Are you eligible for Penalty Relief?

Each year the IRS assesses millions of penalties against taxpayers. Most taxpayers are unaware that the IRS also abates many of those same penalties.

Below is helpful information taken directly from the IRS website in regards to Penalty Relief.

You may qualify for relief from penalties if you made an effort to comply with the requirements of the law, but were unable to meet your tax obligations, due to circumstances beyond your control.


Penalties eligible for penalty relief include:

• Failing to file a tax return
• Failing to pay on time
• Failing to deposit certain taxes as required
• Other penalties as applicable.

 

The following types of penalty relief are offered by the IRS:

Reasonable Cause

The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Sound reasons, if established, include:

• Fire, casualty, natural disaster or other disturbances
• Inability to obtain records
• Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
• Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.

Most reasonable cause explanations require that you provide documentation to support your claim, such as:

• Hospital or court records or a letter from a physician to establish illness or incapacitation, with specific start and end dates
• Documentation of natural disasters or other events that prevented compliance

 

Administrative Waiver and First Time Penalty Abatement

You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the Service's First Time Penalty Abatement policy if the following are true:

• You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
• You filed all currently required returns or filed an extension of time to file.
• You have paid, or arranged to pay, any tax due.

The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the Service's first time penalty abatement policy.

Other administrative relief: If you received incorrect oral advice from the IRS, you may qualify for administrative relief.

 

Statutory Exception

If you received incorrect written advice from the IRS, you may qualify for a statutory exception. If you feel you were assessed a penalty as the result of erroneous written advice you received from IRS, the following items may be needed when requesting penalty relief:

• Your written request for advice.
• The erroneous written advice you relied on that was furnished to you by the IRS.
• The report, if any, of tax adjustments identifying the penalty or addition to tax, and the item(s) relating to the erroneous advice.
  

Generally, Form 843, Claim for Refund and Request for Abatement should be filed to request penalty relief based on incorrect written advice from IRS. 

For more information regarding Penalty Relief - please contact Ken Anaya at: (844) KAA-4TAX or (844) 522-4829

Taxes Filed - What To Do Next!

So, you have finally filed your taxes, your anxiously awaiting your return or in some unfortunate situations, trying to figure out how to pay back what you owe the IRS. Remember, that what you do after you file your taxes is just as important as what you do before you file.

 

Refund: If you received a refund, consider what you will spend it on. Will you save for the following year, pay off unnecessary debt or will you finally take that desperately needed vacation?

 

Do you owe? Make plans now to start paying off any IRS debt, don't build up any additional interest if at all possible. The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start.

You can also set-up an Online Payment Agreement with the IRS if you owe $50,000 or less in combined tax, penalties, and interest, and filed all required returns. You may also qualify for a short-term agreement if your balance is under $100,000. Once you have set-up a payment arrangement - the IRS will give you the ability to Pay online through a bank account or debit/credit card.

Start Collecting and Saving: Collect things during the year that you’ll need to file for next years taxes. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good record keeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.

If you have questions throughout the year - its okay to contact your accountant or tax advisor. They are there to help even before issues arise, so take advantage of their knowledge and expertise, so you know what to prepare for now. This includes understanding what new changes in your life will mean for your filing status. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

Dog Related Tax Deductions

Have you ever wondered if dogs were tax deductible? As much as we all believe that our pets are members of our family, the IRS sees things differently - so, you will not be able to claim your pet as a dependent; however, there are certain exceptions to the rule.

You can deduct the cost of shipping your car and your household pets (including dogs, cats, birds, fish, etc.) to your new home. There is a catch though:

• Your move is closely related to the start of work.
  
• You meet the distance test.
  
• You meet the time test.
  

For more information - Review Publication 521

 

If you own a guard dog (size and breed do matter here) to protect your business - keep your records and all work-related expenses. This would include dog food, any special training or veterinary bills.

If you open your home (or heart) to foster animals in need: Foster animals from a qualified nonprofit are deductible on Schedule A as a charitable donation. Keep in mind that expenses should go toward caring for these animals, such as buying them food, pet supplies and put towards any vet visits.

Service animals are considered to be part of your medical expenses, so they are also tax deductible if you itemize.
  
Claiming tax benefits could require some creativity, convincing the IRS that you have reason to deduct pet-related expenses and good old research. The information is out there, it just takes due diligence. To make things even easier, working with a knowledgeable consultant or accountant can take all the guess work out of the equation. If  you have any pet-related expense questions - contact us - we can help!

Did you purchase a New Home in 2016?

If you bought a home last year, you will find a tax write-off buried under all the paperwork accumulated from the slew of documents your escrow company provided. You are able to deduct mortgage points paid by the seller. It is best to bring your final escrow documents when having your taxes prepared. I know that being able to write off an expense someone else has paid for sounds too good to be true. But it is true, so bring this paperwork when having your taxes prepared. 

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

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.

Got Gambling Winnings? How to reduce the taxes.

 

 

If you have winnings from gambling, you can deduct a large number of expenses to go to Vegas up to the point where it offsets much or all of the gains. You can deduct your losses, but no more than your winnings in that tax year. Gambling income includes winnings from State lotteries, raffles, horse races and casinos, and the fair market value of prizes winnings such as cars, boats, planes, and trips around the world. To deduct your losses, you must be able to provide receipts, tickets, statements or other important records. Most casinos can provide you with a ledger that tracks slot play activity (cash in and cash out).

Have new additions to the Family?

Very Important!!

If you have a new little bundle of joy who was born in 2016, don’t forget to bring their Social Security card when meeting with your Tax professional. As it is required in order to claim your rightful personal exemption valued at $4,050 for 2016.

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. 

 

         


         

Business Owner News - Sales and Use Tax Rate Decreases January 1, 2017

Due to Voter-approved Proposition 30 along with The Schools and Local Public Safety Protection Act of 2012, the one quarter of one percent (0.25 percent) temporary statewide sales and use tax rate expired on December 31, 2016. As a result, effective January 1, 2017, the California statewide sales and use tax rate will decrease by 0.25 percent from the current rate of 7.50 percent to the new rate of 7.25 percent. In some instances the total tax rate in many cities and counties will remain higher than the statewide rate because of local voter-approved district taxes in those areas.

Need more clarification in filing a Sales Tax Return contact Ken A Anaya at www.KAA4Tax.com or call toll FREE (844) KAA-4TAX.