taxpayers

IRS Announces 2017 Filing Season Date

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!

2016 Year-End Tax Planning

 

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By Tax News

The Internal Revenue Service (IRS) has announced that the next US tax season will begin on January 23, 2017, and reminded individual taxpayers claiming certain tax credits to expect a longer wait for their refunds.

More than 153m individual tax returns are expected to be filed in 2017, and the agency expects more than four out of five will be prepared electronically using tax return preparation software.

Many software companies and tax professionals will be accepting tax returns before January 23 and then will submit the returns when IRS systems open. While the IRS will begin processing paper tax returns at the same time, it was stressed that there is no advantage to filing tax returns on paper in early January instead of waiting for the IRS to begin accepting e-filed returns.

The IRS said it anticipates issuing more than nine out of ten refunds in fewer than 21 days, but reminded taxpayers that it is now required to hold refunds claiming the earned income tax credit and the additional child tax credit until February 15.

In addition, the IRS said it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the agency cautioned that many affected taxpayers may not have actual access to their refunds until the week of February 27.

“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay.”

The filing deadline to submit 2016 tax returns will be April 18, 2017, rather than the traditional April 15 date due to a weekend and a holiday.

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 compliance costs $409 billion a year

By Bankrate

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!

taxes-blog-Tax-compliance-costs-409-billion-a-year

The Internal Revenue Service is up front about the hassles of filing your annual tax return. In the instructions for Form 1040, the tax agency breaks out its estimates of taxpayer filing burden.

According to the IRS, it takes the average taxpayer 13 hours to fulfill his or her annual filing responsibility. That covers filling out the forms, records keeping, tax planning and other miscellaneous tax tasks.

Now the Tax Foundation has taken a macro look at the compliance costs of IRS regulations.

Billions of hours and dollars

The Washington, D.C.-based tax policy think tank says Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016. And those hours will cost the U.S. economy $409 billion this year, says the Tax Foundation.

While the ever-growing tax code is a major factor, an equally annoying problem is the amount of regulations the IRS issues in connection with those tax laws.

“The tax statutes passed by Congress are only the tip of the iceberg when it comes to tax complexity,” says Tax Foundation President Scott Hodge in the report. “There are roughly 7.7 million words of tax regulations, promulgated by the IRS over the last century, which clarify how the U.S. tax statutes work in practice. On top of that, there are almost 60,000 pages of tax-related case law, which are indispensable for accountants and tax lawyers trying to figure out how much their clients actually owe.”

Or, as the old Capitol Hill saying goes, the tax code is the ultimate “keep tax professionals employed” law.

A big business burden

The Tax Foundation study, using data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistics, calculated the productivity costs of IRS paperwork.

Topping the list of 50 forms is the business income tax return.

Companies spend 2.8 billion hours completing their tax forms at a total annual cost of more than $147 billion.

Individual taxpayers burdened, too

We individual taxpayers are close behind. Filing of individual tax returns takes more than 2.6 billion hours, coming to a dollar cost of $98.7 billion.

Rounding out the top 5 most costly tax filings are tax returns for an S corporation, Form 4562 to claim depreciation and amortization (personal aside: the first time I filed this form in pre-software days, I got so frustrated I cried) and employers’ quarterly federal tax returns.

Also in the top 10 are filings for estates and trusts and Schedule C, which is filed by entrepreneurs operating their own businesses.

Time is tax money

“Time is the most valuable thing we have, and we should not be forced to waste it complying with IRS forms,” says Hodge, who encourages Congress to keep the Tax Foundation findings in mind when considering tax reform.

Do you feel overwhelmed when you do your taxes? How long does the process take? Or do you hand your tax duties over to a professional?

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.

IRS does sometimes call taxpayers

By Bankrate

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!

taxes-blog-irs-does-sometimes-call-taxpayers

The Internal Revenue Service has learned a hard lesson about never saying never.

After years of assuring us that IRS employees never initiate calls to taxpayers, a tax preparer told the National Taxpayer Advocate that one of his clients had indeed received a call from the IRS — the real, live, legitimate IRS — without any prior notice.

That “no call without a letter first” procedure is regularly cited by the IRS, including by Commissioner John Koskinen himself, when alerts are issued in connection with the persistent IRS impersonation telephone tax scam.

As the scam, which the IRS and the Treasury Inspector General for Tax Administration say is the largest ever, expanded, taxpayers were advised to ignore purported phone calls from the IRS in order to protect themselves against tax identity theft and refund fraud.

