How to Get a Copy of Your IRS Transcripts – Need to see what the IRS has in your file?
How to Get a Copy of Your IRS Transcripts – Need to see what the IRS has in your file?
Getting copies of the information you have on file at the IRS is not too difficult. Here is how to go about making a request.
There are now a number of ways to obtain information filed with the IRS for your tax return. Use the method that works best for you.
- Online. You can get a copy of most line items on your tax return online at irs.gov using their “Get Transcript” application. The transcript will include originally filed information and any math error corrections. It will not include amended returns or later adjustments.
- By mail. Using the same “Get Transcript” application, you can request a copy of your information be sent to you via mail. The IRS says these requests are sent with 5 to 10 days of the request.
- Other methods. Fill out a Form 4506T-EZ and send it in to receive your tax return transcript. This form can be sent in by mail or via fax. You can also call in your transcript request.
- Special financial aid IRS import. If you have a student who is required to fill out an annual FAFSA to receive financial aid, you can use the on-line FAFSA tool to get your required IRS tax information imported into the application. The IRS data retrieval import tool is built into the online FAFSA application form.
Should you need assistance please do not hesitate to ask for help.
IRS Automated Audit Programs Working Well – Programs aid in $2.9 Trillion 2015 tax revenue
IRS Automated Audit Programs Working Well – Programs aid in $2.9 Trillion 2015 tax revenue
Each year the IRS releases a Data Book that recaps Internal Revenue Service activities for the prior fiscal year ending in September. The 2015 Data Book was recently published which recaps the 2014 tax year. Here is what you need to know:
Each year the IRS releases a Data Book that recaps Internal Revenue Service activities for the prior fiscal year ending in September. The 2015 Data Book was recently published which recaps the 2014 tax year. Here is what you need to know:
- The $2.9 trillion in gross revenue collected was up 7.8% from the prior year
- $1.4 trillion of the revenue collected came from individual income tax returns
- 1.7 million notices were sent out involving 2.2 million math errors on tax returns
- Approximately 0.84% of all individual tax returns were examined by the IRS
- Automated programs yielded over $9 billion in additional tax assessments
Of specific interest is the recap of two automated programs in place at the IRS; the Automated Under Reporter Program and the Automated Substitute for Return Program.
Automated Under Reporter Program
- Description: This is the IRS computer program that compares information returns (W-2s and 1099s) provided by third parties with the information provided by taxpayers on their tax return. If there is a mis-match, the program automatically sends out a form to have you explain the difference.
- Results: The 2.6 billion information returns received by the IRS identified 3.7 million discrepancies resulting in $6.3 billion additional tax assessments.
- Trend: This program appears to be working for the IRS. In 2015 there were 800,000 fewer discrepancies identified and $800 million less tax assessments than in the 2012 report.
- Action: This program is an efficient way for the IRS to find missing revenue. Make sure you receive all your information forms and that the information stated on them is correct. Errors can be corrected on your tax return, but it is always best to get your employer or provider (bank, brokerage or customer) to issue a corrected 1099 or W-2 form.
Automated Substitute for Return Program
- Description: This is the IRS computer program that uses third party information and automatically creates a tax return with that information if you do not file one.
- Results: This program identified 614,000 non-filed tax returns. The created returns yielded an additional $2.7 billion in tax assessments.
- Trend: The Substitute Return Program appears to be working as well. There were 189,000 fewer substitute returns created by the IRS versus 2012. Tax assessments from this program have dropped $4 billion versus the 2012 reporting period.
- Action: If 1099s or W-2s (and other informational tax forms) have been issued, the IRS expects you to file a tax return or will do it for you if you don’t. While it is possible that this might create a refund, do not expect the IRS to grant you all your available deductions. It is best to file a return or request an extension to provide time to get your information to them.
The IRS Data Book is loaded with useful information. Unfortunately, even with a 7.8% increase in revenue, the Federal Government annual spending is still over $400 billion more than it projects to take in for the year.
The 1099 Economy – Get your tax moves down now!
The 1099 Economy – Get your tax moves down now!
If you have a number of part-time jobs through the use of internet tools like Uber you will need to make sure you understand your tax obligations. Waiting until the year is over will be too late.
