Tips for Taxpayers Who Owe Taxes

Tips for Taxpayers Who Owe Taxes

TAX PROBLEMS – While most taxpayers get a refund from the IRS when they file their taxes, some do not. The IRS offers several payment options for those who owe taxes.

Here are eight tips for those who owe federal taxes.
1. Tax bill payments. If you get a bill from the IRS this summer, you should pay it as soon as possible to save money. You can pay by check, money order, cashier’s check or cash. If you cannot pay it all, consider getting a loan to pay the bill in full. The interest rate for a loan may be less than the interest and penalties the IRS must charge by law.
2. Electronic Funds Transfer. It’s easy to pay your tax bill by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal Tax Payment System.
3. Credit or debit card payments. You can also pay your tax bill with a credit or debit card. Even though the card company may charge an extra fee for a tax payment, the costs of using a credit or debit card may be less than the cost of an IRS payment plan.
4. More time to pay. You may qualify for a short-term agreement to pay your taxes. This may apply if you can fully pay your taxes in 120 days or less. You can request it through the Online Payment Agreement application at IRS.gov. You may also call the IRS at the number listed on the last notice you received. If you can’t find the notice, call 800-829-1040 for help. There is generally no set-up fee for a short-term agreement.
5. Installment Agreement. If you can’t pay in full at one time and can’t get a loan, you may want to apply for a monthly payment plan. If you owe $50,000 or less, you can apply using the IRS Online Payment Agreement application. It’s quick and easy. If approved, IRS will notify you immediately. You can arrange to make your payments by direct debit. This type of payment plan helps avoid missed payments and may help avoid a tax lien that would damage your credit.
6. Offer in Compromise. The IRS Offer-in-Compromise program allows you to settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t fully pay your taxes through an installment agreement or other payment alternative. The IRS may accept an OIC if the amount offered represents the most IRS can expect to collect within a reasonable time. Use the OIC Pre-Qualifier tool to see if you may be eligible before you apply. The tool will also direct you to other options if an OIC is not right for you.
7. Fresh Start. If you’re struggling to pay your taxes, the IRS Fresh Start initiative may help you. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens.
8. Check withholding. You may be able to avoid owing taxes in future years by increasing the taxes your employer withholds from your pay. To do this, file a revised Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool at IRS.gov can help you fill out a new W-4.

For more information about payment options or IRS’s Fresh Start program, contact us today to get a free consultation!
ABA Tax Accounting
651-621-5777 or (763) 269-5396
info@abataxaccounting.com
http://abataxaccounting.com/incometaxserviceforindividuals.php
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Published in: on August 2, 2013 at 2:48 pm  Leave a Comment  
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IRS Highlights Simplified Option for Home Office Deduction

Tax Strategies For Business Owners – Do you work from home? If so, you may be familiar with the home office deduction, available for taxpayers who use their home for business. Beginning this year, there is a new, simpler option to figure the business use of your home.

This simplified option does not change the rules for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements. The new option can save you a lot of time and will require less paperwork and recordkeeping.

Here are six facts the IRS wants you to know about the new, simplified method to claim the home office deduction.

1. You may use the simplified method when you file your 2013 tax return next year. If you use this method to claim the home office deduction, you will not need to calculate your deduction based on actual expenses. You may instead multiply the square footage of your home office by a prescribed rate.

2. The rate is $5 per square foot of the part of your home used for business. The maximum footage allowed is 300 square feet. This means the most you can deduct using the new method is $1,500 per year.

3. You may choose either the simplified method or the actual expense method for any tax year. Once you use a method for a specific tax year, you cannot later change to the other method for that same year.

4. If you use the simplified method and you own your home, you cannot depreciate your home office. You can still deduct other qualified home expenses, such as mortgage interest and real estate taxes. You will not need to allocate these expenses between personal and business use. This allocation is required if you use the actual expense method. You’ll claim these deductions on Schedule A, Itemized Deductions.

5. You can still fully deduct business expenses that are unrelated to the home if you use the simplified method. These may include costs such as advertising, supplies and wages paid to employees.

6. If you use more than one home with a qualified home office in the same year, you can use the simplified method for only one in that year. However, you may use the simplified method for one and actual expenses for any others in that year.

Considering a Tax Professional? For no obligation free consultation about home office deductions contact us today!
ABA Tax Accounting
651-621-5777 or 763-269-5396
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Published in: on July 30, 2013 at 3:39 pm  Leave a Comment  
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FBAR filing deadline is rapidly approaching

EXPATRIATE TAX – U.S. residents with $10,000 or more in foreign bank accounts must file a Report of Foreign Bank and Financial Accounts by the end of the month or risk substantial fines.