Now, that warning has been turned upside down — at least a bit.

IRS contact confusion

That actual IRS agents do sometimes call taxpayers unannounced has the tax world buzzing. It also has taxpayers worried about how they now can differentiate between real IRS callers and criminal con artists.

The revelation came at a May 5 public forum in Iowa, one of several that National Taxpayer Advocate Nina Olson is holding across the country.

According to the tax publication Tax Analysts, which first reported the real IRS auditor calls, an Iowa enrolled agent said an IRS employee in the state called one of his clients, an elderly man, without first sending the taxpayer a contact letter.

While Olson expressed surprise at the unannounced IRS phone call, others at the forum said the practice was common, at least in the Hawkeye State.

After the Iowa event, Olson told Tax Analysts that an Omaha, Nebraska-based Taxpayer Advocate Service staffer told her that as far back as a year ago, the Internal Revenue Manual advised revenue agents that the preferred method for initiating taxpayer contact was by phone.

Olson gave the IRS’ occasional first-contact calls the benefit of the doubt, speculating that the IRS manual’s call instruction may be old and not revised to account for the current rash of telephone tax scams.

IRS revises phone call procedure

The IRS itself, however, has had second thoughts about its call-first audit outreach.

In statement issued after the Iowa forum, the IRS detailed the differences between a real auditor’s call and one from tax ID thieves. “Generally, phone scam callers are focused on masquerading as an IRS collection operation and demanding immediate payment of money,” said the IRS statement. “These callers typically are not saying they are contacting taxpayers for an audit.”

The IRS also noted that when a legitimate tax agent conducts an audit, an appointment generally must be scheduled to discuss the case. IRS revenue agents do, in some limited in-person field audits, call first to schedule the initial audit meeting. But during those scheduling calls, a real IRS agent will not ask for payment or personal financial information.

Those call-first instances, however, are over.

“In an abundance of caution and in light of pervasive phone scams seeking to extort money from taxpayers, the IRS has decided to adjust this policy for in-person field exams,” said the IRS in its statement. It now will notify taxpayers in this smaller exam category first by mail that their return has been selected for audit and then contact them to schedule audit appointments.

You, too, can help by remaining skeptical of all purported tax calls. If you are concerned about a call ostensibly from the IRS, hang up and contact the agency directly yourself or have your tax preparer do so.

Don’t worry. The IRS won’t be mad that you broke off the call. In fact, the agency suggests the very same thing.

You also should keep an eye on your personal data and credit reports if you have or suspect you’ve fallen prey to tax identity thieves.

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.

Pay taxes in cash at 7-Eleven stores

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

taxes-blog-pay-taxes-in-cash-at-7-eleven-stores

The Internal Revenue Service now is accepting cash from taxpayers who don’t have bank accounts or who prefer to pay their bills, tax and otherwise, that way.

Uncle Sam’s tax collector has partnered with ACI Worldwide’s Official Payments and PayNearMe to make cash tax payment available at more than 7,000 7-Eleven stores across the country.

“Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash,” said IRS Commissioner John Koskinen in announcing the new service.

But, this being taxes and the IRS, the cash option isn’t as simple as showing up at your neighborhood convenience store and handing over your tax payment.

Here’s a primer on using the cash tax payment option.

Pay, but not quickly, with cash

Start at the IRS payments web page. Click the tab at the top of IRS.gov, “Payments,” to take you there.

Once at the payments page, click the “cash” link (under “Other ways you can pay”). Under the first step, click the link that takes you to Official Payments, with which the IRS has worked since 1999 to accept debit and credit card tax payments.

At the Official Payments website, start the payment process. No, it doesn’t say “pay with cash” yet. You’ll get there after you select the type of tax payment (annual 1040, estimated tax, etc.) you want to make.

After clicking on “Start,” the next web page offers you the “Cash at 7-Eleven” payment option. When you click “continue,” it will take you through the process, which ultimately will result in you getting an email from Official Payments that validates your information.

After the IRS also confirms your data, you’ll then get another email, this time from PayNearMe. This is the company that actually accepts your cash at a 7-Eleven and delivers it to the U.S. Treasury.

In that email you’ll find a link that will provide you with your PayNearMe code. You can print it or have it sent to your smartphone.

