Pay Your Tax Bill In Installments

If you cannot pay the full amount you owe shown on your tax return or on a notice sent to you by the IRS, you can make monthly payments through an installment agreement. Before you apply for any type of payment agreement, you must file all required tax returns. You may be eligible for a guaranteed installment agreement.

To qualify for a guaranteed installment agreement with the IRS, the taxpayer must meet the following conditions:

  • Owe less than $10,000, (not including interest and penalties);
  • In the previous five years, the taxpayer has filed tax returns, paid taxes owed, and has not entered into an installment agreement;
  • The taxpayer is unable to pay the tax liability when due;
  • The tax liability will be paid off within three years, and
  • The taxpayer must pay at least the minimum monthly payment (tax liability, interest and penalties divided by 30)

Haven’t filed a tax return for years? Let Us Help You Get That Problem Behind You.

So a few years ago, you didn’t file a tax return because you feared you might have to  pay rather than get a refund. Or, you didn’t have all of the information you needed to do the tax return. Or, you just lost your job or you just got divorced. Then, the following year, you didn’t file again for the same reason. You were also worried that filing a return would “raise a red flag” or trigger a tax bill from the IRS for the prior year. This vicious cycle began repeating itself and it has now been several years since you last filed a tax return.

And now, the IRS has caught up with you. They even filed a tax return for you – something they call a Substitute For Return (SFR). More importantly, they say you owe a bunch of money in taxes. And interest! And penalties!

There are many ways to solve this problem of unfiled tax returns. I can contact the IRS and get your transcripts. This is information the IRS has received from third parties reporting income paid to you including W-2s, 1099s, etc. and mortgage interest you paid on 1098s. I can also assist in filing your tax returns using other sources if some records are missing.

Unfiled tax returns should be filed as quickly as possible to avoid additional interest and penalties. More importantly, tax returns from the most recent three years should be filed immediately to claim any refunds which may be due.

Let’s get this problem solved and get you back on track. Call me today at 813-514-2920 to schedule a free consultation.

John S. Wood, C.P.A., P.A. Announces New IRS Tax Problem Representation Service for Tampa Bay Area Residents

IRS problems are a very personal matter and people often do not know where to turn for help. Unresolved IRS problems generally affect all aspects of your life. Many people just live with the problem for months, sometimes years. They assume that nothing can be done about it. Imagine how relieved you or someone you know, who has IRS problems, would feel if you could just put him/her in the hands of a competent expert, someone who deals with the IRS on a daily basis, and someone who really cares about helping people. A person who would give them the peace of mind they and their family deserve, so they can stop looking over their shoulder once and for all, knowing that they do not need to meet or communicate with the IRS any longer. As your representative, I handle all IRS communications on your behalf.

It’s easy for good, hard-working Americans to fall behind. Providing IRS tax help to the Tampa Bay region was a natural evolution for my practice. I want to help people like you. I have come across many people who have tried to handle their IRS situation themselves (or with their current CPA or person that prepared their taxes) but didn’t receive the relief they were seeking. I know the “ins and outs” of the tax system and can negotiate a personalized solution for you.

I now provide IRS representation services which include: Preparation of Unfiled Income Tax Returns, Penalty Reduction, Offers In Compromise, Payment or Installment Plans, Wage Garnishments/Bank Levy Releases, Audits and IRS Appeals.

I’ll listen to your IRS difficulties in my office in complete confidence at NO CHARGE. I will answer your questions, explain your options, suggest solutions and provide you with a written estimate of my fees to permanently resolve your IRS difficulties.

If you or someone you know has an IRS problem, call 813-514-2920. Call now! The IRS acts fast when they think you have their money!

The Child Tax Credit May Be Worth $1,000 Per Qualifying Child

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

  1. Amount – With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
  2. Qualification – A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
  3. Age Test – To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.
  4. Relationship Test – To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  5. Support Test – In order to claim a child for this credit, the child must not have provided more than half of their own support.
  6. Dependent Test – You must claim the child as a dependent on your federal tax return.
  7. Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  8. Residence Test – The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  9. Limitations – The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
  10. Additional Child Tax Credit – If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Lifetime Learning Credit Is Worth Up To $2,000 Per Tax Return

The Lifetime Learning Credit is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses–including courses to acquire or improve job skills. There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return.

Who can claim the LLC?

