tax tip

Plan would give retirement savers more time

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

give retirement savers more time

Sen. Ron Wyden, D-Ore., proposes to change some aspects of the way people must take retirement withdrawals from tax-deferred accounts. Chip Somodevilla/Getty Images

I admit it. I’m thinking about retirement. Of course, I’ve been thinking about retirement since I was 30.

Back then, my retirement thoughts were (mostly) about socking away money for my post-career years. Now they’re about how to take that money out so that I can enjoy the type of retirement I want.

The tax code makes some withdrawal decisions for retirement savers. If you have a traditional IRA or other tax-deferred account like a 401(k) workplace plan, you must take what are known as required minimum distributions once you hit age 70 1/2.

Sen. Ron Wyden, D-Ore., thinks that age trigger needs to be changed.

RMD details

Required minimum distributions, or RMDs in Internal Revenue Service acronym-speak, is the amount you must take out of tax-deferred retirement accounts each year once you hit that septuagenarian half-birthday.

The reason is obvious. Uncle Sam is tired of waiting to collect taxes on all that retirement money that’s been sitting untouched, in many cases for decades.

The specific withdrawal amounts are a percentage of your total tax-deferred retirement account balances, based on your age.

What if you don’t need or want to touch your traditional IRA or similar account when you get into your 70s? Tough.

Fail to take your annual RMD and you’ll be hit with a penalty that’s 50% of what you should have withdrawn.

ADVISER SEARCH: Need help figuring out your retirement plan? Find a financial planner in your area at Bankrate.com today!

Waiting longer on RMDs

Wyden, who is the ranking Democrat on the tax-writing Senate Finance Committee, wants to push back the RMD age.

In a proposal that Wyden is calling the Retirement Improvements and Savings Enhancements, or RISE, Act, he proposes bumping up the RMD age to 71 in 2018.

The age mandating retirement account distributions then would be increased to 72 in 2023, 73 in 2028 and, thereafter, would be adjusted based on actuarial estimates of increases in life expectancy.

“The ‘required minimum distribution’ age of 70.5 years has remained unchanged since the early 1960s,” says Wyden. Since then, life expectancy has risen, but the target withdrawal age for retirement accounts has not moved. Wyden’s proposal essentially is a life-expectancy inflation adjustment.

No RMDs for smaller amounts

Wyden also thinks it’s unfair to force savers to deplete their retirement savings within a certain time frame when they don’t have huge sums in their tax-deferred accounts.

The RISE Act would exempt owners of traditional IRAs and similar RMD-affected accounts from the mandatory withdrawal rules if balances in their retirement plans come to less than $150,000.

This flexibility, says Wyden, will let owners of small retirement accounts use that money as they need during their older years.

RATE SEARCH: Thinking about downsizing? Compare mortgage rates at Bankrate.com today!

Tell Wyden what you think

Wyden acknowledges that some already are questioning some of his proposals.

For example, there is concern from plan managers that the $150,000 exemption level would be hard to administer.

So Wyden is seeking public input on this and other portions of the RISE Act.

The measure, he notes, is not a formal piece of legislation (yet). Rather, it’s a discussion draft. It is being circulated specifically to get reaction, review and comment. “The responses will be reviewed and, if appropriate, incorporated into legislation,” says Wyden.

You can email your thoughts on the RISE Act to Retirement_Savings@finance.senate.gov. If you prefer snail mail, address your thoughts to Wyden at Senate Committee on Finance, 219 Dirksen Senate Office Building, Washington, D.C. 20510.

Bankrate also would like to hear from you on not only the RISE proposal discussed here, but other retirement savings issues. Do you find tax laws help you sock away cash for your golden years? Or are the retirement account tax rules too complicated or restrictive?

Keep up with federal and state tax news, as well as find filing tips, calculators and more at Bankrate’s Tax Center.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Tax Calendar Q1 2015

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

Your 2015 Tax Calendar Is Here.

time-481450_640

January 15

• Individual taxpayers’ final 2014 estimated tax payment is due unless Form 1040 is filed by February 2, 2015, and any tax due is paid with the return.

February 2

• Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security, and income taxes withheld in the fourth quarter of 2014. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.

• Employers who have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944 (“Employer’s Annual Federal Tax Return”).

• Give your employees their copies of Form W-2 for 2014. If an employee agreed to receive Form W-2 electronically, have it posted on the website and notify the employee.

