Time Running Out to Claim $1 Billion in Tax Refunds

Taxpayers who did not file a tax return for 2013 may be one of the nearly 1 million who may be due a refund from that year. Taxpayers must claim their part of almost $1 billion by this year’s April 18 tax deadline. To claim a refund, taxpayers must file a 2013 federal income tax return. Here are some facts about unclaimed refunds:

The unclaimed refunds apply to people who did not file a federal income tax return for 2013. The IRS estimates that half the potential refunds are more than $763.
Some people, such as students and part-time workers, may not have filed because they had too little income to require them to file a tax return. They may have a refund waiting if they had taxes withheld from their wages or made quarterly estimated payments. A refund could also apply if they qualify for certain tax credits, such as the Earned Income Tax Credit.
The law generally provides a three-year window to claim a tax refund. For 2013 returns, the window closes on April 18, 2017.
The law requires that taxpayers properly address, mail and postmark their tax returns by April 18, 2017, to claim their refund.
After three years, unclaimed refunds become property of the U.S. Treasury. There is no penalty for filing a late return if taxpayers are due a refund.
The IRS may hold 2013 refunds if taxpayers have not filed tax returns for 2014 and 2015. The U.S. Treasury will apply the refund to any federal or state tax owed. Refunds may also be held  to offset unpaid child support or past due federal debts such as student loans.
Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for prior years should ask for copies from employers, banks or other payers. Taxpayers unable to get these copies can request a wage and income transcript either online or by mail.  Taxpayers can also file Form 4506-T to get a transcript.
The three-year window also usually applies to a refund from an amended return. In general, you must file Form 1040X, Amended U.S. Individual Income Tax Return, within three years from the date you filed your original tax return. You can also file it within two years from the date you paid the tax, if that date is later than the three-year rule. That means the deadline for most people to amend their 2013 tax return and claim a refund will expire on April 18, 2017.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.

IRS Expecting Millions of Edited Returns This Year

By Michael Cohn, Accounting Today

The Internal Revenue Service anticipates that nearly 5 million taxpayers will amend their returns by filing Form 1040X this year. If you're considering doing the same thing, contact Neikirk, Mahoney & Smith CPAs at (502) 896-2999.

Nearly 46 million returns were electronically filed from home computers as of April 18, more than the total from home computers for all of 2013. The IRS said Friday that it has received more than 131 million tax returns, of which 88 percent were e-filed.

Taxpayers who need to amend their returns should file this form only after filing the original return, the IRS noted. Generally, for a tax credit or refund, taxpayers must file Form 1040X within three years, including extensions, after the date they filed their original return or within two years after the date they paid the tax, whichever is later. For most people, this means that returns for tax-year 2011 or later can still be amended. 

Read more here

Time to Re-evaluate Your Accounting Resources

Now that tax season is over for most of us, now would be a good time to re-evaluate your resources to make sure you're getting the most bang for your accounting buck.

How do you feel about the way your 2013 taxes were done? Did your accounting firm keep you informed of changes in the tax code that could impact your business?

Did your accounting firm take the time to really understand how your business operates? Did they provide you with suggestions and ideas that would positively impact your bottom line? Were they proactive or reactive? And at the end of the day, do you feel like you were getting what you expected at the cost your expected?

If the answer to any of the questions above is anything but a resounding "yes", contact Neikirk, Mahoney & Smith today. We'll spend some time together, discussing and learning what really matters to you, not to us.

In a world of fast talkers and false guarantees, Neikirk, Mahoney & Smith stands out from the white noise. That's because we really do care about you and your business.

Here's a great article for your reference from Entepreneur.com. And after you've read it, give us a call today.

HOW TO HIRE AN ACCOUNTANT

Every dollar counts for business owners, so if you don't know where you stand on a monthly basis, you may not be around at the end of the year. And while using do-it-yourself accounting software can help monitor costs, the benefits of hiring good accountants extend far beyond crunching numbers. Potentially, they can be your company's financial partner for life, with intimate knowledge of not only how you're going to finance your next forklift, for instance, but also how you're going to finance your daughter's college education.

