Phoenix Tax Consultants

The federal government allows states to collect taxes in order to finance public and government services. Health benefits, law enforcement departments, public schools, and other institutions depend on these local and state taxes to keep serving the citizens.

There are different types of state and local taxes, such as property taxes, individual income taxes, sales taxes, vehicle license taxes, corporate income taxes, etc. In this post, you’ll learn how to file these tax returns for the income you earned in 2019. 

How Can I File My Tax Returns?

You first need a Wage and Tax Statement (also known as a W-2 form) from your employer(s) where you worked during 2019. If you work as a freelance professional, you may receive a 1099 form from various payers to assist in preparing your return. 

According to the IRS, the best way to file tax returns is doing it electronically (online). This also makes it easier to request direct deposit for your refund; people who file online, typically receive their refund within 3 weeks, as opposed to 6 weeks or more (for people who file via mail). At Phoenix Tax Consultants we offer both electronic and mailed tax return options for our clients. 

Taxes should be estimated and paid throughout the year but amounts owed at tax time become payable on the 15^th of April, 2020. If you have a complicated return and need to request for an extension, you should file this request by 15^th April or face penalties and interest charges.

Different Types of Deductible State and Local Taxes

There are four kinds of non-business taxes that are deductible:

• State and local property taxes (for personal property)
• State and local real estate taxes
• State and local general sales taxes
• State, local, and foreign income taxes

In order to be considered “deductible”, you must have paid the tax (that was imposed on you) during the tax year. And you can only claim these taxes as an itemized deduction.

Note: You can only deduct up to $10,000 (if individuals) or $5,000 (if married, but filing separately). 

State and Local Property Taxes

The personal property taxes will be based solely on the value of your properties, such your car, boat, a painting, a bike, etc. Even if this tax is collected more (or less) than once every year, it must be imposed on you on an annual basis.

There are some fees and taxes you are not allowed to deduct, including:

• Social security taxes
• Federal income taxes 
• Stamp taxes (or transfer taxes) on property sale
• Estate taxes
• Any fees charged by the Homeowner’s Association 
• Service charge on trash collection, sewer cleaning, water supply.

State and Local Real Estate Taxes

Most local and state governments charge an annual tax on the entire value of a real estate property. Known as real estate tax, it is deductible if is assessed uniformly at a like rate on all properties throughout the jurisdiction.

If you are paying a loved one’s property taxes for them because they are getting old or are really sick, and can’t afford to do it themselves – it is not deductible. After all, it was not imposed against you.

You have to be the property owner in order to claim the deduction.

State and Local General Sales Taxes & Income Taxes

You can either choose to deduct general sales taxes or state and local income taxes – you are not allowed to deduct both. 

You can use the optional sales tax tables or your actual expenses if you decide to deduct the general sales taxes. Most people compare what they paid in state, local and foreign income tax to what they paid in sales tax, and then deduct the bigger amount out of the two.

They say only two things in life are certain: death and taxes. But these days, it seems that getting scammed by IRS imposters is also likely. While the American taxpayers are busy filing taxes, there’s a small group that has been working hard to scam innocent people out of their hard-earned money.

Statistics show that thousands of people fall prey to tax scammers each year, and considering this is the tax season, it’d be wise to be mindful of the common tax scams in 2019, such as:

• Getting calls from IRS agent imposters 
• Scammers filing your tax return with your stolen ID
• Getting fake emails about a tax refund
• Fake tax preparers. 

Getting Calls From IRS Agent Imposters 

Things got relatively worse when scammers or fake IRS agents figured out how to make their caller ID show up as the IRS. Once the targeted victim picks up the phone, the scammer claims that some IRS payment is urgently due and if they don’t pay up, they will get arrested. 

At this point, many innocent people get scared into taking action, but if they don’t, the scammer calls again, pretending to be from the DMV or police. 

So be cautious and keep in mind that the IRS never:

• Threatens to bring cops to have you arrested for not paying
• Calls to demand immediate payment (they will first send you a bill in the mail, if you owe any taxes).
• Demands payment without giving you the chance to appeal or question the amount “you owe”.
• Asks you to use a specific payment method to pay the money, like wire transfer, gift cards, or prepaid debit card.
• Asks for debit or credit card numbers over the phone.

