Are You Prepared for Tax Season 2015?

Posted on January 22, 2015 by Kursti Nakagawa

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!

Out with the Old……Extended Tax Provisions 2014

Posted on January 14, 2014 by Kursti Nakagawa

Extended Tax Provisions 2014 – It is common knowledge that tax law is constantly changing and it seems that Tax Year 2014 will be no exception. Every year the government makes some changes to the tax code in an attempt to make it fit the current economic climate. These changes include doing away with existing tax laws, initiating new laws and either renewing temporary tax provisions or allowing them to expire. When the American Taxpayer Relief Act was signed into law in January of 2013, it established some new tax laws as well as extending some temporary provisions through the end of the year. Fifty-five of those temporary provisions expired on December 31^st. Although some of those measures are sure to be renewed, there is no telling which ones that will be or when the renewals will take place.

Listed below are a few of the changes that are on the books for Tax Year 2014:

Affordable Health Care Penalty Taxpayers who fail to buy a health insurance plan before the enrollment deadline of March 31, 2014 will be assessed a penalty equal to either 1% of the yearly household income or a set amount for each uninsured individual or family, whichever is higher. The penalty will be due with the filing of the 2014 tax return.
Joint Tax Returns for Same-Sex Couples Starting in 2014 with returns, same sex couples will file their federal tax returns either jointly or as married filing separately, regardless of whether they live in a state that recognizes same-sex marriage. However, if they live in a state that does not recognize same-sex unions they will have to file separate state returns as single taxpayers.
Regulation of Tax Preparers A final decision on the regulation of professional taxpayers will probably be made some time in 2014. The IRS wants tax preparers who are not already licensed CPAs, Enrolled Agents or attorneys to be required to pass a competency exam and complete continuing education hours. However, a lawsuit has been filed against the IRS with reference to this issue and an appellate court decision is now pending.
Tax Brackets and Personal Exemption Income tax brackets have been widened for 2014 and the personal exemption amount has been increased slightly, from $3900 to $3950.

If you have questions about changes to the tax code for 2014 or need help resolving a tax debt that you are unable to pay, our experienced professionals can provide you with the help you are looking for. Visit us today at www.professionaltaxresolution.com to find out more about our services or call us at 877.889.6527 to set up a free, no obligation consultation. With over 16 years in the business of resolving tax debt, we have the experience to know which settlement option will be the best fit for your specific set of circumstances.

End of the Year Tax Planning for Investors

Posted on December 17, 2013 by Kursti Nakagawa

Year End Investment Planning

Although tax planning is important for investors year round, it is most important as the calendar year draws to a close. While investment decisions are made throughout the year, they are particularly critical at year end because of the potential tax implications. The United States tax code provides many tax planning opportunities for investors but the majority neglect to use what is available to their maximum advantage. The failure of investors to implement end of the year tax planning strategies (summarized below) can have a significant negative impact on overall investment performance.

Realizing Capital Losses

Consider the following points related to selling investments at a loss before the end of the year:

Up to $3000 in capital losses can be used to offset ordinary income.
Capital losses can be strategically paired with capital gains to lighten the tax burden of selling other investments at a profit.
Any capital loss in excess of the $3000 limit that can be used to offset ordinary income that is not used to offset capital gains can be carried forward into the next tax year.
Short term capital losses are paired against short term gains and long term losses against long term gains until either category is used up. Once that happens, leftover losses and gains are paired against each other.
A taxpayer who projects a significant decrease in income for the next calendar year might be wise to realize capital losses in the current year so that the tax benefits of those losses will be applied at the higher tax bracket.

Realizing Capital Gains

Consider the following points related to selling investments for a gain before the end of the year:

Short term capital gains (gains on investments held less than 12 months) are taxed at a taxpayer’s ordinary income tax rate which is anywhere from 0% to 39.6% (the new top rate in 2013). In addition, those taxpayers who have an adjusted gross income of over $200,000 or $250,000 for a married couple have an additional Net Investment Income Tax of 3.8% added to the 39.6% for a total tax rate of 43.4%. With this in mind, investors may want to defer selling assets that would be subject to short term capital gains rates and hold them until the lower long term rates would apply.
Taxpayers who are in the 10% and 15% tax brackets pay 0% tax on long term capital gains and may want to think about realizing any such gains while the 0% rate still applies. On the other hand, those who are in the top tax bracket currently pay 20% on long term gains plus the Net Income Tax surcharge of 3.8% for a total or 23.8%. Taxpayers in this category may want to think twice about realizing long term gains at the end of the year unless they have losses to offset them.
A taxpayer who projects a significant increase in income for the next calendar year might be wise to realize capital gains in the current year so that the tax consequences of those gains will be applied at the lower tax bracket.

In addition to decisions related to realizing capital gains and losses, end of year tax planning for investors may involve such other considerations as gifting of assets, Roth conversions and allocation of assets between dividend and non-dividend paying stocks. While investment decisions are always important, they are most critical as the tax year closes because they determine the final balance sheet that will be carried over into tax season. Proper tax planning, especially at this time of year, can a very important factor in determining what percentage of the yearly investment returns are retained in the portfolio and what percentage must be passed on to the government.

