Tag Archives: IRS

Should I Make An Estimated Tax Payment?

estimated tax paymentEstimated tax payments, should I make one? That is a good question and often comes up at the end of every year as to whether one should make an estimated tax payment or not. Let’s split this up into three parts: Are you required to make estimated tax payments?  Do I want to make an estimated tax payment?  Do I benefit from making an estimated tax payment?

Are you required to make estimated tax payments?

The rules for making estimated tax payments are a bit convoluted as outlined in IRS Pub 505.  If on 4/15 you will owe $1,000 or more, if you paid less than 90% of your 4/15 balance, or if you paid under 110% of your prior year balance, you might have to pay estimated taxes.  I will once again refer you to IRS Pub 505 for the details and whether they pertain to you.  Additionally, one must keep in mind that estimated tax payments should have been made in four equal installments on 4/15, 6/15, 9/15, and 1/15.  For example, if you were required to make estimated tax payments but you only made one payment in December, you will still get hit with an estimated tax payment penalty.  If you are behind, it is better to get caught up to stop future penalties from accruing.

Do I want to make an estimated tax payment?

Some people make their estimated tax payments regularly and prefer to overpay than to underpay or try to thread the needle and break even.  For some, the prospect of owing money on 4/15 is horrifying.  In the case of a taxpayer who regularly makes estimated tax payments, an overpayment can be applied forward in lieu of the April 15 estimated tax payment; after all, why get a refund just to write a check the next day back to the IRS.  A lot of this is personal preference.  That being said, we have discouraged using a large refund as a savings vehicle because there is a (small) risk that your refund gets delayed for a variety of reasons such as not being able to e-file or tax identity theft.

Do I benefit from making an estimated tax payment?

You may benefit from making an estimated state tax payment before 12/31.  As an individual, you are a calendar year taxpayer and you can deduct the state income taxes you paid in the year they were paid.  Therefore, if you make your state tax payment before 12/31, you can receive a deduction for it on this year’s taxes but this does not always make sense.  If you had a windfall, you can benefit from making the state tax payment in December as you will be in a higher tax bracket in the current year except when you are in the AMT in which case you are better off waiting until January.  If you make estimated tax payments regularly, the timing of the state tax payment may not matter as much since you then miss out on the deduction for next year.

Clear as mud right?  Should you then go ahead and make an estimated tax payment, I can definitively say, it depends. You are always welcome to call me,  Alex Franch, BS EA , at 781-849-7200.

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Massachusetts Tax Refund (or Federal): Checking the Status is Easy

If you already filed your Massachusetts or federal tax return and are due a refund, you can check the status of your refund online.

Federal/IRS – Where’s My Refund?

Where’s My Refund? is an interactive tool on the IRS web site. Whether you split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, Where’s My Refund? will give you online access to your federal income tax refund information nearly 24 hours a day, 7 days a week.

wheres_my_refund_engIf you e-file your federal return, you can get refund information 24 hours after the IRS acknowledges receipt of your return. Nine out of 10 taxpayers typically receive federal tax refunds in less than 21 days when they use e-file with direct deposit. If you file a paper return, refund information will be available starting four weeks after mailing your return. When checking the status of your refund, have a copy of your federal tax return handy. To access your personalized refund information, you must enter:

  • Your Social Security Number (or Individual Taxpayer Identification Number);
  • Your Filing Status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)); and
  • The exact refund amount shown on your tax return.

Once your personal information has been entered, one of several personalized responses may come up, including the following:

  • Acknowledgement that your return was received and is in processing.
  • The mailing date or direct deposit date of your refund.
  • Notice that the IRS could not deliver your refund due to an incorrect address. You can update your address online using the Where’s My Refund? feature.

Where’s My Refund? provides the most up-to-date information the IRS has. There’s no need to call the IRS unless Where’s My Refund? tells you to do so. The database is updated every 24 hours – usually overnight – so you only need to check once a day.

There’s an App for That

IRS2Go is the IRS’ first smartphone application that lets taxpayers check on the status of their federal income tax refund. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Google Play Store to download the free IRS2Go app.

More Questions or Issues?

Where’s My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you can start a refund trace online.

If you’re still unable to resolve your issue, you can contact the IRS toll-free at 800-829-1040 or contact a local Massachusetts IRS Taxpayer Assistance Center.

Massachusetts/DOR – Webfile for Income

webfileMassachusetts allows you to check your Massachusetts tax refund status on their website, but you need to register with the Massachusetts Department of Revenue in order to do so.

Registering

To create a Login User Name and Password to access your account in WebFile for Income, you will need one of the following:

  • A current year four digit PIN which is only available if a pre-printed tax return was mailed to you. If you did not receive a pre-printed tax return you must select one of the other options. You will not be able to obtain a PIN by contacting the Department of Revenue.
  • Your Massachusetts tax return filed for one of the last four years. You will need your refund or tax due amount from this return.
  • If you do not have either a PIN or have not filed a Massachusetts tax return in the past four years, you should select the “I do not have either” option.

