Filing an Amended Tax Return

From Neikirk, Mahoney & Smith CPAs, here are the Internal Revenue Services' Top 10 Tax Tips about Filing an Amended Tax Return

We all make mistakes so don’t panic if you made one on your tax return. You can file an amended return if you need to fix an error. You can also amend your tax return if you forgot to claim a tax credit or deduction. Men with big dogs won't show up at your door if you goof, but here are some tips to help you handle this sort of thing.

1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

Note: If, as allowed by recent legislation, you plan to amend your tax year 2014 return to retroactively claim the Health Coverage Tax Credit, see IRS.Gov/HCTC first for more information.

2. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.

3. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.

4. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See "Where to File" in the instructions for Form 1040X for the address you should use.

5. Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.

6. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 16 weeks to process. You will receive any additional refund you are owed.

7. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.

8. Corrected Forms 1095-A.  If you or anyone on your return enrolled in qualifying health care coverage through the Health Insurance Marketplace, you should have received a Form 1095-A, Health Insurance Marketplace Statement. You may have also received a corrected Form 1095-A. If you filed your tax return based on the original Form 1095-A, you do not need to file an amended return based on a corrected Form 1095-A.  This is true even if you would owe additional taxes based on the new information. However, you may choose to file an amended return.

In some cases, the information on the new Form 1095-A may lower the amount of taxes you owe or increase your refund.  You may also want to file an amended return if:

 You filed and incorrectly claimed a premium tax credit, or
 You filed an income tax return and failed to file Form 8962, Premium Tax Credit, to reconcile your advance payments of the premium tax credit.
Before amending your return, if you received a letter regarding your premium tax credit or Form 8962 you should follow the instructions in the letter.

9. When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.

10. Track your return.  You can track the status of your amended tax return three weeks after you file with “Where’s My Amended Return?” This tool is available on IRS.gov or by phone at 866-464-2050.

Still have questions? Contact Neikirk, Mahoney & Smith at (502) 896-2999.

Inverting Companies Regain Contract Eligibility

In an article published in Bloomberg News, Zachary R. Mider reports that the Obama administration quietly handed a victory to U.S. companies that avoid taxes by claiming a foreign address, suggesting that virtually all of them are still eligible for government contracts.

The Department of Homeland Security last year endorsed a legal memorandum that argued in part that a 2002 law banning such companies from federal contracts was invalid, according to a copy of the memo obtained by Bloomberg News. Although President Barack Obama later began publicly criticizing the tax maneuvers known as inversions, there’s no sign that he has reversed the department’s decision.

The March 2013 memo was submitted to Homeland Security by one of the country’s largest inverted companies, the manufacturer Ingersoll-Rand Plc. The company argued in part that U.S. trade agreements with foreign governments invalidated the law that would prohibit it from winning federal contracts.

You can ask a real person what this means by calling Neikirk, Mahoney & Smith CPAs at 502-896-2999.

To read the full article, click here.

Most Suspicious IRS Audit Triggers

According to Accounting Today, the Minnesota Society of CPAs has compiled a list of red flags that could trigger an audit from the IRS if they apply to your clients' tax returns.

1. Misreporting Your Income
Always make sure your income on your Form W-2 and Form 1099 matches the reported income on your return.

2. Unusually High Charitable Deductions
You may raise some eyebrows if your charitable donations are well above average for your income range.

3. Unusually Low Salaries
The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.

4. Your Social Security Number Is Wrong
Make sure you clearly write or carefully type your Social Security number to avoid added scrutiny over your hand-filed return, or the rejection of your e-filed return.

5. Claiming Losses from “Hobby” Activities
Certain types of businesses showing losses, such as horse racing or horse breeding, will often generate increased attention.

6. Claiming a Different Amount for Your Alimony Deduction or Alimony Income than Your Ex-spouse Claimed for the Corresponding Item This is easy pickings. You must report the Social Security number of your ex-spouse when you report your alimony deduction.

7. A Large Amount for Meals and Entertainment Expenses
Sizable meals and entertainment expenses for your type of business are common targets.

