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5 TAX TIPS FOR PARENTS AND FAMILIES

If you’re the type of person who wants total control of their personal finances and feels that you want to arrange your affairs so that your tax shall be as low as possible, boy do I have some ideas for you:

  1. Cut the cost of college with tax credits. When it comes to tax benefits for college education, Government help falls into the category of “too many choices” according to The Parodox of Choice, by Barry Schwartz.  The best credit is the American Opportunity Tax Credit, which is up to $2,500 per student, per year, and is available for the first four year of undergraduate school.  The student must be enrolled at least half-time.  Qualified education expenses for calculating the credit include: tuition and fees, fees for books, supplies, and equipment used in a course of study that must be paid to the eligible education institution for enrollment; and those expenses can include amounts paid by parents, Grandma, or some other third party.
  2. Put your child on summer payroll. If your child needs a job for the summer, the perfect solution might be right in front of you.  Strategy:  Hire your child to work for your business while school is out.  Your child is eligible for valuable fringe benefits.  If your child is under age 18 and is employed by a parent in an unincorporated business, the earnings are exempt from payroll taxes (FICA).  The exemption also applies to federal and state unemployment.  Now that your child has earnings from a job, your child can sock away up to $5,500 in a traditional or Roth IRA.  Tip:  Pay your child a reasonable amount for the services that are actually performed.
  3. Bunch up medical expenses. For 2015, the deduction for medical and dental expenses is limited to the excess above 10% of your AGI (7.5% if you or your spouse is 65 or older as of year-end).  When it is feasible, schedule elective (i.e. non-emergency) expenses, such as physical exams and dental cleanings, for the end of the year if you expect to clear the 10%-of-AGI mark in 2016.  Otherwise, you may as well postpone these visits to another year when at least you’ll have a chance at the deduction.
  4. Split Family Income. If you expect to be in a high tax bracket for 2016, you might transfer income-producing property to other family members, like young children or grandchildren, who are in much lower brackets.  For instance, with a tax rate differential of 29.6% between the top bracket rate of 39.6% and the lowest bracket rate of 10%, a family can save $2,960 in tax on $10,000 of earnings.  But tax savings may be mitigated by the “kiddie tax.”  Caution: For 2015, unearned income above $2,100 received by a dependent child under age 19 or a full-time student under age 24 is taxed at the parents’ top tax rate.
  5. Turn that vacation into a business deduction. Travel costs incurred while away from home for business purposes are generally deductible, but costs for personal reasons are never deductible.  It is not unusual for travel to include elements of both.  You can turn a vacation into a business deduction if the trip is primarily business in nature.  If more than half of a normal working day is spent for business purposes, the day is a business day.  This includes time spent fielding phone calls and responding to business email or text messages.  Travel days are treated as business days.  Weekends and holidays that fall between business days, even if you’re at the beach all day, may be counted as business days if it is impractical for the taxpayer to return home on the weekend.

Helpful Tips to Protect Against Identity Theft

Identity theft has been on the rise over the last ten years. What can a person do to help protect their personal identity? Here are some helpful tips that can minimize your risk of becoming a victim of identity theft.

• Keep your social security number secure and don’t give out unless absolutely necessary. Don’t carry your social security number with you, keep it at home in a secure location.
• Don’t give out personal information over the phone, mail, or internet unless you initiated the contact.
• Store personal information in a secure place at home.
• Pickup your mail as soon possible after it is delivered. Always mail items at the US Post Office or a collection box, not in your mail box on the curb for a postal worker to pickup. (This creates a high risk for items to be taken from your mail box)
• When leaving town a hold on mail delivery until you return.
• Know the billing cycles of your creditors and contact them if you don’t receive bills.
• Review all of your bank statements, credit card statements, and other bills monthly to insure that charges look correct. If there are unfamiliar charges contact your financial institution or creditor.
• Review credit reports at least annually. (You can request a free credit report once a year at www.annualcreditreport.com
• Shred old documents before throwing them. Example: bank statements, credit card bills, utility bills, preapproved credit card offers, etc. (Even using scissors is better than just throwing them out.)
• Have strong passwords on personal accounts such as financial accounts, email accounts, social network accounts, etc. Include upper and lower case letters, numbers, and symbols to create stronger passwords.
• Also strong passwords on phones will help protect your personal data.
• Use firewall, Anti-virus, and other protective software to help protect your information.
• Before sell or discarding a computer destroy the hard drive.
• Never carry passwords with you, as doing such is risky. IF you have written passwords down, keep in a secure location at home.
• When using ATMs or Pin pads, protect your PIN from prying eyes.
• When using the internet look in the browser bar to make sure that there is a lock icon- insuring that it is a secure website.
• Don’t give out your credit card information on the internet unless it is encrypted on a secure site.
• Minimize the number credit cards that you carry. Carry only what is necessary.
• Cancel credit cards that you haven’t been using.
• When traveling use credit cards or traveler’s checks instead of personal checks.

The acronym SHRED is a helpful reminder of a few basic tips that can help protect your identity.

