What to Do If You Get a Letter from the IRS

What to Do If You Get a Letter from the IRS

Tax Return Deadline: May 17

While the IRS has extended the federal income tax filing due date for individuals to May 17, we can no longer accept returns to meet that deadline. If we have NOT yet received your paperwork, we will be happy to file an extension for you.

To help you prepare your files, please download a copy of our 2020 Personal Tax Preparation Checklist.

First of all, don’t panic! The IRS mails letters or notices for a variety of reasons, including if:

  • You have a balance due.
  • You are due a larger or smaller refund.
  • The IRS has a question about your tax return.
  • The IRS needs to verify your identity or that of a dependent.
  • The IRS is requesting additional information.
  • The IRS made changes to your tax return.

What to Do and Not Do

Follow these tips if you receive a notice from the IRS:

Don’t ignore the letter. Most IRS letters and notices are about your federal tax return or tax account. The notice or letter will explain the reason for contacting you and provide instructions on what to do.

Read the notice. Read the letter carefully and take the appropriate action. If the IRS changed your tax return, compare the information provided in the notice with the information in your original return. Generally, you do NOT need to contact the IRS if you agree with the notice.

Respond quickly. If the letter requires a response by a specific date, be sure to reply in a timely manner. This will minimize any additional interest and penalty charges, and preserve your right to appeal.

Pay any amount due. If you owe money, you should pay as much as you can, even if you cannot pay the full amount. You can pay online or apply for an Online Payment Agreement or Offer in Compromise. The IRS offers several payment options.

Keep a copy of the notice. Be sure to keep a copy of any notice or letter you receive with your other tax records. You may need these documents later.

Contact the IRS only if necessary. If you must contact the IRS by phone, use the number provided in the upper right-hand corner of the notice, and have a copy of your tax return and letter when calling. Typically, you only need to contact the IRS if you don’t agree with the information, if the IRS requests additional information, or if you have a balance due. Generally, it’s best if you write to the IRS at the address on the notice and keep a copy for yourself; allow at least 30 days for a response.

Beware of scams. The IRS will not contact you using social media or text message. The first contact from the IRS usually comes in the mail. If you are unsure if you owe money to the IRS, you can review your tax account information on IRS.gov.

 

We’re Here to Help

While getting a letter from the IRS in the mail can be intimidating, you don’t have to worry. If we prepared your taxes, we’ll help you respond to the IRS letter with the appropriate information. Just email us a copy of the letter you received. If you have any questions or concerns, please contact us. We’re here to help!

Reminder: Dine Out and Take a Tax Deduction

The Taxpayer Certainty and Disaster Relief Act of 2020 (enacted in December) temporarily allows a 100% business expense deduction for meals as long as the expense is for food or beverages provided by a restaurant. The previous deduction was limited to 50%. This provision is effective for expenses incurred from January 1, 2021, through December 31, 2022.

Should You Be Paying Excise Taxes?

An excise tax is imposed on the sale of specific goods or services, such as fuel, airline tickets, heavy trucks, highway tractors, tires and tobacco, or on certain uses, such as indoor tanning. Excise taxes typically help fund projects related to the taxed product or service, such as highway paving projects or airport improvements.

Depending on the good or service, excise tax may be imposed at the time of:

  • Import,
  • Sale by the manufacturer,
  • Sale by the retailer, or
  • Use by the manufacturer or consumer.

If you are subject to excise tax, you must file one or more of the following forms:

  • Form 720, Quarterly Federal Excise Tax
  • Form 2290, Heavy Highway Vehicle Use Tax
  • Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8

If you’re unsure if your business should be paying and filing excise taxes, give us a call. We can help you determine your status and take care of any paperwork.

Are You at Risk for an IRS Audit?

Are You at Risk for an IRS Audit?

This tax season, it’s estimated that the IRS will handle roughly 150 million returns.

Chances are, you will never face an IRS audit — only 0.45% of taxpayers were audited last year. However, you may encounter other types of more-frequent IRS inquiries, such as income-reporting discrepancies or additional tax due notices.

This happens because IRS systems are automated to spot certain types of discrepancies. What’s more, some portions of your tax return invite more scrutiny than others.

The biggest trigger for an audit is higher income (the audit rate is 2.21% for incomes between $1 million and $5 million). Here are some other things that might spark IRS attention:

Unreported Income — If your tax return shows a different amount than is reported directly to the IRS via your Form W-2 and Form 1099, you may get a letter from the IRS. Remember to keep track of the forms you get showing employment income, contract work and taxable interest. If you earn at least $400 from a “side gig,” then you should be paying self-employment taxes on your earnings. Cryptocurrency earnings (or losses) should also be reported.

Earned Income Tax Credit — While this credit is valuable to working taxpayers with children and for low earners, it does invite scrutiny from the IRS because it is often abused. Make sure you truly qualify before taking this credit.

Large Charitable Donations — Because the standard deduction has been increased for 2019 to $24,400 for married couples and $12,200 for singles, taking credit for charitable donations requires you to itemize deductions, which may invite scrutiny depending on your income because the IRS knows how much taxpayers at various income levels typically donate. Also, there is a limit for cash donations of up to 60% of your Adjusted Gross Income (AGI), while donated property also faces limits.

Miscellaneous Errors — Little things like a wrong Social Security number, address or missed checks on boxes can get your return flagged by the IRS. So be sure to double-check everything before you sign and send it.

We Can Help

Not sure if your return invites IRS scrutiny? Let us help you prepare and file your return. We’ll make sure everything is correct, and alert you if we uncover any issues. Give us a call or drop off your paperwork today.

Source: CNBC

atFun Facts: What Happened in the Last Decade?