Inside the Biggest Insider Trading Case in American History

Palatial mansions, multimillion-dollar artwork and a blockbuster financial scandal for a reclusive Wall Street billionaire

By Sam Gustin

When the FBI showed up at Mathew Martoma’s multimillion-dollar Florida mansion shortly before dawn on a November morning in 2011, the former SAC Capital hedge fund trader fainted on his front lawn. 

Read more: SAC Capital: Former Trader Mathew Martoma Faces Insider Trading Trial | TIME.com http://business.time.com/2014/01/06/martoma-sac-capital/#ixzz2pjo2JJdP

Do you need help with your taxes or other financial matters? Call Neikirk, Mahoney & Smith today at 502-896-2999 or contact us at http://nmscpas.com.

Tea Party Finally Bags Lerner

The poster girl for American conservatives, Lois Lerner, the Internal Revenue Service's director of the IRS exempt-organizations division, finally tossed in her towel and retired effective today, IRS officials said in a statement. 

Lerner became a fixture on news broadcasts when she first went into a tirade during her testimony in front of Congress about how she didn't do anything wrong and then almost immediately claimed protection under the Fifth Amendment .

"I am very proud of the work that I have done," Lerner told Congress before pleading the Fifth. "I have not done anything wrong. I have not broken any laws."

Her May 22 statement came as a result of the Treasury Department's Inspector General for Tax Administration's report that criticized the agency's handling of tea-party groups' applications.

Lerner was placed on paid administrative in May. Acting IRS Commissioner and former quarterback for the Florida Gators Danny Werfel told Congress that she had not been terminated and she was still employed. 

Lerner's office oversaw the review of applications from groups seeking tax-exempt status. Evidence indicates that her office selected tea party affiliated groups for further scrutiny if the term tea party was in their names.

But Lerner's resignation won't have any effect on Republican efforts to investigate the agency's actions. “Just because Lois Lerner is retiring from the IRS does not mean the investigation is over,” Utah Senator Orrin Hatch, the top Republican on the Senate Finance Committee, said. “Far from it. In fact, there are many serious unanswered questions that must be addressed so we can get to the truth.”

According to the Wall Street Journal, a Democratic congressional aide said Ms. Lerner's decision came after an IRS review board had informed her that it was set to propose her removal from the agency. The board had found "neglect of duties" during her tenure as , as well as mismanagement consistent with critical findings of an earlier inspector general's report, the aide said. However, the congressional aide noted the board found no evidence of political bias or willful misconduct.

The IRS scrutiny began in early 2010 and affected dozens of tea-party and other grass-roots conservative groups. Some have remained in limbo for years awaiting a decision on their applications, according to the inspector general's report.

Democrats claim that no evidence of political bias exists because some liberal groups were also scrutinized. But Republicans say the number of conservative grass-roots groups that were swept up in the IRS net is far larger, and the scrutiny more onerous, than what liberal groups experienced, according to Accounting Today.

The IRS said that since May—when —it has taken "decisive actions to correct failures" in management of the exempt-organizations division, including replacing the top managers.

What is an IRS audit?

An IRS audit is a review or examination of an organization's or individual's accounts and financial information to ensure information is being reported correctly, according to the tax laws and to verify the amount of tax reported is accurate. At least that's what the IRS says.

In reality, there aren't many things more frightening or humiliating than getting the Certified Letter that makes you catch your breath, while your heart pounds in your chest. It's a scary term - audit. But is an audit really that bad, other than the similarity between an audit and the days when your mother used to root through your underwear drawer?

Just because you've been served notice that you're being audited doesn't automatically infer that you've done anything wrong and your accountant or accounting firm can verify that. Nor does it always suggest that an error has been made.

Returns to audit are chosen through a number of ways, including random selection and computer screening and sometimes returns are selected based solely on a statistical formula. 

Other audits are spurred on by triggering issues. One example of an issue that can trigger an audit is document matching - when payor records, such as Forms W-2 or Form 1099, don't match the information reported on your return. 

Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns have already been selected for an audit. Like your mother said, watch out who you hang around with - they can get you in trouble!