Some Critical Year-End Tax Considerations

Posted on December 9, 2015 by Kursti Nakagawa

Year-End Tax Considerations

Very few important tax decisions have been passed down in 2015 and, with only a few weeks to go, it appears that we may move into the New Year with some important tax matters still unresolved. Some of the critical tax issues hanging in the balance as we move into 2016 are the tax extenders legislation, internet taxation and the licensing of tax preparers. All of these topics are in one stage or another of being discussed and considered by Congress but have not made it through the legislative system to be signed into law. With less than a month to go, it will be interesting to see if any of these measures are enacted before the end of the year.

One important tax measure that is on the hot seat this month is a renewal of the provisions of the bill officially titled the Tax Increase Prevention Act of 2014 (HR 5771). This bill, which included some very important bill tax breaks, officially expired on December 31, 2014. Although the Senate Finance Committee had said they would begin work on a new piece of legislation that would extend many of these provisions, they have yet to present their revisions. This means that, unless Congress acts quickly to extend these tax breaks and make them retroactive to January 1, 2015, they will not be available to individuals and businesses for the 2015 tax year. If this legislation is not extended, business will no longer have access to its 50% bonus depreciation provision or the increased expensing and investment ceiling limits of $500,000 and $2.5 million, respectively. Likewise, individual taxpayers will not be able to write off mortgage debt, deduct the premiums paid for private mortgage insurance or have the ability to use an itemized deduction for state and local sales taxes.

Another important tax issue in focus this month is the Internet Tax Freedom Act which is set to expire on December 11th. The taxing of internet access has been banned since 1997 but the law which prevents it is not a permanent one. This law, which has already been extended several times since its inception, is now set to expire this month. Although the House recently approved the Permanent Internet Tax freedom Act and the Senate followed with its version called the Internet Tax Freedom Forever Act, no further action has been taken to get this legislation signed into law.

In addition to the two tax issues outlined above, Congress is considering legislation that would require the licensing of tax preparers. After attempts by the Internal Revenue Service to require licensing failed in the court system, the Senate Finance committee agreed that they would act on the issue. Following this, member of the House of Representatives introduced a bill called the Tax Return Competency Act. However, the proposal, which is designed to help prevent tax fraud by screening individuals who provide tax preparation services, still sitting in committee. Although the IRS was hoping to have some type of legislation in place before the start of the 2016 tax season, only the time will tell whether this wish will become a reality.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Security Summit Focuses on Identity Theft

Posted on November 23, 2015 by Kursti Nakagawa

Security Summit Focuses on Identity Theft

In March of this year, all of the major players in the tax industry came together to focus on the problems of identity theft and tax refund fraud. Their aim was to have safeguards in place before the beginning of the 2016 filing season. This convocation, identified as the Security Summit, includes the IRS, state tax authorities, and representatives from the tax software and financial services industries. Tax Commissioner John Koskinen, who has called the Security Summit an “unprecedented effort,” maintains that income tax fraud “is not a battle the IRS can fight alone.” He went on to say that identity theft has “become a serious threat to the nation’s tax system” and one that must be dealt with aggressively.

Tax fraud has become an increasingly serious problem as the percentage of e-filed returns has multiplied. Currently, almost every business and tax professional, as well as a significant number of individual taxpayers, files electronically. With this increase in convenience, comes a whole host of associated problems surrounding the issues of taxpayer identification, the sharing of information and internet security. It is exactly these topics that are the focus of the Security Summit. According to remarks made by Koskinen at an October 20th press conference, the Security Summit “now covers virtually the entire population of taxpayers who e-file their tax returns.”

The Security Summit has made significant progress since their initial meeting in March. To date, they have identified and tested more than 20 security items related to the electronic filing of taxes. These items, which focus on all aspects of tax return and tax refund fraud, will be made available to both the IRS and State Tax Agencies to be used in the prevention of identity theft and are expected to be in place by the time the 2016 filing season opens. They target such things as the time it takes to produce a return and identifying instances where multiple returns are generated automatically. The Summit has announced that implementation of these measures is internal. While they will serve to enhance the security of the transmission process, they will not affect how taxes are filed.

