Author Archives: c08895703

IRS Shutdown

During the longest partial government shutdown in U.S. history, many IRS operations are inactive.  About 70,000 IRS employees are furloughed (87.5% of its workforce), and most of those who are still on the job are working without pay.

Despite the shutdown the IRS is open for filing season beginning on January 28, 2019.   Tax refunds will be issued during the government shutdown, while most other functions of the IRS are halted, including processing of transcripts, audits, and processing amended returns.  Additionally, the IRS will not respond to taxpayer questions.

The PATH Act remains in effect which delays refunds for taxpayers claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) until mid-February.  The IRS must hold the entire refund amount until at least February 15th, not just the refundable credit portions.  The delay of refunds is in response to the rise of identity theft, causing the IRS to take additional steps to safeguard taxpayer’s private information.  Since these types of returns go through additional verification processes taxpayers should anticipate even further additional amounts time before receiving their refunds.

The IRS capability of handling problems during the shutdown is questionable.  If a taxpayer has their tax return rejected during the automated filing process they may be waiting a long time for their refund because these types of returns require human interaction.

We recommend E-Filing your income tax returns and file as early as possible.  Our E-filing experiences so far have been efficient IRS return receipt acknowledgements and timely direct deposit of taxpayer refunds.  Whereas any documents that have been mailed to the IRS have been slow to process.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely on this information as your sole source of authority. Contact Steven Cook at Matrix III Income Tax Service, LLC for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. He can save you time and offer insight on how to use the tax breaks available to you. Call 216-332-7283 for more information.

IRS Deadline Approaching for Small Non-Profit Organizations

Garfield Heights, OH. – Even small non-profit organizations, such as sports clubs, civic organizations and local associations, are required to file a yearly report with the IRS. By law, the IRS will automatically revoke the federal tax-exempt status of organizations that fail to file annual reports for three consecutive years. Churches and church-related organizations are not required to file annual reports unless they have unrelated business taxable income.

Form 990-series information returns and notices are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their tax year, making Tuesday, May 15, 2018, the deadline for them to file for 2017. The IRS offers an online search tool called Exempt Organizations Select Check, which helps users more easily find key information about the federal tax status and filings of certain tax-exempt organizations, including whether an organization has had their federal tax exemption automatically revoked.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely on this information as your sole source of authority. As a member of the National Association of Tax Professionals, Steven Cook can help your organization ensure the correct annual reports are filed with the IRS or help your organization get its tax-exempt status reinstated. Steven can be reached by calling 216-332-7283 or emailing info@matrix3tax.com

For more information about NATP, visit natptax.com.

Are Your Child Care Expenses Deductible?

[Garfield Heights, Ohio] – When trying to cut costs during these hard economic times, it is unlikely that your child care expenses can be reduced. Luckily, there is the credit for child and dependent care expenses offered on your individual tax return. The credit can be up to 35 percent, depending upon your adjusted gross income, of up to $3,000 of your qualifying expenses.

In order to be eligible to receive the credit for child and dependent care expenses, the person receiving the care must be a qualifying person—either your dependent child under the age of 13 or certain other individuals who are physically or mentally incapable of self-care. Also, you must be the custodial guardian for the qualifying person and they must live with you most of the year, even if you do not claim them as an exemption. Only care provided while you (and your spouse) are either working or looking for work qualifies. If you are married, you must file a joint return in order to file for the credit. In order to claim the credit, you (and your spouse) must have earned income from wages, salaries, tips or net earnings from self-employment. One spouse can be exempt from having earned income if he or she were a full-time student or were physically or mentally unable to care for him or herself.

Another qualification that must be met in order to receive the credit is that a qualified caregiver must provide the dependent care. Spouses, dependents, and children under 19 are not qualified caregivers. At the end of the year, most caregivers will provide a statement with their federal employer ID number (EIN) or social security number (SSN), full name, address, and the amount paid. All of this information is necessary for your tax return. If you do not receive a statement at the end of the year with this information, you should request this information prior to bringing your information to your tax preparer.

If your employer provides a dependent care benefit, the benefit amount reduces the amount of credit available on your tax return. If you pay someone to come to your home and provide care, you may be considered a household employer in which case additional forms need to be included with your tax return.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely on this information as your sole source of authority. Contact Steven Cook at Matrix III Income Tax Service, LLC for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. Call 216-332-7283 for more information.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer for following the advice.  Other factors may need consideration that would change the opinion presented.  

