businesses that owe $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities and have filed all required returns

Those who owe taxes are reminded to pay as much as they can as soon as possible to minimize interest and penalties. Visit IRS.gov/payments for all payment options.

Why Should You FileYour Taxes

Even if you do not have to file, you should file a tax return if you can get money back. For example, you should file if one of the following applies.

  1. You had income tax withheld from your pay.
  2. You made estimated tax payments for the year or had any of your overpayment for last year applied to this year’s estimated tax.
  3. You qualify for the earned income credit.
  4. Earned Income Credit (EIC).
  5. You qualify for the additional child tax credit. See the instructions for the tax form you file (Form 1040 or 1040A) for more information.
  6. You qualify for the refundable American opportunity education credit.
  7. You qualify for the health coverage tax credit. .
  8. You qualify for the refundable credit for prior year minimum tax.
  9. You qualify for the credit for federal tax on fuels.

There are many unclaimed tax refunds, may be one of them is yours?

You can file your taxes and claim your tax return back up to 3 years and then after guess what -it is all belongs to the government.

Hurry up! Call us now! 801-822-0966

Form 1099-B received. Even if you are not required to file a return, you should consider filing if all of the following apply.

  • You received a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions (or substitute statement).
  • The amount in box 2a of Form 1099-B (or substitute statement), when added to your other gross income, means you have to file a tax return .
  • Box 3 of Form 1099-B (or substitute statement) is blank.

In this case, filing a return may keep you from getting a notice from the IRS.

2012 IRS Standard Mileage Rate:

  • 55.5 cents per mile for business miles
  • 23 cents per mile for medical or moving purposes
  • 14 cents per mile in service of charitable organizations.

The business mileage rate and charitable driving remain the same as the rate in effect or the last six months of 2011; the medical/moving rate has decreased .5 cents.

To calculate the tax deduction for use of a vehicle for business purposes, you must first decide whether to use the standard mileage rate or actual expenses. There are several variables involved with this decision, but the most important is whether you use the vehicle more or less than 50% for business purposes.

If You Drive Less Than 50% for Business, you can use the standard deduction to keep things simple and easy. Keep track of all your miles driven and multiply by the current mileage rates for the year.

If You Drive More Than 50% for Business. you may be able to increase your deduction by using actual expenses. You will need to keep track of all expenses with supporting documentation.

But still your specific circumstances may vary, so the best way is to check with your tax professional before you take the deduction.

The actual calculation of tax-deductible business driving expenses, using the standard mileage rate, is to multiply the number of miles driven for business use by the standard rate in effect at the time. Personal miles are never tax-deductible, so these should not be included in the calculation.

 

New in home office duduction 2013

        The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses owners. 

The new option provides eligible taxpayers an easier path to claiming the home office deduction.  
         Taxpayers claiming the optional deduction will complete a significantly simplified form.
         Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A.
          These deductions need not be allocated between personal and business use, as is required under the regular method.
          Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.
          Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

What income is not taxable income?

While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.   
 To ensure taxpayers are familiar with the difference between taxable and non-taxable income, here are common examples of items that are not included in your income:

•Adoption Expense Reimbursements for qualifying expenses
 
•Child support payments
 
•Gifts, bequests and inheritances ( not full amount so)
 
•Workers’ compensation benefits
 
•Meals and Lodging for the convenience of your employer
 
•Compensatory Damages awarded for physical injury or physical sickness
 
•Welfare Benefits
 
•Cash Rebates from a dealer or manufacturer
 
Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your income are:

•   Life Insurance If you surrender a life insurance policy for  cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
•  Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.  
•  Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.  
All other items-including income such as wages, salaries and tips-must be included in your income unless it is specifically excluded by law.

Can You Take a Home Office Deduction?

If you plan to run your small business out of your home you may be tempted to “write-off” many of your household expenses. But how do you know what is deductible and what is not? The IRS has some advice that may help answer the question: “Can I take a Home Office Deduction?”
Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible.
However, if you use part of your home for business purposes you may be able to take a home office deduction. Expenses that can be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation.
In order to claim a business deduction, you must use part of your home:

Exclusively and regularly as your principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home; or

On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.

In addition, if you work as an employee you can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer.
“Exclusive use” means a specific area of the home is used only for trade or business. “Regular use” means the area is used regularly for trade or business. Incidental or occasional business use is not regular use.
Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.
Example: An attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession, so a business deduction cannot be claimed for its use.

Moving Expenses Related to a New Job

    Did you recently move to another city for a new job or because you old job is now at a new location? A tax break may be coming your way.
     How far you moved and the amount of time you spend on the job will have a major impact on whether you qualify for the tax break. Moves that are only short hops and jobs that are short-term or part-time generally do not qualify. However, if you can satisfy the distance and time tests then job-related moving expenses that you incur may be tax deductible.
         You will meet the distance test if your new workplace is at least 50 miles further from your former home than your previous workplace was from that home.  For example, if your old job was 5 miles from your former home, your new job must be at least 55 miles from that home. 
      The time test requires you work full-time for at least 39 weeks during the 12 months immediately after your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move.  You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required.
      Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
Reasonable moving expenses are deductible and include the costs of moving your household goods and personal effects to your new home. You can also deduct the expenses of traveling to your new home, including lodging costs.
     Meals eaten while in transit between your old and new homes are not deductible as moving expenses.  No part of the purchase price of your new home may be deducted as a moving expense.  You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income.For more information contact our office at :
97 N Center St.

American Fork UY 84003 

801-822-0966

Keeping Good Tax Records

IRS speaking 

In a tax emergency, would you be ready?  Well organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later. If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.

Mortgage Workouts

Mortgage Workouts, Tax-Free for Many Homeowners

There is now tax relief for struggling homeowners. If your mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 you may be able to claim special tax relief by filling out Form 982 and attaching it to your federal income tax return for that year.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.  

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

 

If your debt is reduced or eliminated you will receive a year-end statement (Form 1099-C) from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

 

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven. 

Charitable Contribution

New Rules for Charitable Contribution 2008

Did you make a cash contribution to your favorite charity? Have you recently spent a weekend cleaning stuff out of your garage or basement that you then donated to a local charity? 

Charitable contributions can be tax deductible, but you must have the proper records to support your deduction.  Due to the Pension Protection Act of 2006 the rules on recordkeeping for charitable contributions became a little more strict beginning in January 2007.  

To deduct a charitable cash donation, regardless of the amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank or credit union statements containing the name of the charity, the date and the amount of the contribution.  

Under the previous rules, records such as personal bank registers, diaries or notes made around the time of the donation could often be used as evidence of cash donations. Personal records like this are no longer sufficient.  

Here are some additional tips to help you deduct your charitable contributions on your 2008 federal tax return.  

             Charitable contributions are deductible only if you itemize deductions using Form 1040.

             Contributions must be made to a qualified organization.

             Used clothing and household items such as furniture, linens and appliances must be in good used condition.

             Vehicle donations are subject to special rules.

             To deduct charitable contributions of items valued at $250 or more you must have a written acknowledgment from the    qualified organization.

             To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.

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