Scammers Filing Your Tax Return 

This is one of the most common ways a tax scam works: When you go to file your taxes, you find out that you already have – or worse, someone else has been using your Social Security Number. Identity theft is a real concern in this country and one sure shot way to avoid it is to file your taxes early. 

The longer you wait, the more chance the scammer has to file a fake return and take off with your refund. Meanwhile, you’ll be left behind sorting through the mess with IRS. 

Also, if you filed a federal tax return last year that listed your address in the following states:

• Georgia 
• Florida 
• Michigan 
• District of Columbia 
• California 
• Nevada 
• Maryland 
• Rhode Island 
• Illinois 
• Delaware 

Or, you received a letter from the IRS enabling you to opt-in, you can request a Tax Identity Protection (IP) Pin. This way, the IRS will send you a new IP pin every year, and you can’t file your taxes without it. 

Getting Fake Emails About A Tax Refund 

There are some tax scams where the scammer sends out an email (that looks like it’s from the IRS), and claims that there is a refund for you. They will say that you just need to enter your banking information and Social Security Number, and the refund amount is yours. 

Sometimes, when it sounds too-good-to-be-true, it usually is. 

Another form of this scam is, you will get a fake IRS email that says you are in trouble; this email will also include a part of your old tax return to prove it’s real. Then when you click on the attachment, you download a malware in your computer which compromises every vital piece of information you have there.

So, make sure you only hire someone you know; don’t just go with anyone you have never heard of. 

To Sum it Up

If you know the tell-tale signs of a tax scam, it is easy to avoid them. Here are a few tips to help you protect against such scams:

• Don’t respond to the IRS emails or listen to calls from the IRS.
• Be careful with your account passwords (change them frequently and don’t share them with anyone).
• File your tax returns early.
• Don’t click on “download attachments” file or attached links in emails that claim to be from the IRS.
• Don’t ever use public internet (Wi-Fi) to do banking transactions or when filing returns. 
• If you receive a bill (through mail or email), always check with the IRS to ensure its authenticity.
• Think before you act: the IRS is a government agency, not the Mafia. They will never force you to pay or make a decision on the spot. Never succumb to the pressure of claims like “you have to pay immediately”.

The IRS is a traditional institution. It never makes contact via email, text messages, phone calls, or social media. Whether you owe any back taxes or the IRS owes you a refund, the real agency will never call, email, or text you about it – they will send a letter in the postal mail. Unfortunately, scammers are known to send letters as well so use your caution.

If you receive any such calls, be sure to contact the IRS directly at 800-829-1040 to find out whether the call was legitimate. At Phoenix Tax Consultants we staff IRS Enrolled Agents and are here to help should you have any questions.

As a small business owner, you may think that the IRS has bigger fish to fry than your small firm. But many reports have cited that the IRS is increasingly cracking down on small businesses for tax audits. 

You can avoid a lot of headaches (and fines!) by understanding and fulfilling your business tax responsibilities. If this is your first time filing taxes as a small business owner, you probably have a lot of questions about how much you need to pay in taxes and when to pay it. This post will help you learn what you need to know about filing quarterly business taxes.

How Do I Go About Paying Estimated Quarterly Taxes?

The IRS says that individuals, sole entrepreneurs, partners, and corporation shareholders need to pay quarterly estimated taxes if they expect to owe $1,000 or more in taxes when their state tax returns or federal returns are filed. Small business owners can easily calculate their estimated tax payments by using Form 1040-ES. 

To calculate your quarterly payment, you will estimate your expected adjusted taxable income, gross income, small business tax credits, and deductions for the year. If you’ve never filed a business tax return before, it’s best to consult your accountant or a tax professional for assistance in calculating these estimates.

Looking at your taxes from the previous year as a guide is considered the best way to estimate these numbers (if this is not your first time filing returns).

When Should I Pay the Quarterly Returns?

Here are the deadlines to file the quarterly estimated taxes for small business owners:

• April 15^th (for the period of January 1^st – March 31^st)
• June 17^th (for the period of April 1^st – May 31^st)
• September 16^th (for the period of June 1^st – August 31^st) 
• January 15^th (for the period of September 1^st – December 31^st)

These dates may/will change if the due date is falling on a public holiday or a weekend. 

Note: If you – the business owner – fail to submit at least 90% of the taxes you owe, you’ll be subjected to serious penalties. So please make sure you work with a skilled tax expert to calculate the amount owed and then get it double-checked. Being extra cautious never hurts.