With the move towards the Gig economy many more taxpayers are working for others on a part-time basis. So whether you are picking up a few dollars driving for Uber or are delivering meals for a local restaurant here is what you need to know.
Employee or contractor? Determine if your employer is considering you one of their employees (W-2) or as a Form 1099 independent contractor. Be prepared. Most of these jobs will treat you as an independent contractor.
Over $600. When you earn $600 dollars or more you will receive a Form 1099 informational tax form at the end of each year.
Estimated taxes. You will need to send in your own Social Security, Medicare, and estimated income taxes. You will need to do this periodically or could face tax penalties when you file your tax return. For most independent contractors, a payment is required every three months by filing quarterly estimated payments.
Unemployment taxes. You will also need to be prepared to file necessary payroll reports and pay any applicable employment related taxes.
Other items. You will need to provide your own benefits including required health insurance.
Now is the time to ensure you have your tax moves in order for the year. Please call if you need assistance.
Thinking of Selling Your Home? – Understanding the Home Gain Exclusion
Thinking of Selling Your Home? – Understanding the Home Gain Exclusion
Often a tax surprise occurs when selling your home. The possibility of capital gains tax should be understood before selling your residence. Here is a summary of the rules.
One of the largest tax breaks available to most individuals is the ability to exclude up to $250,000 ($500,000 married) in capital gains on the sale of your personal residence. Making the assumption that this gain exclusion will always keep you safe from tax can be a big mistake. Here is what you need to know.
The rule’s basics
As long as you own and live in your home for two of the five years before selling your home, you qualify for this capital gain tax exclusion. In tax-speak you need to pass three hurdles:
- Main home. This tax term defines what a main home is. It can be a traditional home, a condo, a houseboat, or mobile home. Main home also means the place of primary residence when you own two or more homes.
- Ownership test. You must own your home during two of the past five years.
- Residence test. You must live in the home for two of the past five years.
- Some quirks.
- You can pass the ownership test and the residence test at different times.
- You may only use the home gain exclusion once every two years.
- You and your spouse can be treated jointly OR separately depending on the circumstances.
When to pay attention
You have been in your home for a long time. The longer you live in your home the more likely you will have a large capital gain. Long-time homeowners should check to see if they have a capital gains tax problem prior to selling their home.
You have old home gain deferrals. Prior to the current rules, home-gains could be rolled into the next home purchased. These old deferred gains reduce the cost of your current home and can result in capital gain exposure.
Two homes into one. Often newly married couples with two homes have potential tax liability as both individuals may pass the required tests on their own property but not on their new spouse’s property. Prior to selling these individual homes, you may wish to create a plan of action that reduces your tax exposure.
Selling a home after divorce. Property transferred as a result of a divorce is not deemed a sale of your home. However, if the ex-spouse that retains the home later sells the home, it may have an impact on the amount of gain exemption available.
You are helping an older family member. Special rules apply to the elderly who move out of a home and move into assisted living and nursing homes. Prior to selling property it is best to review options and their related tax implications.
You do not meet the five-year rule. In some cases you may be eligible for a partial gain exclusion if you are required to move for work, disability, or unforeseen circumstances.
Other situations. There are a number of other exceptions to the home gain exclusion rules. This includes foreclosure, debt forgiveness, inheritance, and partial ownership.
A final thought
The key to obtaining the full benefit of this tax exclusion is in retaining good records. You must be able to prove both the sales price of your home and the associated costs you are using to determine any gain on your property. Keep all sales records, purchase records, improvement costs, and other documents that support your home’s capital gain calculation.
Chances of Audit Continue to Drop – What you need to know
Chances of Audit Continue to Drop – What you need to know
The IRS continues to use their audit department as a poster child to try to get more funding. The result can be seen in their declining audit rates. But do not be fooled. Here are the most recent IRS audit statistics for your review.