The FBAR (Report of Foreign Bank and Financial Accounts) is due the year after the year that the $10,000 threshold in met. The FBAR due date cannot be extended and failure to file an FBAR may result in civil and/or criminal penalties. Considering a Tax Professional? For no obligation free consultation contact us today!
ABA Tax Accounting
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Published in: on June 26, 2013 at 12:50 pm  Comments (1)  
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NET INVESTMENT INCOME TAX: WHAT YOU NEED TO KNOW

Income Tax Service For Small Businesses – Now that the 2012 tax season is over, it’s time to focus on tax planning for 2013. One of the most significant tax changes this year is the Net Investment Income Tax (NIIT), which went into effect on January 1, 2013 as a result of health care reform enacted in 2010. Here’s what you need to know.

WHAT IS THE NET INVESTMENT INCOME TAX?
The Net Investment Income Tax is a 3.8% tax on certain net investment income of individuals, estates, and trusts with income above statutory threshold amounts, referred to as modified adjusted gross income (MAGI).

WHAT IS INCLUDED IN NET INVESTMENT INCOME?
In general, investment income includes, but is not limited to: interest, dividends, long and short term capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and passive business activities such as rental income or income derived from royalties.

WHAT IS NOT INCLUDED IN NET INVESTMENT INCOME?
Wages, unemployment compensation, operating income from a nonpassive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends, and distributions from certain Qualified Plans are not included in net investment income.

INDIVIDUALS
Individuals whose modified adjusted gross income exceeds $250,000 (married filing jointly) or $200,000 (single filers) are taxed at a flat rate of 3.8% on investment income. Net Investment Income Tax is paid in addition to other taxes owed and threshold amounts (e.g. $200,000 for single filers) are not indexed for inflation.

Non-resident aliens are not subject to the tax; however, if a non-resident alien is married to a US citizen and is planning to file as a resident alien for the purposes of filing “married filing jointly” tax return, there are special rules. Please consult us if you have any questions.

Because investment income is generally not subject to withholding, taxpayers should be aware that the NIIT might affect tax liability for the 2013 tax year. In addition, it’s possible that even lower income taxpayers not meeting the threshold amounts could be subject to the tax if they receive a windfall such as a one-time sale of assets that bumps their MAGI up high enough.

Give us a call if you are expecting a windfall this year. We’ll help you come up with a strategy such as an installment sale, minimizing AGI, or figuring out the best timing for sale, that will help you to avoid or minimize taxes when you file your 2013 return next year.

SALE OF A HOME
The Net Investment Income Tax does not apply to any amount of gain excluded from gross income for regular income tax purposes ($250,000 for single filers and $500,000 for a married couple) on the sale of a principal residence. In other words, only the taxable part of any gain on the sale of a home has the potential to be subject to NIIT, providing the taxpayer’s income is over the MAGI threshold amount.

ESTATES AND TRUSTS
Estates and Trusts are subject to the Net Investment Income Tax if they have undistributed net investment income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year. In 2013, this threshold amount is $11,950.

Special rules apply for certain unique types of trusts such a Charitable Remainder Trusts and Electing Small Business Trusts, and some trusts, including “Grantor Trusts” and Real Estate Investment Trusts (REIT) are not subject to NIIT at all.

It should be noted that non-qualified dividends generated by investments in a REIT are considered taxable income and taxed at ordinary tax rates. As such, they may be subject to the Net Investment Income Tax.

If you need guidance on the topic of Net Investment Income Tax and estates and trusts, don’t hesitate to call us.

REPORTING AND PAYING THE NET INVESTMENT INCOME TAX
Individual taxpayers should report (and pay) the tax on Form 1040. Estates and Trusts report (and pay) the tax on Form 1041.

Individuals, estates, and trusts that expect to pay estimated taxes in 2013 should adjust their income tax withholding or estimated payments to account for the tax increase in order to avoid underpayment penalties. For employed individuals, NIIT is not withheld from wages; however, you may request that additional income tax be withheld. Call us if you need assistance with this.

Wondering how the new tax affects you? Give us a call. It’s never too early to start tax planning!
ABA Tax Accounting
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Published in: on June 10, 2013 at 5:14 pm  Leave a Comment  
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Tips for Taxpayers with Foreign Income

Tips for Taxpayers with Foreign Income
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.

Here are some tips taxpayers with foreign income should know:
1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department.
3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.
4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012.
5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.
For no obligation free consultation contact us today!
Aba Tax Accounting
Amare Berhie, Enrolled Agent
Amare@Abataxaccounting.Com
612-282-3200 Toll Free866-936-0430
http://www.abataxaccounting.com
Www.abatax81.blogspot.com
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Published in: on March 27, 2013 at 2:44 pm  Comments (1)  
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How to maximize the Child and Dependent Care Tax Credit

Federal, State, Local and International Taxes – The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are some facts the IRS wants you to know about the tax credit for child and dependent care expenses:
1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.
2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent that lived with you for more than half the year that was physically or mentally incapable of self-care.
3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.
4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.
5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.
6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.
7. If your employer provides dependent care benefits, special rules apply
8. You must include the Social Security number on your tax return for each qualifying individual.
9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.