If you have questions relating to capital gains or losses ,asset allocation for tax purposes, Roth conversions, gifting of assets or any other tax related investment topic, our certified tax professionals can provide you with the answers you are looking for. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. We have a thorough understanding of tax law together with the experience to know how to apply it to its maximum advantage for your specific set of circumstances.

Family Finances: Tax Settlement, Innocent Spouse Relief, and Injured Spouse Relief

Posted on October 24, 2013 by Kursti Nakagawa

Family Finances

A recent study by Fidelity Investments revealed that individuals often lack adequate knowledge of family finances. The results of the study showed that a surprising number of marriage partners have insufficient information about important financial matters such as insurance policies, investment accounts, physical assets, beneficiary designations and income taxes, among other things. While this lack of awareness may not be a problem when life is going smoothly, it can have unforeseen consequences there is a bump in the road. In the face of a death, a divorce or a sudden disability, a spouse who does not have a satisfactory understanding of family finances can find themselves at a serious disadvantage.

The results of the recent Fidelity study showed that, while most couples reported that they communicated effectively about financial matters, a much smaller percentage said that they shared daily financial decisions. Less than half of the retired couples surveyed agreed on what type of lifestyle they expected to lead in retirement and only a slightly larger percentage had an acceptable level of information about retirement planning. Moreover, only 28 % of the couples surveyed said that either spouse could single-handedly manage the retirement finances.

Although it is natural to postpone a discussion of family finances when there is no immediate problem, it is important to be prepared for the uncertainty of the future. An unforeseen event can leave either partner with complete financial responsibility. With this in mind, financially responsible couples would be well advised to take the following steps:

Inventory Investment Accounts
Inventory Physical Assets
Prioritize Investments to be Tapped for Retirement
Discuss Income Tax Returns and Related Tax Issues
Prepare Wills with Agreed Upon Financial Conditions

Although the discussion of topics such as those outlined above can be stressful and uncomfortable, not doing so may well leave either spouse in an unfortunate situation. Consider, for example, the spouse who is left with a very aggressive investment portfolio upon his or her mate’s death. If the surviving spouse has no knowledge of the type of investments in the portfolio, they could very well suffer a significant loss if the market suddenly takes a sharp downward turn. Similarly, consider the predicament of a spouse who has no knowledge of his or her mate’s tax obligations. Faced with an unexpected death or divorce, the surviving spouse could be left with a tax debt about which they have no knowledge. Although tax this situation can be handled with a tax settlement agreement in the form of Injured Spouse Relief or Innocent Spouse Relief, it certainly not a situation anyone would chose to face.

If you have questions about Injured Spouse Relief or Innocent Spouse Relief, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Visit us today at www.professionaltaxresolution.com for more information about these and other tax settlement options. Complete our online request form or call us at 877.889.6527 to receive a free, no obligation consultation.

Tax Breaks: Same-Sex Marriages will Receive Equality Across the Entire Nation

Posted on September 4, 2013 by Kursti Nakagawa

Tax Breaks for Same Sex Marriages Across the Nation

A new ruling has declared tax breaks for same sex marriages since they will now receive equality across the entire nation.The Defense of Marriage Act (DOMA), enacted by Bill Clinton in 1996, was terminated this summer. This act, which allowed same-sex couples to receive the same tax benefits as heterosexual couples, was recently repealed by a 5-4 majority vote of the Supreme Court. While this vote may demonstrate a shift in the opinion of the American people, it also provides certain fiscal advantages for gay couples. Previously, only states that recognized gay marriage allowed same-sex couples to file federal tax returns as married couples. Now, however, gay partners are permitted by law to file federal returns as married couples in any state regardless of whether that state recognizes same-sex marriage.

The repealing of the Defense of Marriage Act raises questions as to how states will treat same-sex marriage. While some states may not acknowledge these unions, they are now forced to give gay couples the same federal tax benefits as straight couples. Same-sex couples are now able to file their federal returns, either jointly or separately, as married couples and are therefore entitled to the same tax benefits. However, if their state of residence does not recognize gay marriage, then the couple will be unable to file their state return as a married couple. Currently, only Washington D.C. and 13 states recognize gay marriage.

These new tax advantages extend beyond this year’s return. Same-sex couples can go all the way back to the year 2010 to receive their new-found benefits. To file one of these refund claims, taxpayers are instructed to use Form 1040. In addition the tax benefits already described, gay couples no longer have to pay federal income tax on the health insurance benefits received by one spouse when that spouse is claimed as a dependent on their partner’s plan.

Besides the obvious tax savings that are now available to gay couples, there are other small bonuses that come with the IRS acknowledgement of same-sex couples. Such couples can now transfer unlimited funds between one another whereas the allowable amount was previously restricted. In addition, they can now “gift split” which means that each spouse can gift up to $14,000 to a particular recipient for a total of $28,000. Lastly, gay couples are able to make use of “portability.” This enables widows and widowers to add their spouse’s unused estate tax exclusion to their exclusion. However, in order to use the “portability” benefit, estate tax returns must be filed within nine months of a decedent’s death.

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