Timothy C. Baze, EA

Your filed your return, now what?

tbaze — Mon, 23 Apr 2012 22:49:29 +0000

So you’re all filed and ready to move on from your 2011 tax year, right? Maybe not. The following additional steps should be considered after finalizing your tax return each year.

Save Your Supporting Documents Accordingly.

Generally speaking, it is recommended that you keep your tax records for 3 years which is the standard period that the regulatory agencies can go back and audit your return(s). Some documents, such as stock trades, home purchase agreements, and real estate rental activity should be kept longer. The Internal Revenue Service suggest that you keep “bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.” I recommend scanning your related tax documents into a electronic file and storing for as long as you’re alive. Without the hassle of carrying around paperwork, what’s to loose in having your life’s financial records at your fingertips?

Internal Revenue Service Publication 552 provides more specific details on record keeping for individuals.

What if there is a mistake in my filed return?

If you’ve filed your return and discover that a deduction was overlooked, don’t fret. You can amend your return to claim the additional refund by completing and filing an amended return (1040X for your federal return). In general, Form 1040X must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later, to get a refund.

You self prepared your returns.

If you’ve filed your returns yourself, with or without a software package, I strongly advise having your local Enrolled Agent review your return for accuracy. Today’s software packages, and the marketing surrounding the self-prepared tax industry, leads you to believe that their products can get you the maximum refund possible. However, software only knows what you tell it… a professional will know what to ask in an effort to make sure no deduction, tax credit, or other miscellaneous benefit is overlooked.

Tim.

The end is near!

tbaze — Tue, 10 Apr 2012 16:42:04 +0000

Hard to believe that there’s only 7 days left in this year’s tax season, time really flew by this year. I’ll really look forward to reconnecting with my family and friends next week. One quick note to my wonderful marketing team: Sorry! I had no idea how difficult it would be to find the words to share during the busiest time of the year; probably not the best idea to launch a marketing campaign in Q1. My bad!

For those of you who felt that it took much longer to get your income tax refund from the IRS this year, here’s a nice article explaining why. The newest form of identity theft has targeted the IRS and many returns using real social security numbers and fake W2 information have been filed electronically over the past few years and the IRS’s systems couldn’t keep up. Their newest layer of fraud protection has slowed down the processing of returns, thus causing refunds to be delayed.

A final reminder to file your returns on time, even if you owe. There’s no benefit to delaying the filing, only additional penalties to be paid.

File Your Tax Returns on Time

tbaze — Sat, 10 Mar 2012 03:17:32 +0000

It can’t be stressed enough how important it is to file your income tax returns on time, even if you owe or expect to owe. In addition to any federal income tax owed and associated late payment penalties, you’ll incur another 4.5% per month for up to 5 months in late filing penalties. In general, the IRS is not interested in waiving these penalties. So, if you owe $2,000 and file late, your penalty could be as much as $450. That’s 22.5% extra tax that could have been avoided just by filing the return on time.

Most people don’t file because they don’t have the money to pay and want to hide. Its best to go ahead and file even if you can’t pay. There’s a simple form you can complete and send in with your return to set up a payment plan. It’s called an Installment Agreement and is basically a contract to pay the taxes due over time (up to 60 months). If you owe less than $10,000 and offer them a plan to pay the money in less than 60 months the offer must be excepted. It is the law.

Keep in mind, the IRS isn’t the monster everyone thinks it is and the people that work at the agency really want to help you. At least that’s my experience. Although we’ve argued over technical points, I’ve never once run into an agent or officer that isn’t reasonable and willing to insert some basic common sense to help solve whatever problem you have.

File the return, even if you owe!

Forgiven Debt

tbaze — Sat, 03 Mar 2012 02:45:22 +0000

One note related to the ongoing mortgage crisis in America. Traditionally any debt that is forgiven must be picked up as revenue in the year of forgiveness. Any debt. However, the US Treasury has waived this income if the forgiven debt was for the purchase or major improvement of your primary residence for the tax years 2007 through 2012. That’s right – this waiver ends at the end of this year! So, if you or someone you know is facing foreclosure, or thinking about walking away from a house that is under water, this is the year to make it happen. Foreclosed debt in 2013 will be taxed at ordinary income tax rates unless the income waiver gets extended into next year.

This Week in Tax – 03-02-12

tbaze — Sat, 03 Mar 2012 01:08:52 +0000

Almost everyone I run into these days has the same question when discussing my firm and what we do – “What is an EA?”. Surprising that so few people have heard of us. EA stands for “Enrolled Agent”, and the designation is a license issued by the Internal Revenue Service after a series of 3 exams: individual tax, business tax, and taxpayer representation . Technically the license gives us the authority to represent taxpayers before the IRS and state tax regulatory agencies, but more importantly it represents deep knowledge and understanding into the tax code.

Most Enrolled Agents split their time between tax preparation and planning and taxpayer representation Other accounting professions focus on other areas such as corporate audit, we just focus on tax. We live, eat, and breath tax all day long. So, when asked the usual question I like to simply say that we are tax experts.

Enjoy your weekend!

My new company website

tbaze — Wed, 15 Feb 2012 00:28:28 +0000

Hello, and welcome to my website. On the following pages you can learn about the tax and accounting services I offer: tax planning, tax preparation, IRS audit representation, and payroll and bookkeeping.

I offer an absolutely free review of your current and past three year’s tax returns. Many taxpayers overlook allowable tax deductions and overpay taxes on a yearly basis. Who knows what I might find!