Yes you read that right. The IRS plans to go forward with hiring Equifax to verify and validate taxpayer identities in the wake of their massive systems breach. If you missed the news (because apparently the IRS did), hackers were able to obtain confidential financial information—including social security numbers—of 145 million users; which now equates to the largest US data breach in history.
Outraged by the IRS’s decision to hire Equifax, some members of Congress spoke out including Senate Finance Chairman Orrin Hatch (R-Utah). He recently told Politico:
“In the wake of one of the most massive data breaches in a decade, it’s irresponsible for the IRS to turn over millions in taxpayer dollars to a company that has yet to offer a succinct answer on how at least 145 million Americans had personally identifiable information exposed.”
The IRS continues to defends it’s choice, stating that the service Equifax was hired for will not put U.S. taxpayers personal information at risk. They will, however, keep a watchful eye on their new hire.
If you have been affect and/or would like to find out if your were affected by Equifax’s breach you can do so by clicking here. However, we advise caution before using services to ascertain Equifax exposure. According to the terms and conditions, users that access Equifax’s systems to determine if their information was compromised are voluntarily giving up their rights to sue and/or join class action lawsuits against Equifax.
If you would like more information about this breach or would like to to speak to an R&G Brenner professional, contact us toll free at (888) APRIL-15 or via web by clicking here.
When President Franklin D. Roosevelt created the Social Security program with the 1935 Social Security Act he revolutionized the way Americans would live for decades to come. While social security has served the American populace well, the system can no longer sustain itself long enough to provide the same benefits for the future generations of retirees without a major overhaul.
The miracles of modern medicine have created a disproportionate number of old folks using benefits relative to the healthy, working, taxpaying youngsters contributing to the program. Current projections put complete bankruptcy of the program around 15-20 years from today. After that point, the money currently held in reserve will be completely depleted and tax revenue will only cover 77 percent of scheduled benefits. It’s clear that the system is unsustainable, but how can it be fixed?
Increasing Social Security Taxes
If the program isn’t collecting enough money, the obvious solution would seem to be to raise the Social Security tax, which currently sits at 6.2 percent of workers’ income, plus a matched employer contribution. Even a relatively small increase, say of just one percentage point, to 7.2 percent over a 20-year period, would improve the situation significantly, reducing the current funding shortfall by some 52 percent. What this increase would mean for the average worker earning a $50,000 salary is a tax increase of an additional 50 cents per week each year of the phasing-in period. More abrupt increases to the Social Security tax, up to 7.2 percent in 2022 and 8.2 in 2052, would lower the funding gap a full 76 percent, but that would equate to a $9.60 tax increase per week for the average worker. Therefore, increasing taxes alone, would only delay the problem.
Remove the Tax Cap
Currently, annual earnings beyond $117,000 aren’t subject to the Social Security payroll taxes or factored into retirement benefits. That means that income subject to the Social Security tax is effectively capped. Removing the tax cap is one of the proposed solutions that is widely supported, with 80 percent of Americans polled responding favorably, including 76 percent of people with family incomes greater than $100,000. The elimination of the tax cap over a period of 10 years would mean the top 6 percent of earners would pay Social Security taxes on all of their earnings, consequently receiving higher benefits upon retirement. A whopping 74 percent of the Social Security shortfall could be eliminated this way.
Change the Retirement Age
Raising the retirement age is one of the less effective, less popular proposals on the table. Currently, the age for full retirement is 66 for most Baby Boomers and 67 for those born after 1960. Gradually increasing the retirement age to 68 or 70 over a number of years would only reduce funding shortfalls by between 7 percent and 25 percent, depending on how quickly the change was implemented. Regardless of political affiliation and income level, however, this idea is unpopular for obvious reasons—a full three-quarters of the adult population object to raising the full retirement age to 70.
Cut Benefits and Means Test
Cutting benefits is often suggested by individuals who see the program essentially as an anti-poverty measure, without taking into account the programs that provide much-needed benefits to the unemployed, those who are injured on the job or who have disabilities, as well as women, infants and children. Proponents of this option suggest a reduction or even elimination of Social Security benefits for high earners, starting with a reduction for individuals and couples with incomes greater than $55,000 and $110,000, respectively, and a complete elimination of benefits at the $110,000 level for individuals and $165,000 for couples. This “means test” would reduce the shortfall by a scant 20 percent. Opponents of this plan point to the origins of Social Security, intended to as a universal program to support all workers, regardless of income. It wasn’t designed to be welfare—it was designed to help hardworking Americans live a decent life after their retirement from a life of service.
