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Getting Your Tax Return Done - in These Crazy Times

2017-03-13 by Eva Rosenberg

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Today TaxMama® wants to talk to you about getting your tax returns done – and where to get help.

 

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Dear Friends and Family,

It’s the height of tax season. And this year, there is a lot of confusion about a variety of issues. More than ever, you may need the help of a tax professional. Where can you get help preparing your tax returns?

Did you know that only 3 states actually have testing, licensing and continuing education requirements for tax professionals? Yup! Only California, Maryland and Oregon. The other 47 states, DC, and US territories have nothing. In fact, there are over 400,000 tax preparers registered to file tax returns electronically who are unregulated (over 57% of all preparers).

So how can you ensure that your tax professional IS a professional and is up-to-date on current tax laws, especially in states without licensing?

First, start with a credentialed tax professional – there are three: Enrolled Agents, Certified Public Accountants, and Tax Attorneys. Then there are the licensed tax pros in CA, MD and OR.

To encourage the uncredentialed tax pros to take classes and to stay up-to-date, the IRS established a voluntary program. After completing 16-18 hours of courses, and for some candidates, a 100-question annual examination, they can get an Annual Filing Season Program (AFSP) Record of Completion. Only 50,951 tax pros out of the 400,000 tax pros without credentials have taken the courses. That means, over half the tax pros in the country have no license, and might not have bothered to keep up with changing tax laws.

The IRS’s directory of tax professionals will help you look up your tax pro. You will be able to see if their license, credential or AFSP is in good standing. You will be able to locate them by name or ZIP code. But you will not find and address or contact information for them. (The 350,000+ unlicensed and un-AFSP’d tax pros are not in the directory.) https://irs.treasury.gov/rpo/rpo.jsf

How do you find the right person to help you? And which is right for you?

Enrolled agents (EAs) are tax specialists licensed to represent taxpayers before the IRS. The EA credential allows them to work anywhere in the nation. For tax planning and tax debt issues, bookkeeping and payroll, this is your best choice. You can find them at the National Association of Enrolled Agents (NAEA), http://taxexpert.naea.org/

Certified public accountants (CPAs) are authorized to perform certified audits and issue financial statements. If you have a complex business and need much more than just tax returns – work with a CPA. You can find them the American Institute of Certified Public Accountants (AICPA), http://www.aicpa.org/feedback/shortfb.htm

Tax Attorneys are excellent choices if you need to create trusts, set up contracts and minutes, or deal with courts or criminal issues. They are usually too expensive for routine tax returns. You can find them at the American Bar Association http://www.americanbar.org

To decide if you’re better off preparing your own tax return, or working with a tax pro, read chapters 3 and 4 of Deduct Everything! http://deducteverythingbook.com/

If you’re in business, you will find more details about building an advisory team in chapter 1 of Small Business Taxes Made Easy. http://yourbusinessbible.com/

Please drop by MarketWatch.com and the TaxWatch columns for more tips.

To make comments and toss in your own ideas, please drop into the TaxQuips Forum.

And remember, you can find answers to all kinds of questions about tax filing and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the TaxQuips Forum.

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TaxMama’s TaxQuips Highlights of Trump Tax Plan

2016-11-09 by Eva Rosenberg

Today TaxMama® wants to give you an advance peek on what you can expect from a Donald Trump tax plan, coming to a Congress near you!

To read the details, please drop by here:
TaxMama.com

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He Who Hesitates is Lost - or - Expired Refunds

2016-08-09 by Eva Rosenberg

busy Today TaxMama® hears from several people in the TaxQuips Forum with questions about expired refunds. Let me summarize. “I faced a hardship and didn’t file tax returns for several years. Now, I learn that I cannot get my refunds for all those years. Can you help?”

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Dear Friends and Family,

My answers to Dustin and to DParker don’t bring much hope.

They do have heartbreaking stories. And I truly wish I had a solution.

But here’s the problem. Even the IRS doesn’t have discretionary control over this matter. These r[s3audio s3url=”http://taxmama.audioacrobat.com/download/taxmama-Expired_Refunds.mp3” /]efunds that have expired, due to the statute of limitations, are controlled by laws passed by Congress – they folks you vote for. You need to get in touch with your legislators to get them to make the law more sympathetic.

The tax code doesn’t provide a way to get those refunds from closed years. When we talk about a ” statute of limitations,” the word “statute” means LAW – in this case IRC 6511.

For future reference, please don’t put off filing your tax returns – no matter how sick or depressed you are. Family and friends, please keep an eye on those you love and help file their tax returns. They don’t need to be totally accurate. If some information is frustratingly elusive – make good estimates and attached a statement to the tax return that this has been done. After all, you have three years to correct the tax return. In the meantime, you save the refund for that year – which would otherwise be lost forever.

What can you do if it IS lost? There IS one thing I would try. You have nothing to lose.
Contact the Taxpayer Advocate Service and see if there is any way they can help you. Sometimes, in extreme situations, they can pull a rabbit out of a hat. And their service is free. I truly wish you-all luck!

To see the rest of this discussion, please drop into the TaxQuips Forum.