The system will ask you for your name, Social Security Number, email address, and phone number. It will then ask you to create your own User Name, Password, select a secret question and provide the answer to that question.

User Name: Your User Name is the name that you choose to serve as your WebFile for Income identity. Your User Name is not case sensitive.

Password: Your password is the private combination of letters and numbers you chose when signing up for WebFile for Income. Your password is case sensitive and it must be between 8 and 15 characters, have at least 1 upper and 1 lower case letter, and 1 digit. (i.e. Example1)

Secret Question and Answer: You will select a secret question from the drop down menu and provide an answer to the question selected. The answer is case sensitive so please record your secret answer exactly as you have entered it (including correct placement of upper and lower case). The Secret Question and Answer will be known only to you, and can be used in the future to reset your password if you forget it.

There’s an App for That – for Massachusetts Tax Refund, too!Massachusetts Tax Refund

Massachusetts WebFile Mobile is the DOR’s first smartphone application that lets taxpayers check on the status of their Massachusetts tax refund. Apple users can download the free Massachusetts WebFile Mobile application by visiting the Apple App Store. Android users can visit the Google Play Store to download the free Massachusetts WebFile Mobile app.

Having problems?

You can contact the Massachusetts Department of Revenue for help with your state tax refund at 800-392-6089 or browse their help library online at this link.

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Tax Filing: Jointly or Separately?

By: Alex Franch, BS EA

2015_02_12 Tax Filing Joint or SeparateMost married taxpayers know that they have the option to file jointly or separately for tax filing. The Federal income tax system prods taxpayers toward joint filing. This results in the loss of certain deductions and credits. Also, the inclusion of Social Security benefits is taxable income for those who file separately. Assuming you are better off filing a Federal joint return, when might you consider filing separately? Here are three scenarios for tax filing:

Different Residency Periods

If a taxpayer and spouse are part-year Massachusetts residents and they had different residency periods, they have to file separately on their Massachusetts return. For example, John moves to Massachusetts from Texas in February. He moved due to a new job as a snow plow operator. Marsha remains in their old state to finish out the school year with the kids. She does not move to Massachusetts until July. They are required to file separate Massachusetts tax returns. Note, they are better off in this case, since Marsha’s Texas income will be excluded from taxation in Massachusetts for her tax filing.

IOUs

If a taxpayer has certain unpaid debts, they may opt to file separately. If a taxpayer is in arrears with student loans, back taxes, or child support, their spouse may benefit from filing separately. Your refund can be garnished by various government authorities, and if there is a nominal difference in tax liability, Married Filing Separately (MFS) may be the way to go. Also, if one spouse expects a tax balance in the current year, Married Filing Separately can be appropriate. For example, John and Marsha are filing a joint return. Marsha had some unemployment income and had no tax withheld. They do not expect any Federal tax liability. However, they do expect to owe Massachusetts. They can file separately on Massachusetts only so John is not liable for the taxes owed on Marsha’s unemployment income.

Squirrely Business

If your husband is Vito Corleone, our official advice is, file separately. Oh, and never ask him about his business. If a spouse has questionable business practices, that taxpayer can file separately. This shields them form the associated tax risks.

By the way, If you are stuck at home for Snowpocalypse 3.0, Vito makes for a good trilogy read.

Questions About Tax Filing?

Are you clear about your tax filing status? If you have thoughts, questions or concerns regarding how your taxes are filed, WorthTax uses a triple check accuracy system. We also go though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
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Tax Season is Here!

Time flies! Before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment. Learn about our client discounts here. See our locations.

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Pervasive Telephone Scams: Did you get a call from the IRS?

Identity theft comes in many ways, shapes and sizes. Thieves will stop at nothing to get ahold of your personal information. The best way for them to do this is to make you very afraid. And what are most people afraid of? The IRS.

Pervasive Telephone Scams

Well, the IRS has issued warnings recently about ‘Pervasive Telephone Scams

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. Additionally, the IRS never asks for credit card, debit card, or prepaid card information over the telephone.  In the case of the recent scams, potential victims are threatened with deportation, arrest, having their utilities shut off, or having their driver’s licenses revoked.

This is also the same for IRS emails.

Are you concerned about protecting your personal information when filing your taxes?

Do you have thoughts, questions or concerns regarding how your taxes are filed? WorthTax uses a triple check accuracy system. We also though great lengths to protect your information on secured servers. Please feel free to contact us, leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

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Tax Penalties, Outrage and Indignation

By: Alex Franch, BS EA

If you ever filed and paid your taxes late, you may have first-hand experience with tax penalties. Sometimes this results in a little bit of interest being charged but other times it can lead to substantial dollar amounts. The IRS and Mass DOR each have their own tax penalties. Here are a few amounts:

Failure to Pay a Tax When Due

You may be subject to a maximum penalty of 25% of the tax due.  Mass DOR and the IRS both can assess a version of this penalty. This sounds like a lot, but they typically do not go from zero to sixty on this one.  Still, 25% is a hefty amount.