There is no clear-cut single answer to the question of how to fix Social Security. Experts and politicians continue to argue that cutting benefits and raising the retirement age are viable solutions with equal vehemence as their opponents, who argue that expanding Social Security is what’s needed, or even an elimination of the payroll tax. What’s clear is that the system as it stands now is in jeopard. If we want to revive it we need to act quickly with a combination of the above (or not yet proposed) solutions.
The Church of Scientology is getting a lot of attention these days thanks to “Going Clear”, HBO’s recent documentary on Scientology and a number of its practices. One aspect of Scientology which is receiving even more attention than before is the church’s tax-exempt status. Part of the controversy extends to how the Church of Scientology actually received its tax-exempt status—and to just what ends it uses it. After being hit with over 2,400 lawsuits at once from Scientologists, the IRS, after years of rejecting Scientology’s requests for a change in their tax status, gave it tax exemptions typically applied towards churches in 1993.
Tax Exemptions All Around
While the Church of Scientology hasn’t issued a clear response to questions raised by the documentary, one thing that’s definitely not in question is whether Scientology is making use of its tax-exempt status. Fortune’s Chris Matthews, citing the Scientology news website The Scientology Money Project, estimates that the Church of Scientology is worth somewhere in the area of $1.75 billion, with most of that money wrapped up in real estate. About 70% of that real estate is tax-exempt, meaning that a change in tax could possibly land the church a tax bill of $20 million or so a year.
Matthews cites a number of different sources which make a compelling case that Scientology uses its tax-exemption in ways that are clearly commercial, with examples such as a Tampa Bay Times investigation from 2010 which discovered that Scientology had not been paying a 5% occupancy tax for years. It turns out that Scientologists visiting the head offices in Clearwater were staying at hotels owned by Scientology without paying the tax. It is cases such these, now becoming increasingly visible as more similar stories emerge, that are keeping the debate surrounding Scientology’s tax-exempt status alive in the public.
Against the Public Interest?
In a recent interview with The Wrap, Alex Gibney, the director of Going Clear, noted that the main argument against Scientology losing its tax-exempt status was not predicated on whether or not it’s a “real” church, but rather that Scientology wields its tax-exempt status in order to pursue policies which are not in the public interest. In his documentary alleging that people working for the Church of Scientology often earn as little as 40 cents an hour and accusing the Church of illegal imprisonment and torture at the highest levels, Gibney’s central argument departs from the usual tack: that Scientology isn’t a real religion. Gibney argues instead that the religion is a public threat.
While tax exemption is hard to get, it’s also extremely hard to lose, and the IRS will require a great deal of proof of the claims like those made in the documentary and those from former church members who see themselves as victims of a cult. The Church of Scientology reportedly keeps files on all its members to use against them in case they leave the church, making getting that proof even more difficult than it otherwise would be. The evidence presented in Going Clear is damning, but it hasn’t cost Scientology its tax-exempt status—yet.
Filing taxes is a painstaking process for almost everyone and every year, without fail, many returns full of mistakes are sent in to the IRS. In fact, mistakes are extremely common on tax returns, with an error rate of 50 percent; on self-prepared returns, according to the Government Accountability Office. There is a near-infinite number of things that can be done wrong on tax returns, from simple computational errors to missing out on deductions. Knowing which mistakes people commonly make is a good place to start when trying to avoid making them yourself. To that end, here’s what not to do on your taxes.
Include Undocumented Charitable Contributions
Though many charitable contributions are deductible, not every donation qualifies, and those that do must be meticulously documented. Every donation requires an accurate record, complete with confirmation receipts of the donation amount from the recipient at a qualified charity. Many people now donate money to crowdfunding campaigns, such as those hosted through Kickstarter, but many of these, because donors receive goods or services in return, don’t qualify as charitable contributions.