Before you hire one though, make sure you understand the four basic areas of expertise in a general accounting practice:

1. Business advisory services. Since an accountant should be knowledgeable about your business environment, your tax situation and your financial statements, it makes sense to ask them to pull all the pieces together and help you come up with a business plan and personal financial plan. Accountants can offer advice on everything from insurance (do you really need business interruption insurance or is it cheaper to lease a second site?) to expansion (how will additional capacity affect operating costs?). Accountants can bring a new level of insight, simply by virtue of their perspective.
2. Accounting and record-keeping. These are perhaps the most basic of accounting disciplines. While it makes sense for many business owners to manage their day-to-day records, an accountant can help set up bookkeeping and accounting systems and show you how to use them. A good system allows you to evaluate profitability and modify prices. It also lets you monitor expenses, track a budget, spot trends and reduce accounting fees required to produce financial statements and tax returns.
3. Tax advice. Accountants that provide assistance with tax-related issues usually can do so in two areas: tax compliance and tax planning. Planning refers to reducing your overall tax burden. Compliance refers to obeying the tax laws.
4. Auditing. These services are most commonly required by banks as a condition of a loan. There are many levels of auditing, ranging from simply preparing financial statements to an actual audit, where the accountant or other third party provides assurance that a company's financial information is accurate.

Choosing an Accountant
The best way to find a good accountant is to get a referral from your attorney, your banker or a business colleague. You can also check in with the Society of Certified Public Accountants in your state, which can make a referral.

While accountants usually work for large companies, CPAs (certified public accountants) work for a variety of large and small businesses. Don't underestimate the importance of a CPA. This title is only awarded to people who have passed a rigorous a two-day, nationally standardized test. Most states require CPAs to have at least a college degree or its equivalent. Several states also require post-graduate work.

Once you have come up with some good candidates, it is important to determine how much of the work your company will do and how much will be done by the accountant.

Accounting services can be divided into three broad categories: recording transactions, assembling them, and generating returns and financial statements. Although the first two categories require a lower skill level than the latter, many firms charge the same hourly rate for all three. This is why it's important to determine exactly what work you want an accountant to handle.

The next step is to interview your referrals. For each, plan on two meetings before making your decision. One meeting should be at your site. The other should be at theirs. During the interviews, your principal goal is to find out about three things: services, personality and fees. Here's what to ask in each area.

1. Services: Most accounting firms offer tax and auditing services. But what about bookkeeping? Management consulting? Estate planning? Will the accountant help you design and implement financial information systems? A CPA may offer services that include analyzing transactions for loans and financing; preparing, auditing, reviewing and compiling financial statements; managing investments; and representing you before tax authorities.
   
   Although smaller accounting firms are generally a better bet for entrepreneurs, they may not offer all these services. Make sure the firm has what you need. If it can't offer specialized services, it may have relationships with other firms to which it can refer you to handle these matters. In addition to services, make sure the firm has experience with small business and your specific industry.
2. Personality: Is the accountant's style compatible with yours? Be sure the people you are meeting are the same ones who will be handling your business. At many accounting firms, some partners handle sales and new business, then pass the actual account work on to others.
   
   When evaluating competency and compatibility, ask candidates how they would handle situations relevant to you. For example: How would you handle an IRS office audit seeking verification of automobile expenses? Listen to the answers and decide if that's how you would like your affairs to be handled.
   
   Realize, too, that having an accountant who takes a different approach can be a good thing. Just be sure that the accountant doesn't pressure you into doing things you aren't comfortable with.
3. Fees: Ask about this upfront. Most accounting firms charge by the hour with fees ranging from $100 to $275. However, others work on a monthly retainer. Get a range of quotes from different accountants. Also try to get an estimate of the total annual charges based on the services you have discussed.
   
   Don't base your decision solely on cost, however, as an accountant who charges higher hourly rate is likely to be more experienced and able to work faster than a novice who charges less.
   
   Also be sure to ask for references -- particularly from clients in your industry. Call them to find out how satisfied they were with the accountant's services, fees and availability.

Make the Most of the Relationship
After you make a choice, spell out the terms of the agreement in an engagement letter. The document should detail the returns and statements to be prepared and the fees to be charged. This ensures that you and your accountant have the same expectations.

Also, hold up your end of the agreement. Don't hand your accountant a shoebox full of receipts. Write down details of all the checks in your check register, whether they are for utilities, supplies and so on. Likewise, identify sources of income on your bank deposit slips. The better you maintain your records, the less time your accountant has to spend and the lower your fees will be.

