Why is the IRS Calling me?

If you have ever find yourself asking why the IRS is calling you, then this article is a must read. The first thing you have to know is that the IRS initiates most contact through regular mail delivered by the US Postal Service, so do me a favor and hang up the phone right now! Anytime anyone calls you with a harassing undertone or demands payment over the phone by any means should be a huge RED Flag!

There are special circumstances in which the IRS may call you or come to your home or business, if you have an outstanding tax bill or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. BUT even then, taxpayers will generally receive several letters from the IRS. If an IRS representative visits you, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. You have the right to ask to see both.

The IRS will not:

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  
  

This is a tricky one because believe it or not, I have already heard of some people getting scammed into buying iTunes gift cards - to the tune of $8,000. As crazy as this sounds, these scam artist have been quite successful at using this tactic. Now, it is easy to believe that that is not something that could ever happen to you; however, knowledge is power. If you had no idea that the person on the other line was a scam artist and they were threatening to ruin your life (literally) and take you for everything you had or have an officer come to your home and arrest you - there may be situations you could be fooled. There are scams going on all over the place asking 'smart' people to purchase gift cards for things such as taxes, hospital bills, bail money, debt collection, and utility bills. These scammers spend their entire day contemplating new ways to trick people into giving them their money.

Things to keep in mind

1. Scammers are mostly foreign.
2. Scammers may state the target's name, date of birth, and even Social Security number.
3. Early into the call, the scammer will try to elicit fear.
4. Scammers will tell a target that the best way to pay the tax debt is with an iTunes gift card.
5. The target is instructed to travel to a local retailer such as a drugstore and purchase iTunes gift cards to cover the total amount of tax owed, generally more than one card, since each has a limited maximum value.

•  Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.

The IRS will generally work with you to set up an installment agreement and you can even make revisions on current payment plans.

• Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.

The IRS doesn't initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. In addition, IRS does not threaten taxpayers with lawsuits, imprisonment or other enforcement action. Recognizing these telltale signs of a phishing or tax scam could save you from becoming a victim. See also: How to know it’s really the IRS calling or knocking on your door

Contact K.A.A. Data and Accounting for more information or if you have general questions.

Got money to Pay the IRS on April 18th?

So, you don’t have the money to pay the IRS by the April 18 deadline? Don’t make the dumb and expensive mistake of not filing your tax return. Instead, you should apply for an extension. 

You can defer paying your tax bill until later. But, you will be charged penalties and interest until the tax is filed and paid-in-full. Do not just sit on the couch and do nothing. If you do nothing you will be penalized to the tune of 5% of the unpaid balance each month, up to a total of 25% (after five months). After that, you’ll be charged interest at the 0.83% per month. If an extension is filed it will give you until October 17, 2017 to file. If you are still short come October you can then try to arrange for an installment agreement to pay your tax debt.  

See IRS Form 9465 for more details on how to apply for an installment agreement or talk with your Tax preparer, Ken A. Anaya about this form.

Did you make any Charitable Contributions in 2016?

It is best to have all charitable contributions in receipt form to back up the donation of $250 or more. The tax law says no write-off is allowed should you not have a receipt or letter from the organization. Cash donations of less than $250 made in 2016 are not allowed unless you retain either a bank record that proves the donation. Like for example, a canceled check, bank statement, or debit/credit card statement. Taking it one step-up is to have a written acknowledgment from the organization on their letterhead. Small undocumented cash contributions, such as money placed on church collection plates and cash dropped in red buckets (Salvation Army) at Christmas time won't qualify for write-offs. Get a receipt or have a canceled check from the charity to lock in your rightful tax break.

As for noncash charitable donations of used clothes and household items, you get no deduction unless the stuff is in “good” condition. “Household items” include furniture and furnishings, electronics, appliances, linens, and the like. In other words, you get no charitable write-off for donated junk. See IRS Form 8283 at www.irs.gov for more details on the rules for noncash donations. 