Taking a Write-Off for College You Don’t Qualify For
There are currently two write-offs available for college education: a $4,000 tuition and fees deduction and the $2,500 American Opportunity Tax Credit. Most people take the tuition and fees deduction because it seems like more money, but because the AOTC gives a dollar-for-dollar reduction, as opposed to lowering the income subject to tax, it can often be a better deal. It’s worth crunching some numbers to figure out which is the better option for you each time you file.
Claiming State Refunds as Income
Many people make the mistake of claiming their state tax refunds as income on federal tax returns. The only time a state tax refund should be declared is if the filer does not receive a tax benefit from deducting the taxes. Taking a standard deduction as opposed to itemizing means the filer doesn’t need to show state tax refunds as income.
Confusing Real Estate Taxes
Confusion regarding real estate and other property is one of the biggest sources of tax mistakes. People often take the wrong deductions, on everything from home offices to mortgage interest payments. New homeowners should be particularly careful and make sure to check which taxes they paid during closing to ensure they apply for the accurate deductions on their returns.
Forgetting IRA Savings
Throughout the year many people make regular IRA contributions, but they often forget to report them when filing their tax returns. Many of these IRA contributions qualify individuals for tax breaks. Furthermore, reporting all contributions is mandatory and even nondeductible contributions should be reported in order to avoid paying for them during retirement.
Incorrectly Reporting Foreign Investments
Though foreign investments are only applicable to a relatively small percentage of the tax base, they are amongst the more costly areas to make mistakes. Failing to accurately report foreign bank or financial accounts unintentionally carries a penalty of $10,000 per violation. For willful violations, the fine is $100,000 or 50 percent of the balance of the unreported account at the time of violation, for each violation, if the IRS catches it in an audit. That’s a very expensive mistake!
Changing Jobs and Withholding Too Much/Too Little
Those who switch jobs during the middle of the year and have combined earnings of greater than $117,000 should make sure they are not having extra money withheld. The maximum withholding rate is 6.2% for the first $117,000 of income, but both employers may withhold this amount if the employee made less than that sum at each individual company, meaning the filer would pay too much. It might make for a nice, big tax return, but it also means you’re overpaying on your taxes, and no one wants that. On the flip-side, if you switch jobs or get promoted and withhold too little, you could be surprised you owe taxes come April 15th when you were expecting a refund.
Overpaying on Investments Sold
Making mistakes on investments sold is frequent as it requires many calculations and meticulous record keeping of stock splits, reinvested dividends, capital gains distributions, and sales commissions. There are several online tools available to help investors make accurate calculations of shares bought. Make sure to keep clear records of all your investments.
These are just a few of the things you absolutely shouldn’t do on your taxes. While it’s by no means an exhaustive list, these mistakes are some of the most frequent—and also some of the easiest to avoid. If you’re concerned that you’ve made mistakes (or will make mistakes) on your taxes, you can always contact an R&G Brenner tax professional for assistance.
As the the clock approaches midnight on the 2015 tax season, many taxpayers still haven’t filed their tax return yet. While procrastination is common for many when it come to filing taxes, this year we are seeing a higher number of last minute filers. The winter was brutal on the east coast; extreme cold & snow produced more tax hibernators than in years past. Wage documents like W2s & 1099s were issued extremely late (And when they were finally issued, many were issued incorrectly), and the uncertainty around reporting health insurance on tax returns for the first time has produced even more confusion. But have no fear! There is still time to tackle your individual tax situation. And even if you already filed, below is a definitive list of last minute tax tips everyone should be aware of:
The April 15th Deadline? Only If You Owe!
Many taxpayers know the deadline is April 15th, but the majority of taxpayers do not know that the deadline only applies to those that owe money to taxing authorities. If you are expecting a refund, you have an additional 3 years to file or amend a filed 2014 tax return. No extension is necessary to file if you are expecting a refund. Again, extensions must be filed by the deadline only for those that owe taxes, but are not ready to file their final tax return. However, an extension is only an extension to file a final tax return, NOT to pay your taxes. If you are filing an extension, you must send your tax payment along with it. If you do not know your final tax liability, overestimate. Any overpayment will be refunded to you or applied to future tax liabilities. Any underestimated taxes are subject to penalties & interest that are not paid by the deadline.
