Will your tax return be late?

fox8newskemjIf you are like the rest of the millions of individuals the IRS expects will put their tax return on extension, don’t be alarmed! Here are a few tips if you have yet to file your tax return!

Ask for an extension

If you simply don’t have the time or the effort to get your return out before midnight, consider filing an extension. The IRS offers a service via their website, Free File, which allows anyone to file for an extension or you can manually prepare your Form 4868. Both options will provide you with an additional six months to file, extending your tax return’s due date to October 15th instead. Keep in mind, filing an extension will help you avoid the failure to file penalty, which could be assessed at 5% monthly of unpaid taxes. In addition, this penalty can be assessed up to a whopping 25%!

Yes, the IRS still wants their money!

While filing an extension will give you time to file, it does not however, give you additional time to pay. If you file for an extension, you are required to pay 90% of the actual tax due. Failure to pay will expose you to the failure to pay penalty, which is approximately ½ of 1% monthly up to a 25% maximum penalty. If you can’t afford to pay the entire amount, at the very least, submit a partial payment in order to reduce penalties. In addition, consider using another payment option like an installment agreement, which would allow you to make monthly payments on the amount you expect to owe.

File past tax returns

Not only is your 2014 tax return due, but keep in mind, April 15th is the last day to claim a tax refund for the tax year 2011. The IRS allows individuals to claim a refund by filing an original tax return within 3 years of the tax deadline. Otherwise, you risk the chances of obtaining your tax refund.

Keep in mind, the IRS does not access a failure to file penalty for returns due a refund.

Remember: your choice, your future!
Kemberley Washington is a certified public accountant and professor at Dillard University.  Subscribe to her blog at kemberley.com or connect with her on Twitter @kemwashcpa.

Overlooked tax deductions

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Credit card interest

Are you a business owner? Did you make purchases on a credit card for qualified business expenses? While personal credit card interest is not deductible, you can deduct interest if your credit card was used for qualified business expenses.

Bad debt expense

Does someone owe you a bona fide debt? If you tried to get your money back, the Internal Revenue Service (IRS) will allow you to take a nonbusiness bad debt deduction on your tax return. A nonbusiness bad debt is a debt that is not in connection with a taxpayer’s trade or business on the tax return.

Educator expense

If you are a grade K-12 educator, including counselors, principals and aides, you may be able to deduct $250 for unreimbursed expenses (books, supplies, equipment, etc.) you incurred during the school year.

SEP IRA and IRA deduction

An IRA is a great tool to save for retirement. The best thing is – if you didn’t get a chance to open an IRA before December 31st, the IRS will allow you to contribute up to the tax deadline, which is April 15th.

Searching for a job

If you were in the market searching for a job last year, you may be able to write off some of those expenses on your tax return.  The IRS allows individuals to reduce their tax burden by deducting job search expenses for a new job within the taxpayer’s current occupation.

Mileage for charity and medical

Did you volunteer for your favorite charity? Did you have to travel to your doctor’s office for checkups and procedures?  The mileage traveled can be deducted on your tax return.

Moving expenses

Are you starting a new job or pursuing a self-employment opportunity?  You may be able to deduct qualifying moving expenses. This includes airfare or mileage and the cost of packing and transporting household goods.

Tithes/Charitable contributions

Charitable contributions can be in the form of cash and property. These donations require a record of substantiation such as a bank record or statement from the charitable organization. Non-cash donations should be deducted at fair market value.

American Opportunity Credit

The IRS will grant you a tax credit for the first four years of postsecondary education. Qualified expenses include tuition, fees, equipment, supplies and course materials incurred during the taxable year.  The best thing about this credit is it may be refundable!

Remember, your choice, your future!

Kemberley Washington is the author of the Ten Commandments to a Financial Healing. She is a CPA and professor at Dillard University.

