Five Tax Filing Predictions for 2015

IRS audited 0.86 percent of all individual income tax returns last year, the lowest coverage rate since 2004. And The Washington Post reports that IRS service is, well, abysmal. 

IRS National Taxpayer Advocate Nina Oldon testified that as of February 14, "only 43 percent of the people who called IRS...were able to reach a human being." So, where does this leave us this tax season? The National Association of Enrolled Agents (NAEA), the association that represents the federally licensed tax practitioners who hold the highest credential awarded by the IRS, has released some prognostications for 2015.

1)   The number of calls being answered by an IRS staffer is not going to improve. Same as last year, there were budget cuts at IRS--$346 million worth this time! The level of service is heading down and the wait times are heading up.

2)   The complexity of returns is increasing. The Affordable Care Act (ACA) has thrown some curves into tax return preparation that even experienced preparers have had to dig into to learn. When NAEA offered a three-part Webinar on the effect of the ACA on taxes, members signed up in droves.

3)   In light of the slow response times from IRS and the complexity of returns, more people than ever are going to be hiring tax professionals. IRS has published directories on the IRS.gov site where taxpayers can find licensed tax preparers, such as Enrolled Agents and CPAs, and the NAEA "Find an EA" directory on www.naea.org allows taxpayers to search by location, language specialty, and more.

4)   We may have thought identity theft was at an all time high last year, but the cyber villain hacks affecting Target, Anthem and other companies have released private information such as names, addresses and Social Security numbers into the wrong hands allowing crooks to file taxes and steal other people's refunds. This is going to be a bad year for tax refund theft.

5)   The beleaguered IRS will do what it must: meet projected refund times. Like last year, the IRS expects to issue more than 9 out of 10 refunds within 21 days. 

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Taxes Done? The Perfect Time to Contact a Tax Pro

By the time most of us finish our taxes, we don’t want to think about them again for a long while. However, that’s exactly what financially savvy taxpayers do!  By taking a look at your tax situation before the year is over, you can take advantage of every legal means to reduce the amount you’ll pay in taxes next year.

If you know in advance of looming life changes, events such as marriage, divorce or remarriage, you need to consider the affect of these changes to your tax status. The exemptions claimed on your W-4 may need to be adjusted to prevent an unexpected tax bill. If you are going through a divorce, discussing the tax ramifications of dependents, alimony, childcare or division of property before signing anything is extremely helpful. Divorce decrees often contain wording that has a different tax result than what was intended. Call on your tax professional for a review. 

A change in family size with the birth or adoption of a child can also affect your tax return. And, as children get older, you may lose certain credits.

A career change is another life change that might affect your tax situation. If you have pension opportunities that you are not sure about or excludable benefits such as cafeteria plans and dependent care benefits to choose from, your tax professional can help you evaluate your options. A career change might also increase income, shifting you into a higher tax bracket or changing the work-related deductions available, making a change in withholding a possibility.

And, if you find yourself in financial trouble, bankruptcy may be the option you choose. If so, there are tax implications you should be aware of and options that may be available, so contact your tax professional. Time is of the essence if you are in a bankruptcy situation.

Did your company present you with an early retirement proposal or are you considering an early retirement? This event definitely changes your life and your tax situation! It’s better to discuss the options before you act rather than face a large tax bill because you didn’t. Know the tax implications of your decision: check with your tax professional to make sure you are not triggering an early withdrawal penalty or causing Social Security to be taxable.

Of course, it’s important that you’re speaking with someone knowledgeable who can be trusted. The person doing your taxes should be registered with IRS, have passed testing on taxation, and be required to complete continuing education to keep up with the ever-changing tax code. Enrolled agents are licensed by the U.S. Department of Treasury, must report continuing education credits to IRS in order to maintain their licenses and are bound by a code of ethics. 

Last, but not least, if you receive a letter from the IRS, call us! We have two Enrolled Agents in our office. Do not ignore it or toss it in a drawer hoping it will disappear. Putting off action only creates more letters and possibly, larger penalties.

The key word is communication: keep your tax professional informed of any changes in your life because they may change your tax situation.

About Enrolled Agents

Enrolled agents (EAs) are America’s tax experts. They are the only federally-licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.  

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz

Bartering for Products or Services

Trading one product or service for another has become increasingly popular in recent years. If you barter, you should know that the value of products or services from bartering is taxable income. This is true even if you are not in business.

Here are some things you should know about bartering per the IRS:

·        Bartering income. Both parties must report the fair market value of the product or service they get as income on their tax return.

·        Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some operate out of an office and others over the internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. Exchanges must give a copy of the form to its members who barter each year. They must also file a copy with the IRS.

·        Trade Dollars. Exchanges trade barter or trade dollars as their unit of exchange in most cases. Barter and trade dollars are the same as U.S. currency for tax purposes. If you earn trade and barter dollars, you must report the amount you earn on your tax return.

·        Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes or excise taxes on their bartering income.

·        Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business. 

For more information, contact Elite Bookkeeping & Tax Services at (800) 416-3820 or (775) 884-6188 Address: 123 West Nye Lane, Suite 103, Carson City, NV 89706. Visit our website at www.elitebookkeeping.biz