• Give annual information statements to recipients of certain payments you made during 2014. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be filed electronically with the consent of the recipient.

• File Form 940 (“Employer’s Annual Federal Unemployment (FUTA) Tax Return”) for 2014. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.

• File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2014 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, etc. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 11 to file the return.

• File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural Employees”) to report Social Security and Medicare taxes and withheld income tax for 2014. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

March 2

• The government’s copy of Form 1099 series returns (along with the appropriate transmittal form) should be sent in by today. However, if these forms will be filed electronically, the due date is extended to March 31.

• The government’s copy of Form W-2 series returns (along with the appropriate transmittal Form W-3) should be sent in by today. However, if these forms will be filed electronically, the due date is extended to March 31.

March 16

• 2014 income tax returns must be filed or extended for calendar-year corporations. If the return is not extended, this is also the last day for calendar-year corporations to make 2014 contributions to pension and profit-sharing plans.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

New Law Creates Tax-Favored Savings Accounts for Disabled Taxpayers

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

ttatop

As part of the larger tax extender legislation passed on Tuesday, Congress approved the Achieving a Better Life Experience (ABLE) Act of 2014 (H.R. 647), which will allow disabled individuals to save money to pay for their disability expenses in tax-favored accounts, called ABLE accounts. The House of Representatives passed the measure on Dec. 3, by a vote of 404–17, and it now goes to President Barack Obama for his signature.

The purpose of the bill is “[t]o encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life” and “[t]o provide secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance,” Medicaid, and other sources (H.R. 647, §101).

The bill adds a new Sec. 529A to the Code, under which a qualified ABLE program will be exempt from taxation (except for unrelated business income tax). A qualified ABLE program is a program run by a state that allows a person to make contributions for a tax year, for the benefit of an eligible individual, to an ABLE account established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account. A state’s ABLE program must limit designated beneficiaries to one account and must allow accounts to be opened only for residents of that state or a contracting state.

Eligible individuals must file a disability certification with the IRS or meet certain criteria for blindness or disability under the Social Security Act (42 U.S.C. §1382).

Contributions must be made in cash, and the program must limit annual contributions to the amount of the annual gift tax exclusion in effect for that tax year.

The ABLE program must provide separate accounting for each designated beneficiary, and designated beneficiaries and contributors must not be able to direct the investment of contributions or earnings in the account.

Distributions from the account will not be included in the designated beneficiary’s gross income as long as they do not exceed the beneficiary’s qualified disability expenses. If they do exceed the beneficiary’s qualified disability expenses, the amount otherwise includible in gross income will be reduced by an amount bearing the same ratio to that amount as the expenses bear to the distributions.

Funds in ABLE accounts will also be disregarded for purposes of various federal means-tested programs.

Once signed by the president, the bill will take effect for tax years beginning after Dec. 31, 2014

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Time to make year-end tax moves

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

Tax season finally ended, with millions of tax stragglers getting their 2013 returns into the Internal Revenue Service by the Oct. 15 extension deadline.

Now it’s time to think about 2014 taxes. Here are some info from our friends at Bank Rate.

© Garsya/Shutterstock.com

Sorry. I know you’d like to not think about taxes for a while. But if you snooze, you lose when it comes to taxes.

Tax questions to ask now

Taxes, like other financial planning efforts, require a strategy. The best starting point in any of these plans is where you are now.

Look at your recently filed Form 1040 to find out what you did (or didn’t do) this year. It will offer guidance on what you should do for the 2014 tax year.

What was your 2013 taxable income? Do you expect it to be about the same this year? Does it look like you might be moving into a higher tax bracket? If so, now is the time to look into the possibility of deferring income.

Were you surprised, pleasantly or otherwise, by your tax bill? Did your income level cause you to lose some of your personal exemption amounts and itemized deductions? Did you have to pay the 3.8 percent net investment income tax or 0.9 percent added Medicare surcharge?

Get help now

The tax code is increasingly complex, said Stolz, which is why it is critical to analyze how it affects you. “If you’re comfortable doing these types of analyses yourself, keep doing that,” said Stolz. Bankrate’s tax guide and Tax Adviser can help you answer many of your tax questions.

But if you need more direct, personal help, get it.

“Accelerating this, slowing down that, you might want to work with someone,” Stolz said. “Tax planning is like a clown’s long balloon. When you squeeze one area, it goes up in another.”