You can be audited the later date of either three years after the filing deadline of your tax return or when you actually filed your tax return. However, there are two main exceptions to this rule that can extend the risk of being audited;
| 1 | If the IRS audits a tax return and discovers an error of more than 25% of your claimed tax obligation they can go back six years. |
| 2 | If the IRS deems there is fraud involved, they can go back indefinitely. |
Every year the IRS publishes their examination statistics. Provided here are three years of published information to help you identify trends:
Audit Rate Statistics for INDIVIDUALS
| Fiscal Year Ending | 2015 | 2011 | 2008 |
|---|---|---|---|
| All Individual Tax Returns | .84% | 1.11% | 1.00% |
| No Income (AGI) | 3.78% | 3.42% | 2.15% |
| Income under $25,000 | 1.01% | 1.22% | .90% |
| $25,000 – 50,000 | .50% | .73% | .72% |
| $50,000 – 75,000 | .47% | .83% | .69% |
| $75,000 – 100,000 | .49% | .82% | .69% |
| $100,000 – 200,000 | .64% | 1.00% | .98% |
| $200,000 – 500,000 | 1.54% | 2.66% | 1.92% |
| $500,000 – $1 million | 3.81% | 5.38% | 2.98% |
| $1 million – $5 million | 8.42% | 11.80% | 4.02% |
| $5 million – 10 million | 19.44% | 20.75% | 6.47% |
| $10 million and over | 34.69% | 18.38% | 9.77% |
| Note: These audit rates are stated as a percent of total tax returns with “total positive income” (TPI) as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year. | |||
| Source: IRS Data Books | |||
Observations
- Despite complaints of fewer audits from the IRS, the audit rates are still up dramatically versus 2008 for those with incomes over $500,000. This is because the vast majority of income tax collected comes from these taxpayers.
- Upper income taxpayers could assume they will be audited every 3 to 5 years.
- Those with incomes over $10 million have seen their audit rate go up over 300% since 2008.
Note that the IRS also audits taxpayers with little to no taxable income. Much of this is due to the high incidence of error and fraud within the Earned Income Tax Credit.
Play it safe
Always retain your tax records and support documents for as long as they may be needed to substantiate claims on your tax return. Make sure you consider any state record retention requirements as you review when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, and real estate transactions.
Tax Return Review Hints
Tax Return Review Hints
Prior to e-filing or mailing your tax return, you will want to spend some time reviewing your information for accuracy. Here are some tips.
Prior to e-filing your tax return, you will want to check it for accuracy. Outlined here is a checklist of things to review on your tax return.
The Basics
- Confirm the basics for you, your spouse and your dependents:
Name, address, Social Security Numbers and proper identification of dependents that are under age 17 - Double check filing status
- Confirm your income amount. Start with line 22 total income. Does the amount seem reasonable? Next look at the individual areas that make up your income. Compare wages, interest, and investment income with your tax forms.
Adjusted Gross Income
Most tax returns will not have many lines entered in this area, but some might need special attention:
- Educators: look for your classroom expense deduction
- Self-employed: look for your deductible self-employment tax
- Contributors: check your HSA contributions and retirement plan contributions
- Students: check for tuition and fee deduction and possible student loan interest
- Divorced: check for accuracy in any alimony
Taxes and Credits
- Deductions: Mentally note whether you are taking the standard or itemized deduction approach. If standard: do the math. If itemized: review your Schedule A for accuracy.
- Exemptions: Take each exemption times $4,000. If lower than this, your exemptions may be subject to phase-out rules. If so, review the statement that calculates the phase-out.
- Review the credits. Spend some time reviewing any other activity in this area of the 1040. If you see areas of entered credits, ensure you have a general understanding of what they are and why you qualify for them.
- Line 61. Make sure the box is checked here. This shows you have qualified health insurance for the entire year. If not checked, understand why it is not and know the amount of the penalty you must pay.
Any other entries in this section should be understandable. If in doubt, ask for clarification.
The Balance of the 1040
- Confirm the accuracy of your withholding amounts, any estimated tax payments, and any refund carryovers.
- If self-employed, double check the self-employment tax calculated here.
- If taking the Earned Income Tax Credit, ensure a properly filled out EIC schedule is included with your tax return.
- Review and confirm any other entries on the balance of the tax form
- If due a refund, ensure your instructions are properly documented on your tax form
Important: If asking for a direct deposit of your refund, double check the account number. Errors in this area are hard to correct once your tax return is processed.