Talk with your Tax preparer: Ken A Anaya about this deduction.

Stop the guessing game of when you will receive your tax refund

Here is a simple chart to follow from the IRS compliments of K.A.A. Data Accounting & Tax.

You are losing money doing your own taxes!

Whether you are a Traditionalist, Baby Boomer, or a member of Generation X or Y. Many believe that doing their own taxes will save them money. If you have a very simple return with no deductions, then sure, filing is easy. Not real common, as there is always something going on (i.e. taking a night class could earn Educational Credits, withdrawing on an IRA or 401K after leaving an employer that didn't work out. Not knowing if you will be charged a penalty for early withdrawals. Or things get more complicated when you have kids, a house, business deductions, itemized deductions, stocks, bonds and other complicated financial transactions, doing a return yourself is almost never a good idea.) The income tax code contains 1.4 million words and no software purchased by the average middle-income taxpayer can identify which avenue to take you down. If anyone that has experienced this problem can relate. Taxpayers that try to save a buck and self-prepare, spend 5.4 billion hours each year trying to complete their own taxes. Not to scare anyone but tax audits are on the rise. In 2016 the total number of individual tax audits topped 1 million for the first time since 1999. According to the IRS that number will likely increase in the years to come. The IRS announced plans to add more than 2,000 positions to its audit force this year.

Currently, 1 in 107 returns are audited for those making over $100,000.00 and 1 in 63 returns are audited for those making less than $100,000.00. Money is not saved when doing your own taxes. The refund facts clearly show that $1,492 is the average refund for self-filers and $1,789 is the average refund for taxpayers using a tax professional. Hiring a tax professional not only saves you countless hours but will also save you hundreds of dollars. Contact us today! 

K.A.A Data Accounting & Tax Services, call (844) KAA-4TAX or visit our site: www.KAA4Tax.com. 

 

         


         

Tax Credit Helps Low and Moderate Income Workers Save for Retirement.

As the tax season approaches, the IRS reminds low- and moderate-income workers that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. Taxpayers have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

Employees who are unable to set aside money for this year may want to schedule their 2017 contributions soon, so their employer can begin withholding them in January.

Have questions visit our website at: www.kaa4tax.com or call (844) KAA-4Tax.

Did your ITIN Expire January 1, 2017?

Time has run out for many ITIN holders who need to file a federal income tax return in 2017 and want to avoid a long wait for a refund, according to the Internal Revenue Service.

An Individual Taxpayer Identification Number (ITIN) is used by anyone who has tax-filing or payment obligations under U.S. law but is not eligible for a Social Security number. Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years have expired on Sunday, Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) have also expired on that date.

This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season. Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits until the ITIN is renewed.

ITIN renewal applicants can get help by visiting our website at www.kaa4tax.com  or calling 
(844) KAA-4TAX.

Did you sell your Home in 2016?

Usually, profits you earn are taxable. However, if you sold your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sold your home this year.

1. Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale. 

2. Exceptions May Apply. There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more information on this topic contact KAA Data Accounting & Consulting (844)KAA-4TAX or www.kaa4tax.com. 

3. Exclusion Limit. The most gain you can exclude from tax is $250,000 as a single filer. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain. 

4. May Not Need to Report Sale. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return. 

5. When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. 

 6. Exclusion Frequency Limit. Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule. 

7. Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time. 

8. First-time Home buyer Credit. If you claimed the first-time home buyer credit when you bought the home, special rules apply to the sale. For more information on these rules discuss them with Ken A Anaya. 

9. Home Sold at a Loss. If you sold your main home at a loss, you may or may not be able to deduct the loss on your tax return. This must be discussed with your tax preparer. 

10. Report Your Address Change. After you sell your home and move, update your address with the IRS and State of California. To do this, you must file the proper forms with the IRS and State of California. If you purchased health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. 

Please contact us at (844)KAA-4TAX or www.KAA4Tax.com with any question you may have regarding this Blog.