To claim a LLC, you must meet all three of the following:

  1. You, your dependent or a third party pay qualified education expenses for higher education
  2. You, your dependent or a third party pay the education expenses for an eligible student enrolled at an eligible educational institution
  3. The eligible student is yourself, your spouse or a dependent you listed on your tax return

Who is an eligible student for LLC?

To be eligible for LLC, the student must:

  • Be enrolled or taking courses at an eligible educational institution
  • Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills
  • Be enrolled for at least one academic period* beginning in the tax year

*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. Academic periods are determined by the school. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

What are the income limits for LLC?

  • To claim the full credit, your MAGI, modified adjusted gross income must be $52,000 or less ($104,000 or less for married filing jointly).
  • If your MAGI is over $52,000 but less than $62,000 (over $104,000 but less than $124,000 for married filing jointly), you receive a reduced amount of the credit.
  • If your MAGI is over $62,000 ($124,000 for joint filers), you cannot claim the credit.

MAGI for most people is the amount of AGI, adjusted gross income, shown on your tax return. On Form 1040A, AGI is on line 22 and is the same as MAGI. If you file Form 1040, AGI is on line 38 and you add back the following:

  • Foreign earned income exclusion,
  • Foreign housing exclusion,
  • Foreign housing deduction,
  • Income excluded as bona fide residents of American Samoa or of Puerto Rico.

Claiming the credit

Generally, students receive a Form 1098-T, Tuition Statement, from their school by January 31. This statement helps you figure your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year. But, this amount may not be the amount you can claim. See qualified education expenses for more information on what amount to claim.

Check the Form 1098-T to make sure it is correct. If it isn’t correct or you do not receive the form, contact your school.

What is the LLC worth?

The amount of the credit is 20 percent of the first $10,000 of qualified education expenses or a maximum of $2,000 per taxpayer. The LLC is not refundable. So, you can use the credit to pay any tax you owe but you won’t receive any of the credit back as a refund.

John S. Wood, C.P.A., P.A. is located at 15310 Amberly Drive, Suite 250, Tampa, FL 33647 and concentrates in individual and business tax preparation and planning. We can be reached at 813-514-2920. Please also visit our website is www.jwoodcpa.com.

American Opportunity Tax Credit Can Be Worth $2,500

The American Opportunity Tax Credit is a credit for qualified education expenses paid for an eligible student for the first four years of higher education.You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.

Who is an eligible student for AOTC?

To be eligible for AOTC, the student must:

  • Be pursuing a degree or other recognized education credential
  • Be enrolled at least half time for at least one academic period* beginning in the tax year
  • Not have finished the first four years of higher education at the beginning of the tax year
  • Not have claimed the AOTC or the former Hope credit for more than four tax years
  • Not have a felony drug conviction at the end of the tax year

*Academic Period can be semesters, trimesters, quarters or any other period of study such as a summer school session. The schools determine the academic periods. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

What are the income limits for AOTC?

  • To claim the full credit, your MAGI, modified adjusted gross income must be $80,000 or less ($160,000 or less for married filing jointly).
  • You receive a reduced amount of the credit if your MAGI is over $80,000 but less than $90,000 (over $160,000 but less than $180,000 for married filing jointly).
  • You cannot claim the credit if your MAGI is over $90,000 ($180,000 for joint filers).

MAGI for most people is the amount of AGI, adjusted gross income, shown on your tax return. On Form 1040A, AGI is on line 22 and is the same as MAGI.

If you file Form 1040, you add the following amounts to AGI (line 38):

  1. Foreign earned income exclusion,
  2. Foreign housing exclusion,
  3. Foreign housing deduction,
  4. Exclusion of income by bona fide residents of American Samoa, or of Puerto Rico.

If you need to adjust your AGI to find your MAGI, there are worksheets in the Publication 970 to help you.

Claiming the credit

Generally, students receive a Form 1098-T Tuition Statement, from their school by January 31. This statement helps you figure your credit. The form will have an amount in either box 1 or 2 to show the amounts received or billed during the year. But, this amount may not be the amount you can claim. See qualified education expenses for more information on what amount to claim.

Check the Form 1098-T to make sure it is correct. If it isn’t correct or you do not receive the form, contact your school.

To claim AOTC, you must complete the Form 8863 and attach the completed form to your Form 1040 or Form 1040A.

What is the AOTC worth?