In addition to measure designed to enhance the security of e-filed returns, the Security Summit has made recommendations in several other areas. In particular, the Tax Professional Work Group, which is one of the working committees of the larger effort, is investigating other means by which tax preparers themselves can contribute to the prevention of identity theft. On top of this, the United States Tax Commissioner has asked Congress to pass legislation requiring W-2s, 1099s and other information returns to be sent out earlier, thus allowing more time for the matching of these items with the information submitted on tax returns.

Focus on Trump’s Tax Plan

Posted on October 7, 2015 by Kursti Nakagawa

Focus on Trump’s Tax Plan

Republican presidential candidate Donald Trump recently proposed an innovative new tax plan that he maintains would simplify the tax code and reduce both individual and business taxes while, at the same time, remaining revenue neutral. With Trump currently the front-runner in several of the major polls, Americans were especially interested to hear what he had to say about income taxes. In a nutshell, his plan proposes simplifying the tax code by eliminating loopholes and reducing tax brackets, expanding the 0% income tax bracket for individuals, lowering taxes paid by businesses of all types and eliminating the estate tax.

Here are some of the key provisions of his tax plan:

 Simpler Tax Code

Trump’s plan would drastically simplify the tax code by reducing the number of tax brackets as well as eliminating numerous penalties and loopholes. His plan suggests reducing the current seven tax brackets to four (0%, 10%, 20% and 25 %) as well as eliminating such complicating items as the Alternative Minimum Tax and the marriage penalty, among other things. (https://chacc.co.uk/)

 Lower Tax Rates

The tax brackets suggested by Trump would lower the current income tax rates across he board. In addition, his the expansion of the 0% tax bracket to include individuals with an annual income of less than $25,000 and couples who earn less than $50,000 would esult in an increase in the rolls of those would not owe any income tax. With the institution of the Trump’s tax plan, over half of American individuals and families would not owe any tax at all!

 Reduction in Business Taxes

The Trump tax plan would cap the business tax rate at 15% for businesses of any size or business structure. This would include the self-employed, Partnerships, LLCs, S- Corporations and even large C-Corporations that currently pay more than double that rate. Trump maintains that making the United States more attractive to business by lowering the corporate income tax rate to 15% from the 35% rate that they are currently paying would go a long way toward deterring corporate inversions.

 Elimination of Estate Tax

Trump’s plan would completely eliminate the estate tax, thus allowing heirs to inherit estates of any size without having to pay income taxes. The argument in favor of this tax move is that income taxes are paid at the time funds are earned so taxing them again amounts to double taxation. Although the ceiling on the asset value of estates that can be passed down tax free has been increasing over the past ten years, from $1,500,000 in 2005 to $5,430,000 for the current year, Trump’s plan would amount to a significant tax savings for those who inherit estates in excess of this amount.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement https://professionaltaxresolution.com/services/back-taxes-delinquent-returns/ option will be the best fit for your specific set of circumstances.

The Tax Extension Option

Posted on April 12, 2015 by Kursti Nakagawa

The Tax Extension Option

Tax Extension is a Very Good Option!

You are not alone if you do not file your tax return on or before April 15th. Although this is the official deadline for the filing of personal tax returns, each year more and more people apply for an automatic six-month tax extension. The number of taxpayers requesting an extension increased from 11 million in 2011 to over 13 million in 2013, an increase of almost 20% over the two-year period! Another interesting fact is that, in tax year 2014, 25% of those individuals who had requested and extension were still working on their tax returns in September, just one month before the October 15^th extension deadline.

Although procrastination is one reason for requesting a tax extension, there are other factors that contribute to tax returns not getting filed by the April 15^th filing deadline. Several of those are highlighted below:

Lacking Necessary Tax Information
Although the deadline for the mailing of brokerage statements is February 15^th, the information these statements contain may not be correct. These initial statements often say that changes may be coming. The mailing of corrected 1099s can actually occur right up until April 15^th which does not give the taxpayer enough time to complete the tax return before the filing deadline.