Steven Cook National Association of Tax Professionals (NATP)

Garfield Heights, OH. – Steven Cook at Matrix III Income Tax Service, LLC of Garfield Heights, OH. is affiliated with the National Association of Tax Professionals (NATP).  The NATP is a nonprofit professional association founded in 1979 and is committed to excellence in taxation. Affiliation reflects a mutual commitment to ethical values and dedication to top quality, up-to-date services to professionally and efficiently serve clients.

Contact Steven Cook at Matrix III Income Tax Service, LLC] for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. He can save you time and offer insight on how to use the tax breaks available to you. Contact Steve and his team at 216-332-7283.

The National Association of Tax Professionals (NATP) is the largest nonprofit organization that serves individuals specializing in tax preparation by providing tax education, federal tax research, tax updates and tax office supplies. NATP members work at offices that assist over 12 million people worldwide with U.S. tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. Formed in 1979, NATP’s member base includes enrolled agents, certified public accountants, accountants, attorneys and financial planners. The national headquarters, located in Appleton, WI, employs over 55 professionals. Learn more at www.natptax.com.

Tax Implications for Self-Employed Consultants

Garfield Heights, Ohio – Picking up a second job to supplement household income in a tough economy is becoming more common. Many Americans are choosing to become consultants that visit homes to sell make-up, jewelry, candles, kitchen utensils and food products. Some may not realize the tax implications of becoming a sole proprietor and what they need to do to file taxes.

Conducting business as a sole proprietor is one of the simplest forms of operation. It’s easy to start a business operated as a sole proprietorship and equally easy to discontinue. Your first step when starting a business is to open a separate business checking account. It will be easier to track your deductible expenses if they are not commingled with your personal expenses. If you incurred expenses prior to opening your business, keep them separate from your other expenses. Special tax treatment applies to startup expenses.

It is important to keep track of your mileage, as you might be eligible to deduct it. If you are self-employed and maintain an eligible office in your home, you can deduct the mileage to and from your client/customer’s place of business, as well as between jobs. There are two ways to calculate your auto deductions – the standard mileage rate or actual expenses. The standard mileage rate is the easier method as you simply take your total mileage and multiply it by the current rate ($.535 for 2017). The actual expense method is exactly that, recording the actual expenses such as the cost of gas, oil, insurance, repairs, maintenance, tires, washing, licenses and depreciation. This method requires you to keep very detailed records and if you use your car for personal and business purposes, you’ll have to divide the expenses between the personal and business portion.

The IRS allows self-employed taxpayers to claim a deduction for home-based business expenses if they meet certain requirements. They must use the home office regularly and exclusively:

  • As the principal place of business for a trade or business.
  • As a place to meet with customers in the course of the trade or business, or in connection with the taxpayer’s trade or business, if the location is in a separate structure not attached to the dwelling unit.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely on this information as your sole source of authority. Contact Steven Cook at Matrix III Income Tax Service, LLC for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. He can save you time and offer insight on how to use the tax breaks available to you. Call 216-332-7283 for more information.

# # #

Tax Tips for Military Personnel

Garfield Heights, Ohio – Members of the military and their families may be eligible for special tax benefits. For federal tax purposes, the U.S. Armed Forces include enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense—the Air Force, Army, Coast Guard and Navy.

Travel expenses can be deducted if they are unreimbursed and are incurred while traveling away from home. If you are a member of the U.S. Armed Forces on a permanent duty assignment, your home is considered your duty station. To be deductible, your travel expenses must be work-related. You cannot deduct any expenses for personal travel, such as visits to family on leave. If you are a part of the Reserves, unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties are eligible for deduction. You do not have to itemize deductions since eligible expenses are deducted as an adjustment to income. The standard mileage rate for 2016 is 54 cents and 53.5 cents for 2017.

Uniform purchase cost and future upkeep deductibility depends on whether or not the uniform can be worn when off duty. If you are allowed to wear the uniform when you are off duty, you cannot deduct any cost. However, if the uniform is prohibited from being worn when off duty, you can deduct the cost associated with that particular uniform. The following are deductible:

  • Military battle dress uniforms and utility uniforms that you cannot wear when off duty
  • Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords

Moving expenses have special rules that apply to active duty members of the U.S. Armed Forces and their surviving spouses who move because of a permanent change of station. Deductible expenses include unreimbursed costs of moving, travel, storing and insuring household goods and personal items.

Distributions from an IRA, 401(k) or 403(b) plans which were made after the date of the order or call to active duty and before the close of the active duty period have special rules and may not be subject to the 10% penalty tax on early distributions. Such distributions are also eligible to be repaid to the plan if paid back within two years after active duty ends.