Lower Your Tax Bill Even More
Even with the deadline approaching, you can still reduce your tax liability by making contributions to the following:
Contribute to you IRA
Contribute to your 401(k)
Contribute to your Health Savings Account (HSA)
Contributing to any of these accounts (or opening a new account) before filing your tax return will reduce the taxes you owe. However, each contribution has limits, so consult your tax professional or financial advisor to find out what those limits are. These contributions must be made before you file your final tax return (filing an tax extension also allows you to contribute later as well).
Last Call For 2011 Tax Returns
As stated above, taxpayers have 3 years to file or amend tax returns if they are due refunds. This year’s April 15th deadline will be the final day taxpayers can file or amend a 2011 tax return. The IRS has over $1 Billion in unclaimed refunds for those that have not filed a 2011 tax return. According to IRS Commissioner John Koskinen. “People could be missing out on a substantial refund, especially students or part-time workers. Some people may not have filed because they didn’t make much money, but they may still be entitled to a refund.” Most of these taxpayers fall into the category where they did not break the threshold in dollars earned requiring them to file a tax return. However, taxes were withheld from their paychecks, and that money should be refunded. Any 2011 refund not claimed become the properly of the U.S. Government. Half of the uncollected refunds for 2011 tax returns exceed $698! This is your money. Don’t let the Government keep it!
Health Insurance Subsidies
The Affordable Care Act (ACA) has drastically reduced the number of insured since going into effect in 2014. Subsidies to off-set the cost of insurance is a major reason why. However, many taxpayers this year were shocked to see that their refunds were significantly reduced from years past. This is because ACA subsidies are calculated using an estimate of a taxpayer’s yearly income. If you get a promotion mid-year, a newer higher paying job or simply just underestimate you annual income, you may no longer qualify for the subsidy you’ve already received…and “they” want it back. Therefore, if you’ve received a subsidy this year for health insurance acquired on the exchanges, it is important to report any significant differences in estimated income to your health insurance provider and/or broker. While you may have to pay a higher monthly premium, you won’t have any surprises come tax time.
Where’s My Refund?
So you filed your return. Now “Where’s my Refund”?. This is a question that’s hard to answer specifically. In general, the earlier you file, the better chance you have of getting your refund in the IRS’ allotted time: approximately 2-3 weeks if you’ve electronically filed (even faster if you opted for a direct deposit) and 6-8 weeks if you filed a paper tax return. However, many factors can delay your refund. First and foremost, before you start trying to track down your refund, be sure that your return was filed and accepted by the IRS. Click here to check the status for your return on line. If you filed your return late (between late March & the April 15th deadline) expect to tack on about a week or so. The IRS’ budget has been slashed and they are grossly understaffed. If you need to speak to an IRS agent, good luck. The IRS is only able to answer about 60% of the calls made to the agency. The rest either get tired of waiting for hours or get a “Courtesy Disconnect” (i.e. being hung up on). The key is not to give up. If you keep pestering the IRS, eventually you will make progress. Remember, many states (including NY) have been issuing “pre-refund letters” for the last 4-5 years. Sometimes they ask for something as simple as a copy of your W-2; information they are supposed to have already! These letters are simply designed to delay your refund, they are not “Audits”. If you get one of these “pre-refund letters”, address them immediately. The sooner you send them the information they are requesting (no matter how trivial or ridiculous) the sooner you can get your refund “they” are collecting interest on (and they keep that interest) .
The Internal Revenue Service (IRS) requires all employers to provide employees with a W-2 form, which lists the employee’s income information for the previous year. It doesn’t matter how long you worked for the company; if you earn more than $600, your employer must issue you a W-2. If any of your wages were withheld for Social Security or Medicare, the employer must issue a W-2 no matter how much you earned. Employers are required to provide you with this information by January 31 so that you can complete your tax return by April 15. Once you have your W-2 in hand, it’s time to get to know the form so you can be sure you don’t make any errors in reporting your income taxes.
What Each Box on the W-2 Means
When your W-2 arrives, check it to make sure that your social security number is listed correctly. The boxes on the left of the form should list your employer’s name and address, as well as your name and address. Directly below your social security number is your employer’s identification number. This number must be entered on your tax return.