Now you’re ready to head, code in hand or on phone, to a participating convenience store. You can find one of the IRS-approved 7-Eleven payment locations by going again to the IRS cash payment page.

The convenience store clerk will give you a receipt for your payment, which should post to the taxpayer’s IRS account within 2 business days.

A few more cash payment details

As you can see from the process, it’s not a one-day task, so plan accordingly. If you wait until April 18 to pay, you won’t make the deadline and will be hit with late-payment penalties.

Similarly, the payment code is not good forever. It will expire 7 days after it is emailed to you.

Find your 7-Eleven early. Not every store is participating. And in some states, you can’t use this cash payment option at all. Official Payments notes in the fine print when you choose the cash option that, “There are no participating locations in the following states at this time: AL, AK, AR, GA, HI, LA, MN, MS, MT, NE, NM, ND, OK, SD, TN, WY.”

The maximum cash payment you can make is $1,000 per day.

And whatever cash amount you pay, it will cost you a few dollars more. A $3.99 service fee will be added automatically when you set up your cash payment at Official Payments.

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.

 

IRS will share tax-filing info to fight identity theft

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

taxes-blog-irs-will-share-tax-filing-info-to-fight-identity-theft

When taxpayers hear that their tax information will be shared, they generally freak out, and with good reason. Almost daily we learn of some hacking incident in which personal data is obtained and then used to steal the victims’ financial identities.

The IRS has not been immune from such security breaches. Its own online transcript tool was compromised last spring. Tax-related identity theft topped the Federal Trade Commission’s consumer complaint list in 2014 and continues to grow.

Now, however, the IRS, along with state tax administrators and tax industry partners that make up the so-called Security Summit, say that sharing of taxpayer filing data will help stem tax identity theft and tax-return fraud.

The group, which was formed in March, has announced new security practices that will take effect with the 2016 filing season.

Share and share alike

One security move is ensuring that federal and state tax agencies, along with the tax industry that helps millions of individuals file their returns each year, have all the information they need to fight identity thieves.

In its work over the past 7 months, the Security Summit identified 20 new pieces of information that can be shared at tax-filing time with the IRS and states to help authenticate a taxpayer and detect identity theft refund fraud.

This information includes such things as repetitive use of Internet Protocol, or IP, numbers to transmit returns; identification data from computers from which returns originate; and the time it takes to complete a tax return, a potential indicator of computer-mechanized fraud.

States, tax industry responsibilities

Among those sharing this data will be e-file providers who submit 2,000 or more returns a year. These e-filing agents now will be required to research and analyze returns and then provide any potential identity-theft data to the IRS and the states.

State operating agreements also will include like-kind requirements for data-sharing and identity theft lead reporting to the IRS.

The goal here is to catch patterns of fraud and stop them before they become full-blown identity theft catastrophes.

The IRS, at the request of tax industry representatives and state tax offices, will act as the conduit for sharing the information with states via a secure data transfer process for the 2016 filing season. So far, 34 state departments of revenue and 20 tax industry members have signed on to part of the new information-sharing system, with more expected to sign later.

Regardless of what tax info is shared among preparers and tax agencies, you need to keep track of who’s looking at your personal data. You can do so through myBankrate.

Do you agree with the IRS and its tax-filing partners that the sharing of filer data will help stop tax identity theft? Or do you think it provides another avenue for private information to be hacked?

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.

Thieves Access IRS Get Transcript App, 100,000 Accounts Compromised

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 AICPA

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The IRS announced on Tuesday that criminals have used taxpayer-specific information to gain access to approximately 100,000 taxpayers’ accounts through the IRS’s Get Transcript online application and steal those taxpayers’ data. The Get Transcript app has been shut down temporarily.

The IRS says the criminals obtained enough taxpayer-specific information from outside sources that they were able to get through the Get Transcript authentication process. The IRS became aware of the problem late last week when it noticed unusual activity taking place in the application. The hacking apparently started in February and involved approximately 200,000 attempts to access the Get Transcript app. The Get Transcript app is not hosted on the IRS computer system that handles tax return filing submissions, and the IRS says that the filing submission system remains secure.

Both the Treasury Inspector General for Tax Administration (TIGTA) and the IRS’s Criminal Investigation unit are investigating the matter. As for a motive, the IRS said in its announcement of the breach, “It’s possible that some of these transcript accesses were made with an eye toward using them for identity theft for next year’s tax season.”