This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely on this information as your sole source of authority. Contact Steven Cook at Matrix III Income Tax Service, LLC for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. He can save you time and offer insight on how to use the tax breaks available to you. Call 216-332-7283 for more information.

 

# # #

 

E-filing Your Tax Return – Simple and Safe

Garfield Heights, Ohio – Not so long ago e-filing taxes wasn’t very common. In 2001, of all the federal tax returns filed, 31% were filed electronically. In nine short years, approximately 70% of all federal tax returns filed in 2010 were done so electronically. Those who don’t e-file are now the exception.

Why would almost 99 million taxpayers choose to e-file? No more waiting in line at the post office, no more worrying if your return reached its destination, and no more writing out a check are good reasons. You can pay any tax due by using the Electronic Federal Tax Payment System (EFTPS). Electronic payment options are convenient and secure. E-filing allows you to submit your tax return to the IRS in a quick, accurate and efficient way. You don’t need to worry about attaching specific documents to certain pages or if the person at the IRS correctly keyed in your return. Also, since an e-filed return is computer processed, the processing time is quicker, so you can get your refund faster! More than 74 million refunds were electronically deposited saving taxpayers a trip to the bank.

E-filing is also beneficial for the IRS. For 2009 federal tax returns, it cost the IRS $0.19 to process an e-filed tax return compared to the $3.29 it took the IRS to process a paper return. Computer processed e-filed federal returns consequently have fewer errors than the human processed paper returns.

Contacting a qualified tax preparer is the easiest way to e-file. Contact Steven Cook at Matrix III Income Tax Service, LLC for professional advice for your tax situation. Steven is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. He can save you time and offer insight on how to use the tax breaks available to you. Call 216-332-7283 for more information.

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer for following the advice.  Other factors may need consideration that would change the opinion presented.  

# # #

 

Avoid Common Tax Return Errors

Avoid Common Tax Return Errors

Incorrect Social Security numbers top the list of most frequent mistakes.

Garfield Heights, OH. – At the close of each tax filing season, the Internal Revenue Service (IRS) compiles a list of the most common errors taxpayers make when filing their tax returns. Believe it or not, incorrect mathematical calculations are not the number one error. The most frequent culprit for the past several years is submitting incorrect Social Security numbers on individual income tax returns.

When an incorrect return is filed, the IRS first “rejects” it then sends a notice to the taxpayer requesting additional information. This can delay a refund by several weeks, or even months. In other instances, the IRS may issue a refund to you, but for a lesser amount than what you were expecting. This may occur when a claimed dependent has a missing or incorrect Social Security number, or when another taxpayer claims the same dependent.

Another reason you may receive a reduced refund is if you are eligible to claim a tax credit for child and dependent care expenses but you do not include the Social Security number of your caregiver on your tax return. The IRS will issue your refund, less the amount of the credit. You will then have to file an amended return and wait several more weeks for the rest of your money. All this can be avoided if care is given when entering the required information on your return.

Other details to keep in mind when filing your taxes this year include:

  • Remember to sign your return in the proper place. If you are filing a joint tax return with a spouse, both of you must sign. If one spouse has passed away during the year, the surviving spouse must sign both names.
  • For proper filing, attach Copy B of all Forms W-2 received during the year to the federal return. Also, attach any Forms 1099 that report tax withholding. For electronic filing, all of the appropriate W-2 or Form 1099 information should be entered on the input form, which is included with the electronic return.
  • Mail your return to the proper address. The IRS often changes the address for mailing returns. If you have a balance due, you must use a payment voucher and mail your return to a lock box instead of the service center. If you electronically file your return, the chance of mailing your return to the wrong service center is virtually eliminated.
  • If you owe money this year, make your check payable to the United States Treasury Service, not the IRS.
  • Double-check the tax from the tax tables, as well as all calculations.
  • Make a copy of the return for your records.
  • Be certain there is enough postage on the envelope. Include your full return address. If you owe, it’s a good idea to spend the extra dollars and use registered mail so there is a record that the IRS received your return.

Taking a few minutes to double check your tax return before you send it to the IRS, whether you mail it or electronically file, will increase the likeliness that IRS issues your refund in a timely manner. The IRS encourages taxpayers to e-file. By e-filing your tax return, many common errors may be avoided or corrected by the computer software. Contacting Steven Cook, EA at Matrix III Income Tax Service, LLC is the easiest way to e-file.  Steve is an expert who keeps current on tax law changes as well as a member of the National Association of Tax Professionals. Visit www.matrix3tax.com for contact information.