- Sign your tax return or your e-file approval and send the form to the correct address. Without a signature, your e-file cannot be submitted and your tax return is not deemed to be filed.
Other Forms and Schedules
Review the supporting schedules. Pay special attention to any missing schedules and new ones required for this year’s tax filings. As a final suggestion, pull out last year’s tax return and compare it with this year’s filing. Focus your questions and review on the areas with significant differences.
IRS May Retain $1 Billion in Taxpayer Refunds – File now to receive your refund
IRS May Retain $1 Billion in Taxpayer Refunds – File now to receive your refund
The IRS is going to keep close to one billion dollars in unclaimed refunds from those who have not filed a 2012 tax return. Do not let this happen to you or someone you know.
The IRS estimates that one million taxpayers may lose close to $1 billion in refunds if they do not file their 2012 tax return before the upcoming April filing deadline.
Don’t let this happen to you or someone you know. Here is what you need to know.
- The three-year rule. You have three years to file a tax return and request your refund. If you miss this window, the U.S. Treasury absorbs your funds.
- There is no penalty. If you are wary of filing a tax return because you are late, do not worry. The IRS does not penalize you for late filing a tax return where they owe you a refund.
- Income too low? Think again. Often taxpayers do not file a tax return because their income is too low to be taxed. This can be a big mistake. There are many provisions in the tax code that allow you to receive a refund even if you paid no tax. Many of these are refundable credits like the Earned Income Tax Credit.
- Who should check. So who are all these people owed money? Here are some common taxpayer groups that are owed this nearly billion dollars. If you know of someone in any of these groups, please remind them of this looming filing deadline.
- Students
- Senior citizens
- Low income taxpayers
- Those with kids
- Those with other problems (owe child support, non-citizens, multiple-non filing years, and those who owe back-taxes from other tax years)
- Need missing information? One of the common reasons given for not filing is missing information. If you have lost the required information to file a tax return please contact your employer and other institutions (banks, Social Security, and customers) to obtain replacement copies. If this is not feasible you can receive a copy of your transcript from the IRS.
- To request your information:
- Fill out and file Form 4506-T. Here is a link to the form. Form 4506-T: Request for Transcript of Tax Return
OR
- Go to IRS.gov and use the “Get a Transcript by Mail” button to order a paper copy of your transcript and have it sent to your address of record. Taxpayers can use the information on the transcript to file their return.
IMPORTANT: If this applies to you or someone you know, ask for your information immediately as time is running out. Your tax return must be filed on or before April 18th, or April 19th for those in Massachusetts and Maine.
Ethics?
There is ethical irony in the way the IRS looks at unclaimed refunds. If you do not file a tax return and the IRS thinks you owe money you will receive a notice with a tax due calculated by the IRS. However, if the IRS believes that they may owe you money and you have not filed a tax return, no notice is given and they keep your refund. Please understand this, review your situation, and file a tax return to get your refund before it is too late.
Supplement Your Retirement Outside Retirement Savings Accounts – Five great ideas
Supplement Your Retirement Outside Retirement Savings Accounts – Five great ideas
In addition to Social Security, retirement accounts are a primary resourse for income when you retire. But these aren’t the only tax advantaged tools available to you. Here are five other great ideas to supplement your retirement income.
The tax code is very specific in helping you save for retirement through use of IRA’s, 401(k)’s, 403(b)’s, and benefit accounts. However, there are other tax savings to be had if you know where to look. Here are some tax-advantaged ways to earn more during your retirement.
- Rent your home. You can rent your home for up to 14 days each year tax-free. For example, with proper planning you can arrange to rent out your home while you are away having fun or visiting grandchildren.
- Maximize your earnings. Each year you can earn some income and still stay below your taxable income threshold. Be careful here, as you may inadvertently make some of your Social Security Benefit taxable. You will also need to account for any minimum required retirement account distributions.
- Leverage your Roth distributions. Roth IRA’s and Roth 401(k) distributions are not taxable as long as you abide by the account rules. Consider this in your planning to reduce distributions from taxable retirement accounts.
- Use volunteerism instead of taxable income. If you plan to travel in retirement consider ways to volunteer at desired destinations in lieu of paying for food or lodging. Many national parks and other vacation destinations look for retirees to help manage campgrounds and scenic places. The free lodging and other benefits can save hard earned income that has already been taxed.
