March 1 Tax Deadline

The Internal Revenue Service reminds farmers and fishermen about the March 1 deadline to take advantage of special rules that can allow them to forgo making quarterly estimated tax payments.

Taxpayers with income from farming or fishing have until March 1 to file their 2016 Form 1040 and pay the tax due to avoid making estimated tax payments. This rule generally applies if farming or fishing income was at least two-thirds of the total gross income in either the current or the preceding tax year.

Ways to Pay:

IRS Direct Pay – IRS Direct Pay offers individual taxpayers an easy way to quickly pay the tax amount due or make quarterly estimated tax payments directly from checking or savings accounts without any fees or pre-registration. Direct Pay is available 24 hours a day, seven days a week and taxpayers can schedule a payment up to 30 days in advance. Last year, IRS Direct Pay received more than nine million tax payments from individual taxpayers totaling more than $31.6 billion. When a taxpayer uses the tool they receive instant confirmation after they submit their payment.  Direct Pay cannot be used to pay the federal highway use tax, payroll taxes or other business taxes.
EFTPS – The Electronic Federal Tax Payment System allows individual and business taxpayers to pay their federal taxes electronically. Taxpayers must enroll and receive a PIN in the mail to use EFTPS. Visit IRS.gov/payments to check out other payment options.
Farmers and fishers choosing not to file by March 1 should have made an estimated tax payment by Jan. 17 to avoid a penalty.

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

Name Change?

A name change can have an impact on taxes. All the names on a taxpayer’s tax return must match Social Security Administration records. A name mismatch can delay a tax refund. Here’s what taxpayers should know if they changed their name:

Reporting Name Changes. Got married and now using a new spouse’s last name or hyphenate a name? Divorced and now back to using a former last name? In either case, taxpayers should notify the SSA of a name change. That way the new name on IRS records will match the SSA records.

Making Dependent’s Name Change. Notify the SSA if a dependent had a name change. For example, if a taxpayer adopted a child and the child’s last name changed. If the child does not have a Social Security number, the taxpayer may use an Adoption Taxpayer Identification Number on their tax return. An ATIN is a temporary number.

Getting a New SS Card. File Form SS-5, Application for a Social Security Card. The form is on SSA.gov or by calling 800-772-1213.

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

Capital Gains and Losses – 10 Helpful Facts to Know

Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.

Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset.

Net Investment Income Tax. Taxpayers must include all capital gains in their income.

Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.

Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return.

Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.

Long and Short Term. Capital gains and losses are either long-term or short-term.

Net Capital Gain.  If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain.

Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income.

Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers

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

Itemize or Choose the Standard Deduction

Most taxpayers claim the standard deduction when they file their federal tax return. However, some filers may be able to lower their tax bill by itemizing. Find out which way saves the most money by figuring taxes both ways.

The IRS offers the following six tips to help taxpayers decide:

1. Use IRS Free File. Most taxpayers qualify to use free, brand-name software to prepare and file their federal tax returns electronically.

2. Figure Your Itemized Deductions.  Taxpayers need to add up deductible expenses they paid during the year. Special rules and limits apply.

3. Know The Standard Deduction. If a taxpayer doesn’t itemize, then the basic standard deduction for 2016 depends on their filing status. If a taxpayer is 65 or older, or blind, the standard deduction is higher than the previous amounts. The deduction may be limited if the taxpayer can be claimed as a dependent.

4. Check the Exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if the taxpayer is married filing a separate return and their spouse itemizes.

5. Use the IRS ITA Tool. Go to IRS.gov and use the Interactive Tax Assistant tool. It can help determine whether a taxpayer can use the standard deduction. It can also help a filer figure their eligibility for certain itemized deductions

6. File the Right Forms.  For a taxpayer to itemize their deductions, they must file Form 1040 and Schedule A, Itemized Deductions. Filers can take the standard deduction on Forms 1040, 1040A or 1040EZ.

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

IRS Summarizes "Dirty Dozen" List of Tax Scams for 2017

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program  to enable people to catch up on their filing and tax obligations. (IR-2017-35)

Courtesy of IRS
For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Video Relay Scam Targeting Deaf and Hard of Hearing

Every day scammers come up with new ways to steal taxpayers’ identities and personal information. Some scammers pretend to be from the IRS with one goal in mind: to steal money.

Be aware that con artists will use video relay services (VRS) to try to scam deaf and hard of hearing individuals. Don’t become a victim. Deaf and hard of hearing taxpayers should avoid giving out personal and financial information to anyone they do not know. Always confirm that the person requesting personal information is who they say they are.

Do not automatically trust calls just because they are made through VRS. VRS interpreters do not screen calls for validity.

The IRS has procedures in place for taxpayers who are experiencing tax issues. If you receive a call through VRS from someone claiming to be from the IRS, keep this in mind:

The IRS Will Never:

Demand immediate payment and require the payment be made a specific way, such as by prepaid debit card, gift card or wire transfer. In most cases, the IRS will not call taxpayers about taxes owed without first having mailed a letter to the taxpayer.
Threaten that local police or other law-enforcement groups will immediately arrest taxpayers for not paying a tax bill.
Demand that taxpayers pay taxes without giving them the opportunity to question or appeal the amount owed.
Ask for credit or debit card numbers over the phone.

Courtesy of IRS

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

IRS Committed to Stopping Offshore Tax Cheating

Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. Then access the funds using debit cards, credit cards or wire transfers. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant  fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward to voluntarily disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program  following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 501-896-2999