Each of the boxes on the right side of your W-2 should have a number. Box 1 indicates the total salary you received, less any tax-exempt or tax-deferred benefits. This includes health insurance, dental insurance, retirement savings, and the cost of most other benefits that your employer deducts from your paycheck. Box 2 is the total amount of income tax withheld by the federal government. Box 3 indicates your total wages subject to the Social Security tax, including amounts not listed in Box 1. This number could be higher than the one in Box 1, because it’s calculated before payroll deductions. Box 5 indicates wages subject to Medicare taxes; since there is no cap for Medicare taxes and they generally don’t include any pretax deductions, this number might be bigger than the one in Box 3.
Boxes 4 and 6 indicate how much you paid for Social Security and Medicare taxes, respectively. The amounts are calculated based on a flat rate: 1.45% for Social Security and 6.2% for Medicare. That means that the numbers in Boxes 4 and 6 should be equal to the amounts in Boxes 1 and 3 multiplied by 1.5 and 6.2 Boxes 7 and 8 reported wages earned from tips; if you don’t report tips to your employer, these boxes will be empty. Box 9 actually no longer serves a purpose; the reporting requirement that made Box 9 necessary expired a few years ago, but the box has yet to be removed from the form.
If your employer paid any dependent care expenses on your behalf, you will see the total amount in Box 10. In Box 11, your employer lists any amounts distributed to you during the year from its non-qualified deferred compensation plan. Box 12 is pretty complicated, and involves entering different codes, only some of which are taxable. For a better explanation of Box 12, it’s best to go straight to the source and read what the IRS has to say about it. Boxes 13 and 14 will be filled out by your employer to indicate if you’re a statutory employee, if you participated in your company’s retirement plan or if you received sick pay from a third-party insurance policy.
Boxes 15 through 20 are information you need to file your state income tax return. This includes your state’s two-letter abbreviation, your employer’s state identification number, your income subject to state taxes (including that which is currently exempt from federal taxes), the amount of state income tax withheld from your paychecks last year, your local wages, local taxes, and the locality name where you paid them. It’s not common for figures to appear in the last three boxes.
What to Do if You Don’t Receive a W-2
If you haven’t received your W-2, make sure your employer mailed it to the correct address. If it was returned to your employer as undeliverable, request a new one and then wait until February 14. At this point you will need to contact the IRS and provide your full name and social security number, your employer’s complete address, your employer’s telephone number, and your estimated wages and tax paid for last year. If you haven’t received a W-2 by April 15, use Form 4852, Substitute for Form W-2, Wage and Tax Statement to file. Should you receive your W-2 after you have filed, use Form 1040X to send the correct information.
Imagine, as an American, choosing to become a teacher in Russia, or a tour guide in Italy. According to U.S. tax law, you would have to pay taxes on your earnings, just as you would if you worked domestically. Now, imagine you’re an American corporation which has just purchased a foreign company. You shift over ownership and operations to your new foreign holdings and become subject to a different set of tax laws, allowing your business to avoid paying what it otherwise would in taxes.
Are Inversions Helping the Economy… or Corporations?
While the Obama administration made fixing these loopholes a priority earlier this year, most on all sides agree these are temporary measures unlikely to stop any real, long-term capital flight. The main reason for this is because while such capital expatriation schemes work in the short-term, other loopholes exist to shift ownership. As a result, there are two solutions that are seriously being discussed: one on the side of the multinational corporations themselves, and another which is now starting to gain traction in economic circles and which was the subject of recent lectures at NYU.
Changing the Tax Structure to Inhibit Capital Flight
Most multinationals and think-tanks that want change would prefer change that would continue to allow corporations to do multinational business. The general basis of this argument runs as follows: if the taxation scheme in the U.S. were friendlier to businesses, this would stem capital flight and cause corporations to reinvest in the U.S. The motivation would stem primarily from tax incentives to do business in the U.S., thus reducing the costs of operation for corporations who would otherwise turn overseas.
Not all investors agree that a “trickle-down” solution would actually work. Controversial venture capitalist Nick Hanauer points out that companies given indirect incentive to reduce their costs at a domestic level often fail to reinvest in their domestic workforce, but in fact simply add that money into their general profits. It is difficult to see how continuing to provide incentive to reduce corporate costs internationally would change that paradigm. Since such a program would in no way incentivize such corporations to shift their profits back into U.S.-based research and development, this answer seems to simply reward corporations already using a tiered structure.