• Strengthen passwords: Use upper and lower case letters, symbols, and numbers at least 8 characters long.
• Handle personal information with care: Don’t give out information unless absolutely necessary and you have initiated it.
• Read credit reports annually: Access a free credit report at: AnnualCreditReport.com
• Empty your purse or wallet: Only carry necessary items with you.
• Discuss tips with friends: Share your knowledge about identity protection with others.
(SHRED information was found on the following link: http://www.idtheftcenter.org/Protect-yourself/id-theft-prevention-tips.html)

Tips for Reporting Identity Theft:

• Act as soon as you discover a problem.
• Contact the local police and get a report filed. Creditors will require a case number to move forward with the fraud claims. You will need to provide copies of documents regarding fraudulent issues.
• Keep a record of all documentations, emails, or conversations.
• When sending information always keep the originals and mail the copies of whatever information you are sending.
• Report Identity Theft to the Federal Trade Commission. Contact number is 877-438-4338 (877-IDTHEFT) Fill out a Federal Trade Commission’s ID Theft Affidavit and get it notarized. (Copy of the Affidavit can be found at: www.ftc.gov/bcp/edu/mifrosites/idtheft )
• If your banking or credit card accounts have been compromised, close them immediately.
• Contact the Fraud Department at your Financial Institutions.
• Contact Credit Reporting Agencies. The credit reporting agencies will flag your account. This will tell creditors they need to verify identity before issuing you credit. Fraud alert can be placed on accounts for up to seven years. Phone numbers for agencies are: Equifax 800-525-6285, Experian 888-397-3742, TransUnion 800-680-7289.
• Notify creditors immediately when an issue arises. This will reduce your liability and will help put steps in place to protect you.
• Contact the Social Security Administration Fraud line 800-269-0271
• Contact the United States Post Office. Your local office can point you in the right direction and process to undertake.
• Contact the Internal Revenue Service 800-829-0433
• Be persistent. Changes will only happen if you are persistent to improve the situation.

(Information on tips for reporting identify theft from the National Crime Prevention Council –Link to pamphlet is: http://www.ncpc.org/topics/fraud-and-identity-theft/identity-smart )

Resourceful links for more information on protecting your identity.
Identity Theft Resource Center- This website had additional links at the bottom for a variety of items concerning protection tips for different topics regarding keep your identity safe.
http://www.idtheftcenter.org/Protect-yourself/id-theft-prevention-tips.html

National Crime Prevention Council
http://www.ncpc.org/topics/fraud-and-identity-theft/tips-to-prevent-identity-theftUSA.gov
https://www.usa.gov/identity-theft
Federal Trade Commission
http://www.consumer.ftc.gov/features/feat-identity-theft
https://www.identitytheft.gov/ (Recovering from Identity Theft)

Four Tips If You Can’t Pay Your Taxes on Time

If you find you owe more than you can pay with your tax return, don’t panic. Make sure to file on time. That way you won’t have a penalty for filing late.

Here is what to do if you can’t pay all your taxes by the due date.

1. File on time and pay as much as you can.  File on time to avoid a late filing penalty. Pay as much as you can to reduce interest charges and a late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.

2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.

3. Use the Online Payment Agreement tool.  You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month. It also means you won’t miss payments that could lead to more penalties.

4. Don’t ignore a tax bill.  If you get a bill, don’t ignore it.  The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can. Find out more about the IRS collection process on IRS.gov. Also check out IRSVideos.gov/OweTaxes.

User Fees for Installment Agreements and Offers-in-Compromise Increased

The IRS has issued final regulations that provide user fees charged for processing installment agreements and offers-in-compromise. The regulations affect taxpayers who want to pay their federal tax liabilities through installment agreements and offers-in-compromise. These regulations are effective on December 2, 2013, and apply to installment agreements entered into, restructured, or reinstated and offers-in-compromise processed on or after January 1, 2014.

The fee increases were proposed in NPRM REG-144990-12 (TAXDAY, 20130830, I.2). The final regulations increase the fee for entering into an installment agreement from $105 to $120 (it remains $43 for low-income taxpayers) and the fee for restructuring or reinstating an installment agreement from $45 to $50. The fee for processing an offer-in-compromise increases from $150 to $186. The fee for offers based on doubt as to liability and offers from low-income taxpayers continue to be excepted from a user fee.

Tax Preparers Assaulted, Shot at This Season

This season is turning dangerous for tax preparers, according to published reports.

 

Chicago Heights, Ill.: In mid-February a Liberty Tax preparer pulled a gun on a customer’s boyfriend who police said threatened to beat him up during a dispute over fees. The boyfriend, 34, has reportedly been charged with assault after confronting the preparer over $500 in additional fees that the girlfriend was charged for her return. Police told reporters the preparer, 45, had a valid firearm owner’s ID.

 

Kirkwood, Mo.: A 53-year-old local man is accused of choking an H&R Block worker earlier this month after reportedly becoming enraged about his “tax situation.” Police told news outlets that the assailant knocked the Block employee to the ground and is now charged with misdemeanor assault. The Block worker reported minor injuries but did not require hospital treatment.

 

Deerfield Beach, Fla.: A bullet narrowly missed the ear of preparer Michelle Merced as she sat in the office of Dixie Fast Tax in late February. “I wanted [tax season] to be busy with people, not bullets, coming in,” she told news outlets. The shooting was connected to a dispute outside her office and police confirmed that Merced and her staff were not intended targets.

 

The incidents come on the heels of reports of gunfire and the beating of a preparer in the Detroit office of Tax City Tax Service on February 28 by a 19-year-old local man after the woman he was in the office with couldn’t get her refund in cash. Four people were shot in the scuffle and the preparer told news outlets that she plans tighter security when she re-opens her office.

This is hardly the first season refunds and taxes turned clients and their companions violent. Two years ago, according to reports, a Toledo, Ohio, woman and her son robbed and threatened to shoot their Liberty Tax preparer using a curling iron wrapped in a towel.

 

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January 8, 2016

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