 

 

What to do if the IRS comes knocking

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You received the letter many dread. The Internal Revenue Service (IRS) has requested to audit your tax return. It could be for many different reasons. Maybe your income on your tax return did not match the amount reported to the IRS or your expenses seem to be a bit questionable. If so, you could be the lucky winner of a full IRS audit. No matter what reason the IRS decides to come knocking, one thing is certain – you must be prepared. As a former IRS agent, I’ve had the opportunity to participate in a host of audits, and time and time again, the key to surviving these unwanted ordeals is to make certain you understand your rights and responsibilities.

Fight Back

You should first get an understanding of what items are being audited and review the examiner’s document request. This request will outline items needed to substantiate the amount claimed on the tax return. Remember, during a tax audit, the burden of proof is on you.

Gather documents to substantiate questionable items on the tax return. What? You do not have any records? Have no fear! Remember, there are other methods of substantiating items on the tax return. For example, if you are a home health nurse and you previously claimed vehicle expenses, consider obtaining patient records for the appropriate year and estimate mileage based on these visits. Examiners are allowed to accept various types of evidence to substantiate items, including third-party testimony, affidavits and other types of verification.

Get Help

If you are uncomfortable with the mere mention of the letters I-R-S, it may be a good idea to obtain an agent to work on your behalf. This may include a certified public accountant (CPA), an enrolled agent or even a tax attorney. Once you inform the IRS examiner you wish to obtain representation and the IRS has received your completed Form 2848 and Power of Attorney, the IRS must make all future contact with the representative only, thus alleviating you from speaking to the IRS.

Do Not Settle for Defeat

If you are not in agreement with the examiner’s position, you do have rights. First, you should raise concerns with the examiner. Most often, the examiner may be willing to compromise on certain issues, if you are willing to sign an agreed report. However, if you are unable to come to an agreement with the examiner, you can request a meeting with the examiner’s manager or request that the case is heard by appeals. Remember, the ultimate goal of both the examining group and appeals is to close the case without a subsequent trial. Therefore, if you stay persistent, chances are you will be able to obtain favorable results.

Remember, Your Choice, Your Future!

Kemberley Washington is a certified public accountant and a business professor at Dillard University. Kemberley is the author of The Ten Commandments to a Financial Healing. Follow her on Twitter @kemwashcpa.

 

 

 

 

 

Oh No! Will your tax return be tardy?

Tax return latenj 2.15 image kemberley.comIf you are like the rest of the 5 million individuals the IRS expects will put their tax return on extension, don’t be alarmed! Here are a few tips if you have yet to file your tax return!

Ask for an extension

If you simply don’t have the time or the effort to get your return out before midnight, consider filing an extension. The IRS offers a service via their website, Free File, which allows anyone to file for an extension or you can manually prepare your Form 4868. Both options will provide you with an additional six months to file, extending your tax return’s due date to October 15th instead. Keep in mind, filing an extension will help you avoid the failure to file penalty, which could be assessed at 5% monthly of unpaid taxes. In addition, this penalty can be assessed up to a whopping 25%!

Yes, the IRS still wants their money!

While filing an extension will give you time to file, it does not however, give you additional time to pay. If you file for an extension, you are required to pay 90% of the actual tax due. Failure to pay will expose you to the failure to pay penalty, which is approximately ½ of 1% monthly up to a 25% maximum penalty. If you can’t afford to pay the entire amount, at the very least, submit a partial payment in order to reduce penalties. In addition, consider using another payment option like an installment agreement, which would allow you to make monthly payments on the amount you expect to owe.

File past tax returns

Not only is your 2014 tax return due, but keep in mind, April 15th is the last day to claim a tax refund for the tax year 2011. The IRS allows individuals to claim a refund by filing an original tax return within 3 years of the tax deadline. Otherwise, you risk the chances of obtaining your tax refund.
Keep in mind, the IRS does not access a failure to file penalty for returns due a refund.

Remember: your choice, your future!

Kemberley Washington is a certified public accountant and professor at Dillard University.  Subscribe to her blog at kemberley.com or connect with her on Twitter @kemwashcpa.