Internationalizing Capital Taxation
An alternate solution being proposed, however, would more directly impact how inverted companies do business: by requiring a consistent standard on global profits as opposed to simply reported American profits. This would immediately force companies profiting in the U.S. but diverting their profits outside the country to still pay taxes on them. This would ensure that companies making money in the United States would have to pay their fair share, regardless of where they try to move their money.
The end of 2014 is just days away, and if you’re like many Americans, you are planning to give to one or more charitable organizations before the new year dawns. Around 34 percent of all charitable giving is done in the last three months of the year and slightly more than half of that is during the month of December. Giving is up substantially this year over 2013, thanks in large part to the continued national economic recovery.
While the desire to help others is the main reason that most people give to charity, they also enjoy the ability to claim a deduction on their tax return. However, many Americans incorrectly report their charitable giving and do not receive the credits they are entitled to.
The biggest mistake, according to the Internal Revenue Service (IRS), is that people don’t verify that they are giving money or goods to a qualified charitable organization. They also make the mistake of assuming that donations made to individuals, political candidates and political organizations are deductible on their tax return. If you try to claim any of these as charitable donations, the IRS will deny your credit.
How to Claim a Charitable Deduction on Your Tax Return
If you plan to deduct your charitable contributions in 2014, you must use Form 1040 and itemize the deductions on a Schedule A. You may donate cash, tangible goods, services or personal property and write it off on your taxes this year. If you are donating a non-cash item, you should use IRS Publication 561 to determine its value.
In the event that you received merchandise in exchange for your donation, the IRS only allows you to deduct the amount of that item that exceeds fair market value. For example, if you donated money to fund a scholarship and the college gave you season tickets to watch its football team, you must deduct the value of those tickets from your charitable donation.
Stocks, bonds, and other deferred financial contributions are typically deducted at fair market value. This is the amount that the item would sell for if a competent buyer purchased it and the seller presented all relevant facts. In effect this means that all used items that you donate, such as cars and clothing, must be in good used condition in order to claim a tax deduction.
Proof of Donations
If the donation you itemized on Schedule A is worth more than $250, you must have written documentation that contains the name of the organization receiving the gift, the amount of the donation, and the date it changed hands. This communication can be in the form of a bank statement, a pay stub showing a payroll deduction, a letter from the receiver, or a printout of a text message or email.
For donations totaling more than $500 for the year, you need to complete IRS Form 8283 for Non-Cash Charitable Contributions and include it with your return. You should also use Section B of this form for non-cash donations worth more than $5,000 and include a professional appraisal when you submit your return. In most cases, the IRS limits the credits you can claim for charitable giving to 50 percent of your taxable income.
The only certainties in life are death and taxes, as the saying goes. Taxes are an annual event that, however unpleasant, we all have to deal with. It may interest you to know that according to the Internal Revenue Service (IRS), an estimated 239.3 million tax returns were filed in 2012 by individuals and businesses in the United States. That amount exceeded by a little more than 1% the number of returns that were filed in 2011, and by 2018 that number is projected to grow by almost 6% to 253.5 million tax filings.
What about those individuals who do not file a regular tax return? More importantly, what would be your fate if you did not pay your taxes in a timely manner? Below are some of the potential consequences that you may face for failing to file or pay your taxes in a timely manner.
Failure to File Penalty
Whether you owe taxes or expect a refund for a given tax year, it is important to provide the IRS with an informational tax return on or before April 15th of every year. When you miss the April 15th deadline you are subject to a penalty of 5% of the amount that you owe for each month you do not file. The penalty for failure to file can grow to 25% of the total unpaid amount. If you file a return 60 days after the due date of April 15th, you will be subject to a penalty of $135 or 100% of the unpaid tax liability, whichever is greater. This applies to both those expecting a refund and those who have taxes due.