And it’s better to seek professional tax advice now, when changes can be made by year’s end, rather than trying to deal with a misshapen tax balloon once 2015 arrives.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Individual Year End Tax Planning Ideas

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

DeathtoStock_Simplify10As we approach year end, it’s time again to focus on last-minute moves you can make to save taxes — both on your 2014 return and in future years. Here are a few ideas.

Maximize the benefit of the standard deduction. For 2014, the standard deduction is $12,400 for married taxpayers filing joint returns. For single taxpayers, the amount is $6,200. Currently, it looks like these amounts will be about the same for 2015. If your total itemized deductions each year are normally close to these amounts, you may be able to leverage the benefit of your deductions by bunching deductions in every other year. This allows you to time your itemized deductions so they are high in one year and low in the next. For instance, you might consider moving charitable donations you normally would make in early 2015 to the end of 2014. If you’re temporarily short on cash, charge the contribution to a credit card — it is deductible in the year charged, not when payment is made on the card. You can also accelerate payments of your real estate taxes or state income taxes otherwise due in early 2015. But, watch out for the alternative minimum tax (AMT), as these taxes are not deductible for AMT purposes.

Consider deferring income. It may be beneficial to defer some taxable income from this year into next year, especially if you expect to be in a lower tax bracket in 2015 or affected by unfavorable phase out rules that reduce or eliminate various tax breaks (child tax credit, education tax credits, and so forth) in 2014. By deferring income every other year, you may be able to take more advantage of these breaks every other year. For example, if you’re in business for yourself and a cash-method taxpayer, you can postpone taxable income by waiting until late in the year to send out some client invoices. That way, you won’t receive payment for them until early 2015. You can also postpone taxable income by accelerating some deductible business expenditures into this year. Both moves will defer taxable income from this year until next year.

Secure a deduction for nearly worthless securities. If you own any securities that are all but worthless with little hope of recovery, you might consider selling them before the end of the year so you can capitalize on the loss this year. You can deduct a loss on worthless securities only if you can prove the investment is completely worthless. Thus, a deduction is not available, as long as you own the security and it has any value at all. Total worthlessness can be very difficult to establish with any certainty. To avoid the issue, it may be easier just to sell the security if it has any marketable value. As long as the sale is not to a family member, this allows you to claim a loss for the difference between your tax basis and the proceeds (subject to the normal rules for capital losses and the wash sale rules restricting the recognition of loss if the security is repurchased within 30 days before or after the sale).

Invest in tax-free securities. The most obvious source of tax-free income is tax-exempt securities, either owned outright or through a mutual fund. Whether these provide a better return than the after-tax return on taxable investments depends on your tax bracket and the market interest rates for tax-exempt investments. With the additional layer of net investment income taxes on higher income taxpayers, this year might be a good time to compare the return on taxable and tax-exempt investments. In some cases, it may be as simple as transferring assets from a taxable to a tax-exempt fund.

Again, these are just a few suggestions to get you thinking. Please call us if you’d like to know more about them or want to discuss other ideas.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

 

Simple Tax Savings Techniques for Security Gains

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

Simple Tax Savings Techniques for Security Gains

The market swings over the last several years may have you wondering whether it’s time to capitalize on some market gains. While taxes should not be the main consideration in this decision, they certainly need to be considered, as they can make a significant impact on your investment return.

With that in mind, here are a couple of tax-smart strategies to consider as you analyze your investment opportunities and decide what to do about recent gains.

Should you wait to sell until the stock qualifies for long-term capital gains treatment?

If the stock sale qualifies for long-term capital gains treatment, it will be taxed at a maximum tax rate of 23.8%. Otherwise it will be taxed at your ordinary-income tax rate, which can be as high as 43.4%.

Clearly, you’ll pay less taxes (and keep more of your gains) if the stock sale qualifies for long-term capital gains treatment. The amount of taxes you’ll save depends on your ordinary-income tax bracket.

To qualify for the preferential long-term capital gains rates, you must hold the stock for more than 12 months. The holding period generally begins the day after you purchase the stock and runs through (and includes) the date you sell it. These rules must be followed exactly, because missing the required holding period by even one day prevents you from using the preferential rates.