Failure to File a Partnership Return

Massachusetts can charge $5 for every day the partnership fails to file. Partnerships typically do not pay tax since the income passes through to the owners. This is so they cannot charge a percentage of tax owed. Nevertheless, $5 per day can add up quickly. This pales in comparison to the IRS penalty of $195 per partner, per month. This can get out of control very quickly. The good news is that the IRS penalty is capped at 12 months. Eventually however, after several years and depending on the number of partners, the Massachusetts $5/day penalty might catch up to the IRS penalty.

Failure to Satisfy a Required Minimum Distribution

The IRS is great for tax deferred growth but eventually the money has to come out.  Taxpayers are required to begin taking distributions by April 1st in the year following the year in which they turn 70-½.  If you forget – bam, 50% penalty on the required distribution.  Take that, grandma.  Outrage and Indignation to follow.

Failure to Report a Foreign Account

FCEU Tax PenaltiesAmong other tax penalties is failing to report a foreign financial account can get you in hot water with the IRS. Previously, one would file Form TDF 90-22.1 with the Department of Treasury. This was updated recently to FinCEN Form 114 and gets filed electronically with the Financial Crimes Enforcement Network (FinCEN).  They threshold for filing is $10,000 at any point during the year.  The penalty for non-willful violations is $10,000.  The penalty for willful cases is the greater of 50% of the account balance or $100,000 with the possibility of criminal prosecution.  Ouch is an understatement to say the least.

Are you looking to avoid tax penalties?

As mentioned, tax penalties can cost you a lot of money. And we believe, better money in your pocket than someone else’s pocket. The best way to avoid tax penalties is to have a trusted professional. Are you are at a place in your business you need tax advice? Do you have thoughts, questions or concerns regarding how to claim the start-up costs for your small business? Please feel free to contact us, leave your comments below or post on our FacebookGoogle+ or LinkedIn pages.

Maybe you know someone who can benefit from this information, feel free to share:
Linkedin - Joseph Cahill / WorthTaxTwitter - Joseph Cahill / WorthTax / WorthTaxPrepFacebook - Joseph Cahill / WorthTaxGoogle+ - Joseph Cahill / WorthTaxalignable_logo - Joseph Cahill / WorthTax

 

Tax Season is Here!

Time flies – before it slips away, call Alex Franch, EA at 781-849-7200 for your appointment and learn about our client discounts here.

– – – – – – – – – –

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Tips on the Dependent Care Tax Credit

by Cindy Toran, Tax Manager

As any parent knows well, expenses for dependent care, such as child care or adult care, can be significant. The IRS provides a subsidy for working people who pay for dependent care while they work, look for work, or attend school full-time.

To Qualify for Dependent Care:

  1. 2014_12_08 Dependent Care owned by AVSofficeBoth parents must have earned income or be a full-time student. Both parents must have earned income or one may be a full-time student.
  2. Children must be age 12 or younger or unable to care for themselves.
  3. Expenses must be directly connected to allowing the parent(s) to work (i.e., not off-hours babysitting for personal reasons and no overnight camps) or to attend school.
  4. Expenses cannot be paid to a spouse or parent of the child or other person who is a dependent of the taxpayer.
  5. Generally taxpayers must file jointly or as head of household.
  6. Parents must be able to provide the name, address and tax identification number of the care provider on your tax return.

How much is the Dependent Care credit?

The amount depends on the number of children and ranges from 35% to 20% of work-related dependent care costs depending on your adjusted gross income (AGI). As the AGI increases, the percentage decreases.

  1. The amount of expense is limited to $3,000 for one child and $6000 for 2 or more children.
  2. Your tax bill must exceed the allowable credit (i.e., any credit in excess of the tax is not usable).
  3. Eligible daycare expenses must be reduced by any dependent care benefits provided through an employer, such as a Flexible Spending Account.

The IRS subsidy will certainly not cover the total cost of child care but every little bit helps the family budget, and the dependent care tax credit should not be overlooked. If you have a question regarding any type of dependent care, feel free to leave it below or post to our Facebook or Google+ page.

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DOMA Ruling Leaves a Lot of Questions on the Table

I can’t say that DOMA did not make for some interesting tax strategies.  The latest from the SCOTUS makes tax filing simpler for our same sex couples here in Mass.  Let’s see what the IRS decides for some open ended questions.

Examples:

What is the filing status of a same sex couple who marry in one state and live in a non-same sex marriage state?

Can a same sex couple go back and amend open tax years if it is to their benefit?

Are civil unions equal to marriage?

Maybe this is why the IRS had ‘unusually high call volume’ this morning.

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