Rely on a Tax Professional

Real Estate Property Tax Deduction

A taxpayer is eligible to take an itemized tax deduction for real estate taxes paid during the tax year.  Whether a taxpayer itemizes their tax return deductions or takes the standard deduction depends on which one will give the taxpayer the greatest tax benefit.

In order for the taxpayer to be eligible to take the real estate tax paid deduction they must satisfy the following general requirements:

  1. The property tax was assessed in 2017, meaning the taxpayer is liable for the tax. A taxpayer cannot pre-pay or pay a tax that does not exist.
  2. The taxpayer owns the property
  3. The taxpayer pays the tax, meaning the taxpayer uses their own funds to pay the tax. A taxpayer should pay their taxes using one of their own financial accounts as opposed to cash.

An individual that pays real estate taxes for property that they do not own nor are liable than neither the person that owns the property, or the individual that pays the tax may take the deduction.  An individual might consider gifting to the liable taxpayer so they are still able to take the deduction, ask your tax pro for more information.

The Mortgage Interest Deduction has 5 similar general requirements:

  1. Who paid the mortgage – only the taxpayer that paid mortgage is eligible to take the deduction.
  2. Who is listed as the borrower – A taxpayer can only deduct interest on debt on which they are legally liable.
  3. Who has legal title to the house – Exception to #2 is if not directly liable on the mortgage than a taxpayer can deduct interest they paid on the debt as long as they are the legal owner of the house
  4. Is the home secured by the residence
  5. Limit on deducting personal mortgage interest

Real estate taxes and mortgage interest are common deductions each year on many tax returns.  The deductions seem obvious but the underlying requirements must be satisfied in order to take a legal deduction.  See our attached handout for more information about homeowner itemized tax deductions, Itemized_Deductions_-_Homeowners_2017

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer for following the advice.  Other factors may need consideration that would change the opinion presented.  

 

 

Tax Appointment

Tax Practitioner’s often receive questions about what to bring to a tax appointment.  We like when taxpayers bring their tax documents in early in the season.  Attached is an organizer to give you some ideas of what you will need:  Individual Organizer

Tax Pros love to see last years filed tax returns.  There are several elements on that prior return that are important one of which is that income sources tend to be consistent from year to year.  Secondly, the prior year tax figure is used to calculate whether an underpayment penalty applies.  Prior year state and local returns with an amount due and paid might be a tax deduction.  Whereas a state or local refund might be income in the year received.  Lastly, good practitioner’s give that prior year return a good once over to see if there were any missed deductions or credit.  We are required to inform you of a mistake and recommend amending the return both for the taxpayers benefit and the tax authority.

Common items to have ready are:

  • Wage and tax statement, Form W2
  • Retirement or IRA Distribution, Form 1099-R
  • Miscellaneous Income Statement, Form 1099-Misc
  • Social Security Benefit Statement, Form SSA-1099

Other income items to be aware are:

  • Interest Income, Form 1099-INT
    • A taxpayer will receive a 1099-INT for the cash they received for opening a new bank account
    • Or the FMV for goods, for example a free toaster
  • Dividend Distributions, Form 1099-Div
  • Proceeds From Broker, Form 1099-B
    • These statements tend to come out later than other tax documents. Many times brokerage houses will make corrections to their original 1099-B and 1099-DIV statements.  If your brokerage house regularly makes corrections to their original tax documents it might be better to wait longer to file or file an extension to avoid filing amended returns.
  • Partner’s Share of Income, Deductions, and Credits, Schedule K-1

Bring ID:

  • Valid State ID
    • Required this year to E-File individual tax returns. Helps protect tax payer identity.
  • Children Birth Certificates
  • Social Security Cards
  • Proof of Credible Health Insurance Coverage for everyone on the tax return
    • IRS Form 1095-A, 1095-B, or 1095-C
    • Medical Cards
    • Cost of employer sponsored health program, DD code box 12 of W2

Finally we want to know about you the taxpayer.  We want to know what your occupation is, where you going, and when you anticipate your next career change or promotion.  We need to know about household changes of marriage, children, additions or subtractions to the family, or divorce.   We want to know where you came from, where you are at, and where you plan to go.

Pertinent Information:

  • Retirement
  • School
  • Veteran
  • Member of the Safety Forces

This written advice is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer for following the advice.  Other factors may need consideration that would change the opinion presented.