The question then becomes: Are the tax savings that would be realized by holding the asset for the long-term period worth the investment risk that the asset’s value will fall during the same time period? If you think the value will fall significantly, liquidating quickly, regardless of tax consequences, may be the better option. Otherwise, the potential risk of holding an asset should be weighed against the tax benefit of qualifying for a reduced tax rate.

Comparing the risk of a price decline to the potential tax benefit of holding an investment for a certain time is not an exact science. We’d be glad to help you weigh your options.

Use “specific ID method” to minimize taxes

If you are considering selling less than your entire interest in a security that you purchased at various times for various prices, you have a couple of options for identifying the particular shares sold:

(1) The first-in, first-out (FIFO) method and

(2) The specific ID method.

FIFO is used if you do not (or cannot) specifically identify which shares of stock are sold, so the oldest securities are assumed to be sold first. Alternatively, you can use the specific ID method to select the particular shares you wish to sell. This is typically the preferred method, as it allows you at least some level of control over the amount and character of the gain (or loss) realized on the sale, which can lead to tax-savings opportunities.

The specific ID method requires that you adequately identify the specific stock to be sold. This can be accomplished by delivering the specific shares to be sold to the broker selling the stock. Alternatively, if the securities are held by your broker, IRS regulations say you should notify your broker regarding which shares you want to sell and the broker should then issue you a written confirmation of your instructions.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Weddings Mean Tax Changes & Small Business Resources

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!  

Weddings Mean Tax Changes

7068332325_ee0bd7714f_z

It may not be as high on the wedding plan checklist as the venue, invitations and attire, but there are important tax issues created by a marriage that warrant some prompt attention following the wedding.

Name change. Anytime names are changed, it should be reported to the Social Security Administration (SSA). The name associated with an individual’s Social Security Number (SSN) should match the name on the tax return. To change a name with the SSA, file Form SS-5, “Application for a Social Security Card.” The form is available from www.ssa.gov, by calling (800) 772-1213, or from the local SSA office.

Address change. Let the IRS know about an address change by filing Form 8822, “Change of Address.” Also notify the U.S. Postal Service at www.usps.com to forward mail. You may also report the change at your local post office.

Change tax withholding. A change in marital status requires that a new Form W-4, “Employee’s Withholding Allowance Certificate,” be furnished to the employer(s). Combined incomes may move the taxpayers into a higher tax bracket. Search www.irs.gov for the IRS Withholding Calculator tool for help completing the new Form W-4.

Change in filing status. Marital status is determined as of December 31 each year. Spouses can choose to file jointly or separately each year. We can help you make that determination by calculating your tax liability both ways.

Change in circumstances. Taxpayers receiving an advance payment of the health care premium tax credit in 2014 should report changes in circumstances, such as a change in income or family size, to the Health Insurance Marketplace. Also, the Marketplace should be notified when you move out of the area covered by your current Marketplace to ensure you get the proper type and amount of financial assistance.

 

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Midyear Tax Planning Ideas

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

 

mid-year-tax-planning

Tax planning is a year-round process, so now is a good time to think about the following:

Are you considering making a cash gift to a relative? If so, consider making the gift in conjunction with the overall revamping of your stocks and mutual funds held in taxable brokerage accounts to achieve better tax results. Don’t gift loser shares (currently worth less than you paid for them). Instead, sell these shares, recognize the capital loss on your tax return, and then gift the cash proceeds to a relative. However, do gift winner shares to lower tax bracket relatives (unless they are under age 24 and subject to the Kiddie Tax). The 2014 annual gift tax exclusion is $14,000.

Are you considering making a contribution to a favorite charity? The previous strategies will also work well for contributions to qualified charities. Sell loser shares, recognize the loss on your tax return, and then give the cash proceeds to the charity and claim the resulting charitable contribution (if you itemize). Donate winner shares to the charity and deduct the full current fair market value at the time of the gift (without being taxed on the capital gain). The tax-exempt organization can sell your donated shares without owing tax.

Are you self-employed? Consider employing your child in the business (but pay a reasonable wage for their age and work skills). This practice can shift income (which is not subject to the Kiddie Tax) to the child who is normally in a lower tax bracket, decrease payroll taxes, and enable the child to contribute to an IRA.

Is your estate plan current? If you already have an estate plan, it may need updating to reflect the current estate and gift tax rules. For 2014, the unified federal gift and estate tax exemption is a generous $5.34 million, and the rate is 40%. Furthermore, the impact of the Supreme Court’s Windsor decision and resulting IRS changes in the federal definition of marriage mean that legally married same-sex couples need to revise their estate plan. Plus, there may be nontax reasons to update your estate plan.