The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student. But, if the credit pays your tax down to zero, you can have 40 percent of the remaining amount of the credit (up to $1,000) refunded to you.

John S. Wood, C.P.A., P.A. is located at 15310 Amberly Drive, Suite 250, Tampa, FL 33647 and concentrates in individual and business tax preparation and planning. We can be reached at 813-514-2920. Please also visit our website is www.jwoodcpa.com.

Individuals May Get New Health Care Information Forms This Year

Starting this year, you may receive one or more forms providing information about the health care coverage that you had or were offered during 2015. Much like Form W-2 and Form 1099, which include information about the income you received, these forms provide information about your health care coverage that you may need when you file your individual income tax return. Two of these forms are new this year and on is a form that was sent to some taxpayers in 2015.

The new forms are:

Form 1095-B, Health Coverage.

  • Health insurance providers send this form to individuals they cover, with information about who was covered and when.

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

  • Certain employers send this form to certain employees, with information about what coverage the employer offered. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.

The deadline for insurers, other coverage providers, and certain employers to provide Forms 1095-B and 1095-C is March 31, 2016. Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required; it is not necessary to wait for Forms 1095-B or 1095-C in order to file.

The form that was first issued last year is:

Form 1095-A, Health Insurance Marketplace Statement

  • The Health Insurance Marketplace sends this form to individuals who enrolled in coverage through the Marketplace.  The form includes with information about the coverage, who was covered, and when.

The deadline for the Marketplace to provide individuals with Form 1095-A is February 1, 2016.  If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form.

You are likely to get more than one form if you had coverage from more than one coverage provider, if you worked for more than one employer that offered coverage or if you enrolled for coverage in the Marketplace for a portion of the year and received coverage from another source for part of the year. You are also likely to get more than one form if you changed coverage or employers during the year or if different members of your family received coverage from different coverage providers. You should not attach any of these forms to your tax return but should keep them with your tax records.

John S. Wood, C.P.A., P.A. is located at 15310 Amberly Drive, Suite 250, Tampa, FL 33647 and concentrates in individual and business tax preparation and planning. We can be reached at 813-514-2920. Please also visit our website is www.jwoodcpa.com.

Are Your Social Security Benefits Taxable?

Your Social Security benefits may be taxable. This may be the case only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your return) in addition to your benefits. It depends on how much income you report to the IRS. Your income and filing status affect whether you must pay taxes on your Social Security.

If Social Security is your only source of income, your benefits may not be taxable. You also may not need to file a federal income tax return.

If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

Each January you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received in the previous year.

A quick way to find out if any of your benefits may be taxable is to first add one-half of your Social Security benefits to all of your other income, including tax-exempt interest. This is known as your “provisional income.” Next compare this total to the base amounts below. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:

  • $25,000 – for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year
  •  $32,000 – for married couples filing jointly
  • $0 – for married persons filing separately who live together at any time during the year

If that income is between $25,000 and $34,000 on a single return or between $32,000 and $44,000 on a joint return, up to 50% of your benefits can be taxed. The rest is tax free.

If your provisional income is more than $34,000 on a single return or $44,000 on a joint return, it’s likely that 85% of your benefits will be taxed.

If you have questions about this or other tax matters, please call us today at 813-514-2920.

John S. Wood, C.P.A., P.A. is located at 15310 Amberly Drive, Suite 250, Tampa, FL 33647 and concentrates in individual and business tax preparation and planning. We can be reached at 813-514-2920. Please also visit our website is www.jwoodcpa.com.

IRS Tax Tips for Starting a Business

The IRS offers five tax tips that can help you get your business off to a good start in the IRS Summertime Tax Tip 2015-15:

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules.

1. Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership, and corporation. The type of business you choose will determine which tax forms you will file.

2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers (ALEs). These ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their full-time employees. Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get answers to all of your questions about starting a business and by contacting us for a free consultation. Call 813-514-2920 today to schedule an appointment. You can also visit www.jwoodcpa.com.

Key Points to Know about Early Retirement Distributions

Before you take any money out of a retirement plan, you should consider the potential impact it could have on the amount of income tax you might have to pay.

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1.Early Withdrawals.  An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2.Additional Tax.  If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3.Nontaxable Withdrawals.  The added 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

4.Check Exceptions.  There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs. See IRS.gov for details about these rules.

5.File Form 5329.  If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.