- Consider moving. With the wide array of state income tax rates, there are often lower cost options available to you. States like South Dakota, Florida, Texas, Nevada, Wyoming, Washington, Alaska, and New Hampshire have no state income tax. Be careful as this tax saving technique often has trade-offs and requires you to establish residence in your state of choice. These trade-offs can include high sales taxes, distance from family members and friends, and lack of trusted service providers.
Five Tips for Non-Cash Charitable Contributions
Five Tips for Non-Cash Charitable Contributions
One way to protect the value of your charitable donation deduction is keeping good records. Here are five tips to help ensure your deductions are iron clad.
The IRS is quick to disqualify your non-cash charitable contributions if you do not have adequate records to support your donation. Here are five quick tips to ensure this does not happen to you.
- Get a receipt. Whenever you donate items of value please get a receipt from the charitable organization. It should include the name of the organization, the date of the gift, a general description of the item, and that you received nothing in return for your gift.
- Break out the items donated. Create a detailed list that includes when you acquired the donated item, the estimated value of the item when acquired, and how it was acquired.
- Take a picture of the donation. When itemizing the items to be donated, don’t forget to take a quick photo of the item. Title the photo and place the photo title on the list of items to be donated for cross-reference.
- Create a reasonable value of the donation. Use thrift shop values and online resale values for similar items from sites like e-bay to support your claim of value. Do not forget to provide a statement of condition. Your donated items should be in good or better condition.
- Know when special rules apply. If you donate an item of high value, you may need to obtain an appraisal. Donated vehicles and boats valued over $500 may require an approved Form 1098-C statement from the charity when they sell the vehicle. If they use the vehicle, you will want a print out of value from an approved vendor like Kelly Blue Book or NADA. If the value is over $5,000, you will want to get an independent appraisal of donated items. Donated stocks and mutual funds will need a statement of value from your investment company and from the charity receiving the goods.*
*Special caution: When donating appreciated stocks and mutual funds owned by you for over one year, do not sell the asset. Conduct a direct transfer of the certificates and have the charity sell the investment. This will maximize the value of your donation and avoid potential capital gain taxes.
Receive Copies of Fraudulent Tax Returns – What did thieves try to steal?
Receive Copies of Fraudulent Tax Returns – What did thieves try to steal?
Taxpayers who are IRS identity thief victims have been long frustrated by their inability to see what thieves have filed under their Social Security Number. In a recent announcement, the IRS is now allowing taxpayers to obtain copies of these fraudulently filed tax returns
Along with tax season comes the season of tax identification theft. Those who have become victims know how frustrating the experience can be.
The frustration
Until now, if you were a victim of tax identity theft, you would be unable to receive information from the IRS about the depth of the fraud. Many frustrated taxpayers have tried to get copies of the fraudulently filed tax returns. The IRS has repeatedly refused freedom of information requests to get these copies.
What’s new?
In a recent announcement, the IRS has changed course on requests to get copies of fraudulently filed tax returns. As long as you follow their instructions, you are now able to get copies of what thieves attempted to do with your tax information. But be forewarned. The IRS may black out information on the requested return that does not pertain to you. They will try to present you with enough of the falsely filed tax return to allow you to determine the depth of the data that has been stolen.
Why the theft information may be important
- You can see what personal information the thieves have. What has been compromised? Name, address, and Social Security Number? Do they have your dependent’s or spouse’s information? Perhaps they also have your income and withholding data. Knowing this will help you plan the extent of data protection you will need.
- There may be clues as to where the identity theft occurred. Of the information stolen, who had access to it? Did the data breach of your identity happen through the IRS or somewhere else?
- There may be more tax years impacted than you thought. Request information from the year you first became aware of the identity theft at the IRS. But you may wish to request information in a prior year and in the year following the theft. The IRS has access to up to six years of tax returns. Try to determine whether the theft is ongoing is a one-time occurrence.
The request requires specific information. Here is a link to the IRS announcement: Instructions for Requesting Copy of Fraudulent Returns
Thankfully, the IRS’ recent decision to share this fraudulent information is allowing victims to take some action to protect themselves.