Please contact us to discuss any tax planning strategies you are interested in implementing.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Federal Income Tax Withholding Adjustment & Tax Calendar

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Do you need to adjust your federal income tax withholding amount?

With over half the year already gone, now is a good time to check to see if you are on track to have about the right amount of federal income tax withheld from your paychecks for 2014. The problem with not having the correct amount of taxes withheld for the year is that:

 

    • If your taxes are significantly underwithheld for the year, you risk being hit with a nondeductible IRS interest rate penalty.

 

 

    • If your taxes are significantly overwithheld for the year, you are basically making an interest-free loan to the government when you could be putting that money to work for you.

 

Neither situation is good. The simplest way to correct your withholding is by turning in a new Form W-4 (“Employee’s Withholding Allowance Certificate”) to your employer. Taking this action now will adjust the amount of federal income tax that is withheld from your paychecks for the rest of 2014.

Specifically, you can adjust your withholding by increasing or decreasing the number of allowances claimed on your Form W-4. The more allowances claimed, the lower the withholding from each paycheck; the fewer allowances claimed, the greater the withholding. If claiming zero allowances for the rest of the year would still not result in enough extra withholding, you can ask your employer to withhold an additional amount of federal income tax from each paycheck.

While filling out a new Form W-4 seems like something that should be quick and easy, it’s not necessarily so – because the tax rules are neither quick nor easy. Fortunately, there is an online Form W-4 calculator on the IRS website at www.irs.gov that can help to make the job simpler. From the IRS home page, click on the “More …” link under “Tools.” Then click on the “IRS withholding calculator” link. You will see the entry point for the online calculator. It’s pretty easy to use once you assemble information about your expected 2014 income and expenses, plus your most recent pay stub and tax return.

Please understand that the IRS calculator is not perfect. (Remember, it’s free, and to some extent, you always get what you pay for.) However, using the calculator to make withholding allowance changes on a new Form W-4 filed with your employer is probably better than doing nothing, especially if you believe you are likely to be significantly underwithheld or overwithheld for this year.

Of course, if you want more precise results, we would be happy to put together a 2014 tax projection for you. At the same time, we can probably recommend some planning strategies to lower this year’s tax bill. Contact us for details.


Setting a dateTax Calendar

July 15

 

    • If the monthly deposit rule applies, employers must deposit the tax for payments in June for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

 

July 31

 

    • If you have employees, a federal unemployment tax (FUTA) deposit is due if the FUTA liability through June exceeds $500.

 

 

    • The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is also due today. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until August 11 to file the return.

 

August 15

 

    • If the monthly deposit rule applies, employers must deposit the tax for payments in July for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

 

September 15

 

    • Third quarter estimated tax payments are due for individuals, trusts, and calendar-year corporations.

 

 

    • If a five-month extension was obtained, partnerships should file their 2013 Form 1065 by this date.

 

 

    • If a six-month extension was obtained, calendar-year corporations should file their 2013 income tax returns by this date.

 

 

  • If the monthly deposit rule applies, employers must deposit the tax for payments in August for Social Security, Medicare, withheld income tax, and nonpayroll withholding.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Taxpayer Bill of Rights

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Web

Since assuming her position in 2001, National Taxpayer Advocate Nina E. Olson has emphasized the protection of taxpayer rights in tax administration. In her 2007 Annual Report to Congress, and in later reports, she proposed a new Taxpayer Bill of Rights. On June 10, 2014, the IRS formally adopted the Advocate’s proposal, to renew the focus on protecting the rights of taxpayers in all of their dealings with the IRS.

This document groups the dozens of existing rights in the Internal Revenue Code into ten fundamental rights, and makes these rights clear, understandable, and accessible for taxpayers and IRS employees alike.

The Right to Be Informed
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

The Right to Quality Service
Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.

The Right to Pay No More than the Correct Amount of Tax
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

The Right to Challenge the IRS’s Position and Be Heard
Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

The Right to Appeal an IRS Decision in an Independent Forum
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

The Right to Finality
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

The Right to Privacy
Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

The Right to Confidentiality
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

The Right to Retain Representation
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

The Right to a Fair and Just Tax System, Including Access to the Taxpayer Advocate Service
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

 

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.