Failure to Pay Penalty
In addition to the failure to file penalty that you face for missing the filing deadline, you are subject to a failure to pay penalty of half of 1% of the unpaid balance. This amount is assessed each month that your taxes go unpaid and is capped at 25% of the unpaid amount. Generally the failure to file penalty is higher than the failure to pay penalty. Filing a tax extension (Form 4868) on or before April 15th and paying some or up to 90% of the amount owed, as well as paying the balance in full by the extension deadline (typically 6 months or by October 15th), will help you avoid the failure to file and failure to pay penalties.
Loss of a Tax Refund
If you are owed a refund from the Federal government, filing a tax return by the deadline is the only way for you to ensure that the money will be returned to you in a timely manner. The IRS can hold a taxpayer’s refund for up to 3 years. After this time your refund is treated as a “gift” to the government and will remain in the treasury. This means that your failure to file could result in a generous donation of your tax refund to the federal government to do with as they please. Don’t let that happen…
Loss of Wages, Assets or Arrest
If you do not pay your taxes, the IRS will eventually come after you directly. There initial contact will be a letter informing you of your outstanding liability (or failure to file) with an opportunity to file an amended return. Ignoring this opportunity will result in a possible wage garnishment and even seizure of your assets, such as your home or car. If the amount of your tax liability is deemed by the IRS to be excessive you may be arrested and charged with tax evasion, subject to a fine of up to $100,000 and up to 5 years in prison.
Suspension Of Drivers License
Some states like New York are suspending the drivers licenses and/0r disallowing the renewal of licenses for those that have not paid their taxes. This recently went into effect in 2013. Expect more and more states (especially those with budget issues) to follow suit.
Not filing your taxes, or failing to pay them, is a serious concern and should not be taken lightly. If you need help filing your taxes, or you’ve missed a deadline and need to know what your next steps should be, don’t hesitate to contact an R&G Brenner professional tax preparer.
There are tax breaks that come along with owning your home. These breaks may serve as an incentive for the purchase of homes within certain targeted areas of the country or may make up for any losses a homeowner might face when selling his or her home. As a homeowner it is important to understand what tax breaks are available to you in order for you to take advantage of them and help your tax situation.
These include tax breaks that come when you sell your home, breaks for losses associated with a sale and incentives for certain types of homebuyers, such as first-time home buyers. Here are some tax tips for homeowners or anyone looking to purchase their first home.
Common Tax Breaks
As a homeowner, one of the most common deductions you will take is the one for the interest you pay on your mortgage. The mortgage interest deduction allows a homeowner to receive a reduction in their taxes, with the ability to deduct interest for a home valued at $1.1 million or less. In addition to the mortgage interest deduction, low-income homeowners who were required to take out private mortgage insurance to secure a loan (not to be confused with homeowner’s insurance). This particular deduction may be expiring soon, so it is important to claim it as a homeowner if you qualify.
Tax Incentives for First-time Homebuyers
If you first purchased a home in 2008, 2009 or 2010, you may qualify for a first-time homebuyer credit. This credit, which was extended for purchases with a closing between June 30 and September 30, 2010, reduces your tax bill or increases your refund, depending on how much you owe in taxes already. Qualifying for the credit is based on when you purchased and closed on the purchase, income (based on your modified adjusted gross income) and can be enhanced by military service or working for the federal government. If you received the credit and the home is no longer your primary place of residence, you may be required to repay the balance you received.
Home Seller Tax Breaks
IRS Publication 523 explains ways in which you as a homeowner can either take an exclusion for any gains from the sale of your home or write off a loss associated with such a transaction. As an example, if you failed to deduct all of the points paid to secure a loan for your mortgage, you may be able to deduct those remaining points in the year in which you sell the house.
Points represent 1% of the loan’s amount that a lender charges in exchange for a lower mortgage interest rate. A maximum exclusion in gains of up to $250,000 from the sale of your home may be taken. The ability to take the exclusion depends on a few factors, which include your meeting the ownership test, use test and other rules. A home owned jointly where separate returns are files permit you and the co-owner to claim up to the maximum exclusion amount on an individual basis.
Tax Help for Homeowners that Experience a Loss
If you were the victim of a catastrophic loss, such as damage from a fire or an earthquake, it may have been covered by insurance but require you to meet an out-of-pocket cost (such as a deductible). You may be able to deduct your costs associated with those losses on your taxes. Although your out-of-pocket amount may be deductible, any loss covered by insurance would not be considered deductible for income tax purposes.