Missing Required Tax Forms
If a taxpayer holds investments that are structured as partnerships, they must wait for the K-1 Forms that are based on partnership income. These partnerships must first finish their own tax returns which can be extended until September 15^th before these forms are generated. This means that partnership K-1 Forms could be in the hands of taxpayers as late as the month preceding the extension deadline.

Increased Complexity of Tax Code
The increased complexity of the tax code has made tax returns more and more difficult to complete which, in turn, has made it harder to get them submitted by the April 15^th tax filing deadline. In addition to the introduction of such changes as the net investment income tax, two different dividend tax rates and the alternative minimum tax, taxpayers must now report all overseas holdings. All of these changes require increased tax preparation time for certain categories of taxpayers which, in turn, has resulted in an increase in the number of requests for tax extensions.

Although filing a request for a tax extension does not relieve a taxpayer of the obligation to pay any taxes owed, it is definitely a better option than filing an incorrect or incomplete return. As long as the request for a tax extension is either e-filed or postmarked before the end of the day on April 15^th, it will allow the requesting taxpayer to avoid the late filing penalty which usually amounts to 5% of any unpaid tax balance for any month or partial month that the return is late. In addition, it will give the requesting individual six full months to submit a complete and correct tax return.

Are You Prepared for Tax Season 2015?

Posted on January 22, 2015 by Kursti Nakagawa

Are You Prepared for Tax Season 2015?

Are You Prepared for Tax Season 2015? While no one looks forward to tax season, there are a few simple ways get prepared and make the whole experience a little less painful. While it is best if some of these steps are taken before tax season starts, timing is not crucial. It is better to get organized now that Tax Season 2015 is underway rather than not get organized at all! The good thing is that each passing tax season presents a chance for the development of a new and better system of organization based on what has worked in the current year.

We offer the following suggestions to get Tax season 2015 off to a good start: First, set aside a large folder or envelope appropriately labeled Tax Documents. Keep the folder in safe spot and at easy reach for the filing of W-2s, 1099s and other tax related statements as soon as they arrive in the mail. This eliminates the possibility of misplacing an important tax document, the omission of which could flag your tax return for an IRS audit.

Next, gather all pertinent receipts and place them in an envelope in the Tax Documents folder. Although there is an advantage to gathering receipts all year long, it is better to start collecting them at the beginning of tax season rather than waiting until the tax filing deadline approaches if that has not been the case. Make a list of all possible tax deductions – no matter how large or how small. Even if you have not itemized in the past, it is important that you make a list of everything, from charitable contributions to business expenses, which might reduce the taxes you owe. If you keep this up, you will learn what items save you tax dollars and will become more tax savvy with each passing year. The following link contains some helpful information on tax breaks you won’t want to miss: https://professionaltaxresolution.com/blog/tax-breaks-dont-want-miss/.

Following this, consider major changes that might have occurred during the previous tax year. Got married /divorced? Perhaps had a baby? Did one of your children leave the house? These are all things to keep in mind, as they can and will affect your tax filing status. Outside of this, consider major changes to your financial situation that might have an impact on your tax return. If you would benefit by opening or contributing to a traditional IRA or Roth IRA, you can contribute and have those contributions included for the previous tax year up until April 15th of the following year.

Finally, come up with a plan for preparing your tax return. If you are planning to prepare the return yourself using a tax software program, be sure to review the programs available. Once that process is complete, secure and install the program you have selected so you are ready to start preparing your tax return as soon as you have received all of the necessary tax documents. If you are going to enlist the services of a CPA or another certified tax preparer, be sure you review that individual’s qualifications carefully. Read the following link to ensure that you know what to look for in the selection process: https://professionaltaxresolution.com/resources/select-tax-professional/ to ensure you have chosen the right tax preparer.

If all else fails, remember you can always file a tax extension if necessary. Although interest will accrue on any tax amounts due, there will be no other late filing consequences. This makes the tax extension a valuable safety net for taxpayers who are caught unprepared, have extenuating circumstances or are simply overwhelmed by their tax issues.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to your tax resolution options free of charge. For more information about our services, visit us today at https://professionaltaxresolution.com/ or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Happy Tax Filing 2015!