Lauren Rosson, CPA EA MST

Individual Taxpayers: Seven Things to Do When an IRS Letter Arrives The IRS mails millions of letters to taxpayers every year for many reasons. Here are seven simple suggestions on how individuals can handle a letter or notice from the IRS: 1. Don’t panic. Simply responding will take care of most IRS letters and notices. 2. Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.... 3. Compare it with the tax return. If a letter indicates a changed or corrected tax return, the taxpayer should review the information and compare it with their original return. 4. Only reply if necessary. There is usually no need to reply to a letter unless specifically instructed to do so, or to make a payment. 5. Respond timely. Taxpayers should respond to a letter with which they do not agree. They should mail a letter explaining why they disagree. They should mail their response to the address listed at the bottom of the letter. The taxpayer should include information and documents for the IRS to consider. The taxpayer should allow at least 30 days for a response. When a specific date is listed in the letter, there are two main reasons taxpayers should respond by that date: To minimize additional interest and penalty charges. To preserve appeal rights if the taxpayers doesn’t agree. 6. Don’t call. For most letters, there is no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can use the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling. 7. Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.

Divorce or Separation May Affect Taxes Taxpayers who are divorcing or recently divorced need to consider the impact divorce or separation may have on their taxes. Alimony payments paid under a divorce or separation instrument are deductible by the payer, and the recipient must include it in income. Name or address changes and individual retirement account deductions are other items to consider. IRS.gov has resources that can help along with these key tax tips:... Child Support Payments are not Alimony. Child support payments are neither deductible nor taxable income for either parent. Deduct Alimony Paid. Taxpayers can deduct alimony paid under a divorce or separation decree, whether or not they itemize deductions on their return. Taxpayers must file Form 1040; enter the amount of alimony paid and their former spouse's Social Security number or Individual Taxpayer Identification Number. Report Alimony Received. Taxpayers should report alimony received as income on Form 1040 in the year received. Alimony is not subject to tax withholding so it may be necessary to increase the tax paid during the year to avoid a penalty. To do this, it is possible to make estimated tax payments or increase the amount of tax withheld from wages. IRA Considerations. A final decree of divorce or separate maintenance agreement by the end of the tax year means taxpayers can’t deduct contributions made to a former spouse's traditional IRA. They can only deduct contributions made to their own traditional IRA. For more information about IRAs, see Publications 590-A and 590-B. Report Name Changes. Notify the Social Security Administration (SSA) of any name changes after a divorce. Go to SSA.gov for more information. The name on a tax return must match SSA records. A name mismatch can cause problems in the processing of a return and may delay a refund. See more

Tips to Keep in Mind on Income Taxes and Selling a Home Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home. Below are tips to keep in mind when selling a home:... Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have: Owned the home for at least two years Lived in the home as their main home for at least two years Gain. If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return Loss. A main home that sells for lower than purchased is not deductible. Reporting a Sale. Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions. Possible Exceptions. There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home. Worksheets. Worksheets are included in Publication 523, Selling Your Home, to help you figure the: Adjusted basis of the home sold Gain (or loss) on the sale Gain that can be excluded Items to Keep In Mind: Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home. Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount. Work-related moving expenses might be deductible, see Publication 521, Moving Expenses. Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address. Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.

Starting a Business This Summer? Here’s Five Tax Tips If summer plans include starting a business, be sure to visit IRS.gov. The IRS website has answers to questions on payroll and income taxes, credits and deductions plus more. New business owners may find the following five IRS tax tips helpful:... 1. Business Structure. An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to 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 a business pays depends on the type of business structure set up. Taxpayers may need to make estimated tax payments. If so, use IRS Direct Pay to make them. It’s the fast, easy and secure way to pay from a checking or savings account. 3. Employer Identification Number (EIN). Generally, businesses may need to get an EIN for federal tax purposes. Search EIN on IRS.gov to find out if the number is necessary. If needed, it’s easy to apply for it online. 4. Accounting Method. An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods: a. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them. b. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year.