2010 — The first iPad was launched, sparking the tablet and large phone craze. “Snowmageddon” blanketed the east coast with up to 40 inches of snow. And the Deepwater Horizon offshore oil rig exploded, killing 11 and spilling oil into the Gulf of Mexico for months.

2011 — Prince William of Wales and Catherine Middleton were married (they now have 3 children). U.S. Navy Seals killed Osama Bin Laden in a late-night raid in Pakistan. And the final Harry Potter movie, Harry Potter and the Deathly Hallows, Part 2, was released.

2012 — “Gangnam Style,” by South Korean musician Psy, became the most-watched video ever. The Mayan calendar said the world would end on December 21, 2012.

2013 — Former National Security Administration contractor Edward Snowden claimed to have stolen tens of thousands of confidential and classified documents from the NSA’s internal computer system. The word “selfie” became Oxford dictionary’s “Word of the Year.” And Candy Crush became the most popular game on Facebook, with 46 million average monthly users.

2014 — Malaysia Airlines flight #370 disappeared while flying from Kuala Lumpur to Beijing; 239 passengers and crew were aboard. The Ice Bucket Challenge filled your Facebook newsfeed.

2015 — The internet debated the color of a dress: was it #blackandblue or #whiteandgold? (It was really black and blue.) Same-sex marriage became legal in the US when the Supreme Court ruled in Obergefell v. Hodges.

2016 — Pokémon Go became the latest world-wide craze, encouraging folks to look for Pokémon around every corner. Businessman Donald Trump was elected 45th president of the United States.

2017 — Thanks to streaming services like Netflix, binge watching became popular. And here in North Georgia, we experienced a total solar eclipse, if even for just a few minutes.

2018 — Hawaii’s Kilauea volcano began erupting soon after a magnitude-5.0 earthquake struck the Big Island of Hawaii. Prince Harry of Sussex married American Meghan Markle (they now have one child). And a record 102 women won seats in the House of Representatives during the mid-term elections.

2019 — NASA astronauts Jessica Meir and Christina Koch conducted the first all-female spacewalk outside of the International Space Station. Category 5 Hurricane Dorian devastated the Bahamas and skirted its way up the eastern coast of the U.S.

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.
Tax Reform — Boon or Bust?

Tax Reform — Boon or Bust?

The Tax Cuts and Jobs Act (TCJA) was announced with much fanfare at the end of 2017. The Act amended the Internal Revenue Code of 1986, including reducing tax rates for businesses and individuals. It simplified personal tax by increasing the standard deduction and family tax credits, but it also eliminated personal exemptions and made it less beneficial to itemize deductions.

So, with tax season now in the rearview mirror, let’s look at what tax reform did and did not accomplish:

Did Filing Get Any Easier?

The big increase in the standard deduction made filing much easier for many taxpayers, with less time spent tracking deductible expenses. The Tax Policy Center estimates that the number of itemizers fell from about 46 million to only about 19 million.

Yet, the Treasury Department also killed Forms 1040A and 1040EZ, which had made filing super easy for folks with very simple tax situations.

In addition, the TCJA included new tax benefits that required millions of filers to do some extra work in return for tax savings. For example, 14 million more households were able to claim the child tax credit for 2018 than for 2017. Others who could benefit from the TCJA’s special 20% deduction for qualified income from pass-through businesses, such as partnerships and sole proprietorships, also had to sort through complex new rules.

Did Refunds Get Any Bigger?

The number of tax returns claiming refunds increased (very) slightly to 95.7 million. The average refund was $2,725, down just a bit from $2,780 in 2018.

Overall, about 64% of households paid less in individual income tax for 2018 than they would have under the pre-TCJA law, while about 6% paid more. In addition, the share of households that did NOT pay federal income tax increased by about 2%.

The Tax Policy Center estimated that the average individual income tax cut for 2018 was about $1,300. Middle-income households (those making between about $50,000 and $85,000) got an income tax cut of about $800 on average, while those in the top 1% paid about $51,000 less.

What It All Means

In the end, tax reform took some and gave some. But as with most things, victory goes to the well-prepared. So make sure you are taking steps now to maximize the benefits of tax reform legislation. We’re always here to answer your tax questions, so please Call 706-632-7850 or email Jackie today.

Did You Know?

President Nixon was the first American president to release his tax returns, starting a practice that most U.S. presidents have since followed. You can find copies of presidential tax returns on the Tax Notes website

Another interesting fact: The check box for the Presidential Campaign Funds contribution (originally $1) was implemented in 1966 during the Johnson administration. Checking the box (now $3) does not change the amount of your tax or refund. Rather, $3 of your tax dollars are simply designated to go to this fund rather than the regular pool.

Tax Season Is Almost Here!

Tax Season Is Almost Here!

Get Ready for Tax Season!

Are you ready for tax time? There are a couple of steps you can take now to alleviate some of the stress of filing your return. Plan to get organized early. Begin by putting together a tax folder with W-2s from your employer, 1099s for other income you may have earned, bank and other financial statements and receipts for things like medical bills and charitable donations.

A meeting is not required; if you have not had any changes, you are welcome to drop your documents off at the firm and we will prepare your return. If you have questions, a tax preparer can contact you to discuss them.

Organizers can be prepared after January 6. If you would like one, please email Sandy or call the office at 706-632-7850.

 

Make an Appointment Today!

We are now taking appointments for the 2017 tax season. We ask, as a courtesy to other clients, that you only schedule an appointment to see Jackie during tax season if you have had significant changes during 2016 or you are a new client for the 2016 tax year.

Call us today to set up your appointment at 706-632-7850 or email Sandy to request a time.