And remember, you can find answers to all kinds of questions about unfiled tax returns and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum

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Wasted Refunds

2016-04-04 by Eva Rosenberg


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Today TaxMama® wants to bring wasted refunds to your attention. The IRS keeps sending out announcements that refunds are expiring. People keep ignoring those announcements, thinking that this doesn’t apply to them.

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Last week’s TaxWatch column at MarketWatch.com tells some stories of people who lost their refunds because…shrug, I just can’t be bothered to file right now.
Please – read that column and pass it on to your friends or family members who aren’t filing.

Let me tell you another story – about someone making close to minimum wage, who also just didn’t bother. One day, this fellow got disabled. He wasn’t in a position to collect either disability or unemployment (OK…through sheer stupidity.) But we were able to persuade him to catch up on his previously un-filed returns (there were at least 7 years unfiled). For the years that were still open, we were able to get him quick refunds of over $3000 . But…for the other years…all gone. And let me tell you, when you are unemployed, sick and have no income coming in, that lost $4000 can make a big difference! It took another 2-3 years before he was able to resolve his medical issues and start getting SSI and VA help. (Don’t ask.)

Every tax professional I know has more stories. So do I…like the doctor living in his car with his two children; or the dementia victim whose bank moved and he couldn’t pay his mortgage or file his taxes, or…folks who will break your heart.

Please, don’t be one of those statistics. Please, FILE YOUR UNFILED RETURNS! Or help someone you love catch up.

Remember, you can find answers to all kinds of questions about tax refunds and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

And Remember, if YOU have questions, please post them into the TaxQuips Forum – just click on Ask A Question. (Family members – use this.)

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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Protect Yourself from the Dirty Dozen Tax Scams

2013-03-29 by

The IRS’s annual ‘Dirty Dozen’ list includes common tax scams that often peak during the tax filing season. The IRS recommends that taxpayers be aware so they can protect themselves against claims that sound too good to be true. Taxpayers who buy into illegal tax scams can end up facing significant penalties and interest and even criminal prosecution.

The tax scams that made the Dirty Dozen list this filing season are:

Identity Theft. Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Combating identity theft and refund fraud is a top priority for the IRS. The IRS’s ID theft strategy focuses on prevention, detection and victim assistance. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft. This compares to $14 billion in 2011. Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should immediately contact the IRS so the agency can take action to secure their tax account. If you have received a notice from the IRS, call the phone number on the notice. You may also call the IRS’s Identity Protection Specialized Unit at 800-908-4490. Find more information on the identity protection page on IRS.gov.

Phishing. Phishing typically involves an unsolicited email or a fake website that seems legitimate but lures victims into providing personal and financial information. Once scammers obtain that information, they can commit identity theft or financial theft. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. If you receive an unsolicited email that appears to be from the IRS, send it to phishing@irs.gov.

Return Preparer Fraud. Although most return preparers are reputable and provide good service, you should choose carefully when hiring someone to prepare your tax return. Only use a preparer who signs the return they prepare for you and enters their IRS Preparer Tax Identification Number (PTIN). For tips about choosing a preparer, visit www.irs.gov/chooseataxpro.

Hiding Income Offshore. One form of tax evasion is hiding income in offshore accounts. This includes using debit cards, credit cards or wire transfers to access those funds. While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements taxpayers need to fulfill. Failing to comply can lead to penalties or criminal prosecution. Visit IRS.gov for more information on the Voluntary Disclosure Program.
“Free Money” from the IRS & Tax Scams Involving Social Security. Beware of scammers who prey on people with low income, the elderly and church members around the country. Scammers use flyers and ads with bogus promises of refunds that don’t exist. The schemes target people who have little or no income and normally don’t have to file a tax return. In some cases, a victim may be due a legitimate tax credit or refund but scammers fraudulently inflate income or use other false information to file a return to obtain a larger refund. By the time people find out the IRS has rejected their claim, the promoters are long gone.

Impersonation of Charitable Organizations. Following major disasters, it’s common for scam artists to impersonate charities to get money or personal information from well-intentioned people. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. Taxpayers need to be sure they donate to recognized charities.

False/Inflated Income and Expenses. Falsely claiming income you did not earn or expenses you did not pay in order to get larger refundable tax credits is tax fraud. This includes false claims for the Earned Income Tax Credit. In many cases the taxpayer ends up repaying the refund, including penalties and interest. In some cases the taxpayer faces criminal prosecution. In one particular scam, taxpayers file excessive claims for the fuel tax credit. Fraud involving the fuel tax credit is a frivolous claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims. In this scam, the perpetrator files a fake information return, such as a Form 1099-OID, to justify a false refund claim.

Frivolous Arguments. Promoters of frivolous schemes advise taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These are false arguments that the courts have consistently thrown out. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages. Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, scammers use a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 to improperly reduce taxable income to zero. Filing this type of return can result in a $5,000 penalty.

Disguised Corporate Ownership. Scammers improperly use third parties form corporations that hide the true ownership of the business. They help dishonest individuals underreport income, claim fake deductions and avoid filing tax returns. They also facilitate money laundering and other financial crimes.

Misuse of Trusts. There are legitimate uses of trusts in tax and estate planning. But some questionable transactions promise to reduce the amount of income that is subject to tax, offer deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits. They primarily help avoid taxes and hide assets from creditors, including the IRS.

For more on the Dirty Dozen, see IRS news release IR-2013-33.

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