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IRS Gives Tax Relief to Victims of Hurricane Harvey; Parts of Texas Now Eligible; Extension Filers Have Until Jan. 31 to File

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Hurricane Harvey victims in parts of Texas have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today.

This includes an additional filing extension for taxpayers with valid extensions that run out on Oct. 16, and businesses with extensions that run out on Sept. 15.

“This has been a devastating storm, and the IRS will move quickly to provide tax relief to hurricane victims,” said IRS Commissioner John Koskinen. “The IRS will continue to closely monitor the storm’s aftermath, and we anticipate providing additional relief for other affected areas in the near future.”

The IRS is now offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, 18 counties are eligible, but taxpayers in localities added later to the disaster area will automatically receive the same filing and payment relief.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 23, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the Oct. 31deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug. 23 and before Sept. 7, if the deposits are made by Sept. 7, 2017. Details on available relief can be found on the disaster relief page on IRS.gov.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year), or the return for the prior year (2016). See Publication 547 for details.

Currently, the following Texas counties are eligible for relief: Aransas, Bee, Brazoria, Calhoun, Chambers, Fort Bend, Galveston, Goliad, Harris, Jackson, Kleberg, Liberty, Matagorda, Nueces, Refugio, San Patricio, Victoria and Wharton.

The tax relief is part of a coordinated federal response to the damage caused by severe storms and flooding and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

If we can any questions or help in any way, call us today at 813-514-2920.

Know Your Taxpayer Bill of Rights

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Every taxpayer has a set of fundamental rights and the IRS has an obligation to protect them. The “Taxpayer Bill of Rights” groups the taxpayer rights found in the tax code into 10 categories. Know these rights when interacting with the IRS. A good way to learn about them is by reading Publication 1, Your Rights as a Taxpayer.

Below are the descriptions of each right, as listed in Publication 1:

  1. The Right to Be Informed. Taxpayers have the right to know what to do in order to   comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures on all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and receive clear explanations of the outcomes.
  2. The Right to Quality Service. Taxpayers have the right to receive prompt, courteous and professional assistance in their interactions with the IRS. They also have the right to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
  3. The Right to Pay No More Than the Correct Amount of Tax. Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties and to have the IRS apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions. They also have the right to expect the IRS to consider their timely objections promptly and fairly and to receive a response if the IRS does not agree with their position.
  5. The Right to Appeal an IRS Decision in an Independent Forum. Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties and have the right to receive a written response regarding the Office of Appeals’ a decision. Taxpayers generally have the right to take their cases to court.
  6. The Right to Finality. Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position as well as the amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.
  7. The Right to Privacy. Taxpayers have the right to expect that any IRS inquiry, audit or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality. Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
  9. The Right to Retain Representation. Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
  10. The Right to a Fair and Just Tax System. Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

The IRS will include Publication 1 when sending a taxpayer notices on a range of issues, such as an audit or collection matter. Publication 1 is available in English and Spanish. All IRS facilities will publicly display the rights for taxpayers.

If you have any questions regarding your rights as a taxpayer or if you need help dealing with a matter regarding the IRS, call us at 813-514-2920.

Pay Your Tax Bill In Installments

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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.

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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

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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

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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

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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

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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.

IRS Tax Tips for Starting a Business

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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

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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.