Eight Tips to Protect Taxpayers from Identity Theft Identity theft happens when someone steals personal information for financial gain. Tax-related identity theft happens when someone uses another person’s stolen Social Security number (SSN) or Employer Identification Number (EIN) to file a tax return to obtain a fraudulent refund. Many people first find out they are victims of identity theft when they submit their tax returns. That’s because the IRS lets them know someone el...Continue reading

Here are several tips from the IRS about miscellaneous deductions: The Two Percent Limit. Most miscellaneous costs are deductible only if the sum exceeds 2% of the taxpayer’s adjusted gross income (AGI). For example, before being able to deduct certain expenses, a taxpayer with $50,000 in AGI must come up with more than $1,000 in miscellaneous deductions. Expenses may include: Unreimbursed employee expenses. Job search costs for a new job in the same line of work. J...ob tools. Union dues. Work-related travel and transportation. The cost paid to prepare a tax return. These fees include the cost paid for tax preparation software. They also include any fee paid for e-filing a return. See more

If you haven't filed a 2013 tax return or need to amend the one you did file, you have until April 15th to still get a refund. After the 15th passes you could lose your opportuntiy to get back any refund from the IRS.

Six Tax Tips for the Self-Employed Self-employed taxpayers normally earn income by carrying on a trade or business. Here are six important tips from the IRS for the self-employed: Self-Employed Taxpayers. Sole proprietors and independent contractors are two types of self-employment. Taxes can be complex for the self-employed. Check out the IRS Self Employed Individuals Tax Center. Estimated Tax. Self-employed taxpayers generally need to make quarterly estimated tax paymen...ts. IRS Publication 505, Tax Withholding and Estimated Tax, has details on making those payments. Schedule C or C-EZ. Self-employed taxpayers must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040. For expenses less than $5,000, use Schedule C-EZ. Each form’s instructions provide the rules for which form to use. SE Tax. For those making a profit, self-employment and income tax may need to be paid. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Allowable Deductions. Taxpayers can deduct expenses paid to run a business that are both ordinary and necessary. An ordinary expense is one that is common and accepted in the industry. A necessary expense is one that is helpful and proper for a trade or business. When to Deduct. In most cases, taxpayers can deduct expenses in the year paid or incurred. Some costs must be ‘capitalized,’ however. This means deducting the cost over a number of years. See more

Early Withdrawals from Retirement Plans Many people find it necessary to take out money early from their IRA or retirement plan. Doing so, however, can trigger an additional tax on top of income tax taxpayers may have to pay. Here are a few key points to know about taking an early distribution: 1. Early Withdrawals. An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59 years old. 2. Additional Tax. If a taxpayer took an early withdr...awal from a plan last year, they must report it to the IRS. They may have to pay income tax on the amount taken out. If it was an early withdrawal, they may have to pay an additional 10 percent tax. 3. Nontaxable Withdrawals. The additional 10 percent tax does not apply to nontaxable withdrawals. These include withdrawals of contributions that taxpayers paid tax on before they put them into the plan. A rollover is a form of nontaxable withdrawal. A rollover occurs when people take cash or other assets from one plan and put the money in another plan. They 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. 5. File Form 5329. If someone took an early withdrawal last year, they may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with their federal tax return. Form 5329 has more details.

IRS Debunks Myths Surrounding Tax Refunds As millions of people begin filing their tax returns, the Internal Revenue Service reminds taxpayers about some basic tips to keep in mind about refunds. During the early parts of the tax season, taxpayers are anxious to get details about their refunds. In some social media, this can lead to misunderstandings and speculation about refunds. The IRS offers these tips to keep in mind....Continue reading

Things to Remember When Choosing a Tax Preparer Taxpayers should choose their tax return preparer wisely with good reason. Taxpayers are responsible for all the information on their income tax return. That’s true no matter who prepares the return. Here are ten tax tips to keep in mind: 1. Check the Preparer’s Qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer ...Continue reading

One last reminder, make sure you prepare any required 1099's for your business by Tuesday. They must be in the mail and postmarked no later than Tuesday the 31st

Don't forget 1099's are due by January 31, 2017. If you operate a business and pay a vendor $600 or more for services during 2016 you might need to send them a 1099 form by the end of the month