The IRS says it will provide a free credit monitoring service for those taxpayers whose accounts were hacked. It is also notifying all 200,000 taxpayers whose accounts were the targets of the unauthorized access attempts. Those letters will start going out this week.

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.

Your Rights as a Taxpayer

Scarsdale CPA Paul Herman is here to answer all your personal finance questions!

You probably don’t think of the phrase “taxpayer rights” in conjunction with the IRS. But income tax obligations are not a one-way street.

Learn Your Taxpayer Rights from Scarsdale CPA

Find out what your rights are as a taxpayer.

 

 

The IRS itself spells out your rights, and it is charged with reminding you of them during any interaction.

You have the right to:

Privacy. Unless authorized by law, the IRS will not disclose your personal/financial information.

  • Representation. You can represent yourself, or be represented by an authorized individual (CPA, attorney, enrolled agent, etc.). You can even record a meeting (with ten days’ notice).
  • Pay only the tax due under the law. No more, no less. You might be allowed to make monthly installment payments.

Ask for help in resolving disputes. Write this number down and file it: 877-777-4778. It’s the phone number for the Taxpayer Advocate Service. If you cannot see eye-to-eye with a representative of the IRS on a tax issue, call this number or write to the Taxpayer Advocate at the office that last engaged you. If a tax bill is causing you exceptional hardship, you can also work with this office.

Be relieved of certain penalties and interest. Yes, you do have that right — in some specific cases. If an IRS employee has given you erroneous information, or if you acted, “…reasonably and in good faith,” the agency will waive penalties when allowed by law. The same holds true for interest, if an IRS employee causes, “certain errors or delays”.

Appeal. Don’t think you owe the amount stated? Or feel that, “certain collection actions” were unwarranted? You can request a review of your case by the IRS Appeals Office – or a U.S. court. This step should only be taken if you kept accurate records and cooperated with the IRS.

Make sure the IRS does not violate your rights as a taxpayer. If you have any questions or would like to discuss this further, please contact us. Remember that dealing with the IRS can be a daunting process, but we are here to help.

Herman and Company CPA’s proudly serves Larchmont NY, Mount Kisco NY, Purchase NY, Scarsdale NY, White Plains NY, Bedford Hills NY, Chappaqua NY and beyond.

Filing Status Implications

Westchester tax preparation Herman & Company CPA’s has all the answers to your personal finance questions!

For married taxpayers, the implications of filing a joint or separate return extend beyond tax rates and the standard deduction. Like many aspects of income taxation, there is usually more than one approach to finding the optimal solution. We have listed some of the more common implications of filing either a joint or separate return. Although not an exhaustive list, it highlights several issues to consider.

Some of the implications of filing a joint return include (among others):

  • The requirement that individuals who file a joint return cannot be claimed as dependents on another return. This can be important when married students are still supported by their parents.
  • An individual who files a joint return is not subject to the “kiddie tax” provisions.
  • Joint filers are both responsible for the tax on their joint return. Thus, nontax factors should be considered (i.e., questionable business transactions). In addition, divorced taxpayers will each be liable for tax, interest, and penalties due on a joint return filed before the divorce.
  • Finally, monthly Medicare premiums can increase substantially for a couple filing jointly versus filing separately, especially for a lower-income spouse.

The implications of filing a separate return include (among others):

  • If one spouse itemizes deductions, the other must also, even if total deductions are less than the standard deduction.
  • Taxpayers can generally only deduct expenses they actually paid versus those paid by either.
  • Credits for child care, adoption, education, and earned income are generally not available.
  • If separate filers lived with their spouse during any part of the year, a greater percentage of social security benefits may be taxable because the income threshold for determining the taxable amount is reduced to zero.
  • The exclusion of gain on the sale of a principal residence is limited to $250,000 (each) for separate filers versus $500,000 for a joint return.
  • The $25,000 passive loss exception for actively managed rental real estate may be totally or partially lost. Also, one spouse’s passive income cannot be offset by the other spouse’s passive losses.
  • The limit on the capital loss deduction on a separate return is $1,500 (each).
  • No exclusion is allowed for interest income from Series EE bonds used for higher education expenses.
  • The deduction for interest on qualified education loans is not available.
  • Taxpayers filing separate federal returns typically must also file separate returns for state income tax purposes.

There you have it: the implications for married taxpayers filing jointly or separately. Please contact us to discuss the most advantageous filing status or any other tax compliance or planning issue.

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.