It's a good idea to meet or at least speak with your accountant every month. Review financial statements and go over problems so you know where your money is going. Your accountant should go beyond number-crunching to suggest alternative ways of cutting costs and act as a sounding board for any ideas or questions you have.

Excerpted from Start Your Own Business, Fifth Edition by the staff ofEntrepreneur.

Social Security to Stop Seizing Tax Refunds

BY MICHAEL COHN, EDITOR-IN-CHIEF, ACCOUNTINGTODAY.COM

A pair of senators have called on the Social Security Administration to end the policy of seizing taxpayers’ refunds to hold them accountable for decades-old errors made by the agency that led to the overpayment of benefits, and the agency has agreed to do so.

Senators Barbara Boxer, D-Calif., and Barbara Mikulski, D-Md., highlighted a story on the front page of the Washington Post last Friday morning that detailed the case of Mary Grice, whose tax refund was seized by the U.S. government to repay an overpayment of benefits made to an unknown member of her family in 1977. 

“While this policy of seizing tax refunds to repay decades-old Social Security overpayments might be allowed under the law, it is entirely unjust,” the senators wrote in a letter Friday to the Acting Commissioner of the Social Security Administration, Carolyn Colvin. “Grice and other families like hers are unfairly being held responsible for decades-old errors at the Social Security Administration – even though many of these taxpayers were children at the time the error was made. Too many of these families are now finding themselves trapped in a mess of paperwork and red tape that is both costly and time-consuming.” 

To learn more about how this measure might affect you, contact Neikirk, Mahoney & Smith PLLC

Read more at Accounting Today

Returns Are UP, According to IRS

The Internal Revenue Service said Thursday that only three weeks after the opening of tax season, it has already received about one-third of the individual income tax returns it expects to receive in 2014.

The IRS reported that tax season has gone smoothly so far, despite the two-week delay before kicking off tax season on January 31.  The IRS has processed almost 98 percent of the 49.6 million returns received so far. Each week this filing season, the IRS has processed a greater percentage of the returns received than during comparable weeks last year.

For more, check out Michael Cohn's article in Accounting Today. If you need help with preparing your 2013 tax returns, contact Neikirk, Mahoney & Smith PLLC.

Ways to choose your Income Tax Preparer

Many people hire an independent tax professional or a reputable accounting firm when it’s time to file their tax return. If you pay someone to prepare your federal income tax return, the IRS urges you to choose that person wisely. Even if you don’t prepare your own return, you’re still legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax preparer:

1. Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. In addition to making sure they have a PTIN, ask the preparer if they belong to a professional organization and attend continuing education classes.
   
2. Check the preparer’s history.  Check with the Better Business Bureau to see if the preparer has a questionable history. Check for disciplinary actions and for the status of their licenses. For certified public accountants, check with the state board of accountancy. For attorneys, check with the state bar association. For enrolled agents, check with the IRS Office of Enrollment.
   
3. Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account.
   
4. Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients generally must file the returns electronically. IRS has safely processed more than 1.2 billion e-filed tax returns.
   
5. Make sure the preparer is available.  Make sure you’ll be able to contact the tax preparer after you file your return - even after the April 15 due date. This may be helpful in the event questions come up about your tax return.
   
6. Provide records and receipts.  Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not use a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.
   
7. Never sign a blank return.  Don’t use a tax preparer that asks you to sign a blank tax form.
   
8. Review your return before signing.  Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.
   
9.  Ensure the preparer signs and includes their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.
   
10. Report abusive tax preparers to the IRS.  You can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Obamacare Related Tax Questions Challenge Tax Preparers

BY JEFF STIMPSON

The Affordable Care Act -- along with its accompanying enrollment Web site and new taxes and tax breaks -- has opened up a host of questions for the taxpaying public, ramping up the usual levels of pre-tax season taxpayer confusion.

“Forty of the 500 provisions in the ACA amend or add provision to the U.S. Tax Code,” reads a primer from The Income Tax School. “Most of the changes that are to be implemented in 2014 have to do with healthcare coverage [that] requires that each person either have the minimum essential coverage, qualify for an exemption or make a payment when filing his or her federal income tax return.”

Among the new taxes is a 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single), and a 0.9 percent additional Medicare tax.

Click here to read the rest of the story from Accounting Today

If you need more information, contact Neikirk, Mahoney & Smith CPAs at (502) 896-2999.