For more information or no obligation free consultations if your cancelled debt is taxable contact us today!
Aba Tax Accounting
Amare Berhie, Enrolled Agent
Amare@Abataxaccounting.Com
612-282-3200 Toll Free866-936-0430
http://www.abataxaccounting.com
http://www.abatax81.blogspot.com
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Published in: on March 15, 2013 at 4:54 pm  Comments (1)  
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IRS Has $917 Million for People Who Have Not Filed a 2009 Income Tax Return

Haven’t Filed a Tax Return in Years?

Federal, State, Local and International Taxes – Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the Internal Revenue Service announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.

The IRS estimates that half the potential refunds for 2009 are more than $500.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2009 refund that their checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refund of taxes withheld or paid during 2009. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2009, the credit is worth as much as $5,657. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2009 were:

$43,279 ($48,279 if married filing jointly) for those with three or more qualifying children,

$40,295 ($45,295 if married filing jointly) for people with two qualifying children,

$35,463 ($40,463 if married filing jointly) for those with one qualifying child, and

$13,440 ($18,440 if married filing jointly) for people without qualifying children.

For no obligation free consultations if your cancelled debt is taxable contact us today!
Aba Tax Accounting
Amare Berhie, Enrolled Agent
Amare@Abataxaccounting.Com
612-282-3200 Toll Free866-936-0430
http://www.abataxaccounting.com
http://www.abatax81.blogspot.com
http://www.abataxaccounting.wordpress.com

Published in: on March 15, 2013 at 4:33 am  Leave a Comment  
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What expenses are deductible as moving expenses?

What expenses are deductible as moving expenses?

You may be able to deduct moving expenses whether you are self-employed or an employee. Your expenses generally must be related to starting work at your new job location. However, certain retirees and survivors may qualify to claim the deduction even though they are not starting work at a new job location

Only two categories of direct moving costs paid or incurred that are attributable to the taxpayer and the members of his household are deductible:

• costs of moving goods and personal effects; and

• traveling costs (including lodging but not meals) for the taxpayer’s household.

 

For 2012, the standard mileage rate for using your vehicle to move to a new home is 23 cents per mile. Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200 Toll Free866-936-0430

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Published in: on February 9, 2013 at 6:20 pm  Leave a Comment  
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Year- End Tax Planning – Income From Foreign Sources

Year- End Tax Planning Income From Foreign Sources

Income From Foreign Sources – Many U.S. citizens earn money from foreign sources. But unless it is exempt under federal law, taxpayers sometimes forget that they have to report all such income on their tax return. 

As such, some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law. 

Effective September 1, 2012, taxpayers who are low compliance risks are able to get current with their tax requirements without facing penalties or additional enforcement action. These taxpayers generally have simple tax returns and owe $1,500 or less in tax for any of the covered years. 

U.S. citizens are taxed on their income regardless of whether they live inside or outside the United States. The foreign income rule also applies regardless of whether the person receives a Form W-2, Wage and Tax Statement, or Form 1099. 

Foreign source income includes earned and unearned income, such as:

  • Wages and tips
  • Interest
  • Dividends
  • Capital gains
  • Pensions
  • Rents
  • Royalties

But there is some good news. Citizens living outside the United States may be able to exclude up to $95,100 of their 2012 foreign source income if they meet certain requirements. This will increase to $97,600 in 2013.

If you’re married and you and your spouse both work abroad and meet either the bona fide residence test or the physical presence test, each of you can choose the foreign earned income exclusion. Together, you can exclude as much as $190,200 for the 2012 tax year.

Caution: The exclusion does not apply to payments made to U.S. government employees or folks in the military living outside the United States.

If you earn income from outside the country, please be sure to meet with us about it. We can advise you on how to address all of the tax implications of this situation. For no obligation free consultation contact us today!

ABA Tax Accounting

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Published in: on November 13, 2012 at 2:43 pm  Leave a Comment  
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IRS delays certain FATCA deadlines

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IRS delays certain FATCA deadlines
International Tax Strategy – The Internal Revenue Service on Wednesday announced it is delaying various deadlines relating to the Foreign Account Tax Compliance Act. Since issuing proposed regulations in February, the IRS has received numerous comments from affected parties saying the original deadlines do not give them enough time to comply with FATCA’s due diligence, withholding and documentation rules. Read the full story at Journal of Accountancy (10/2012). Considering a Tax Professional? For no obligation free consultation contact us today!

ABA Tax Accounting

Amare Berhie, Senior Tax Accountant

amare@abataxaccounting.com

612-282-3200

866-936-0430 Toll Free

http://www.abataxaccounting.com

www.abatax81.blogspot.com

www.abataxaccounting.wordpress.com

Published in: on October 25, 2012 at 5:13 pm  Leave a Comment  
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