How Much Should I Pay in Estimated Quarterly Taxes? 

According to the IRS, you have to make estimated payments if the following two conditions apply: 

1. You expect your refundable and withholding credit to be less than the smaller of: 

• 100% of the total tax on your last year’s return or 110% for higher wage earners, (your last year’s return must cover all twelve months), or
• 90% of your total expected tax for the current year (2019).

1. You expect to owe at least one thousand dollars in tax for this year after subtracting your refundable and withholding credits.

How to Pay the Estimated Quarterly Taxes?

Filing taxes online is much easier, especially with the IRS e-file system. You can also any other appropriate accounting or tax software to do this, we suggest using your trusted team at Phoenix Tax Consultants. 

Once you have calculated the figures, you can submit the payments online through the IRS website or the electronic federal tax payment system. You can also use your credit or debit card to make the payments. 

If you want to do it the traditional way, you can file your returns by mail. Just make sure you follow all the instructions laid out by the IRS, based on the form you’re submitting. Also ensure that you mail your return to the right address; this reduces the chances of any hassle in case the IRS encounters any issues with receiving or processing your returns. And you can remit a money order or check using an estimated tax payment voucher. 

For assistance with your small business tax filings contact Phoenix Tax Consultants.

Many people in the US are motivated to buy their own home solely due to the tax breaks available for homeowners. Whether you are considering buying a home or are already a homeowner, it’s a wise idea to understand how these tax breaks are handled in 2019. 

Also, since the new Tax Cuts and Jobs Act went into effect on January 1^st, 2018, you might be wondering how this change will impact your tax perks.

Read on to understand available tax deductions you should be aware of this year so you don’t miss out on anything that could save you money on your return. Please note each tax return is different and although this is a current list, other opportunities may be available based on your income level. 

Mortgage Interest Tax Deduction

The promise of a mortgage interest deduction never failed to captivate potential homeowners until 2017. Even though the new tax bill hasn’t done away with the deduction completely, it has changed it considerably. 

If your mortgage went into effect before December 15^th, 2017, you will be allowed to continue deducting interest on loans up to the first $1 million of the loan. But if you bought your house after December 15^th, 2017, you’ll be only allowed to deduct the interest on the first $750,000 acquisition debt.

Property Taxes for Homeowners

If you are paying property tax on a car, home, boat, or other personal property, you can count it as an itemized deduction. This deduction, along with the deduction for sales tax or income tax, falls into the SALT (State and Local Taxes) deduction category.

The new tax bill has limited the total amount of SALT taxes you can deduct by capping it at $10,000 a year. 

Mortgage or Home Equity Points

A home mortgage point is equal to 1% of the amount of your loan. So, if your home loan is $200,000, one point will be equal to $2,000. You can deduct the full amount of your points in the year you buy your home.

Home equity points are considered an itemized deduction and if eligible you can claim them on Schedule A of Form 1040.

Energy Efficiency Incentives for Tax Returns

If you have solar energy based heating or cooling systems in your home, you can save a good amount of money. And, there is a credit available so you don’t have to worry about itemizing. 

The percentage of the credit will depend on the date you installed the system. If your solar equipment was installed between January 1^st, 2017 and December 31^st, 2019, you can claim credit for 30% of your installation expenses. 

Home Office Expenses 

The bad news: gone are the days when you could deduct your office space and expenses if you worked from home whenever you wanted. However, there is some good news too! 

If you are self-employed and your home is the main place you work. An easy way that you can claim a home office deduction is to use the simplified method. You can claim a maximum deduction of $1,500 in the form of $5 deduction per square-foot for up to 300 square-feet. If you want to know more about the home office tax deductions, feel free to check out this detailed IRS guide.

What to do if you are unsure about taking a tax deduction?

This post is a short overview of the several tax deductions that might be available to you, and as you probably know by now, some of them have pages-long stipulations attached to them. Unfortunately, we can’t possibly cover it all in one post. If you are not sure about your ability to claim any of the deductions mentioned in this article, don’t hesitate to contact our experienced tax professionals for guidance. You can call us at 610-933-3507 or leave us a message here for a free consultation to discuss your personal tax situation.

Are you recently widowed or having to file your tax returns for the first time since the passing of your spouse? We understand this is a difficult time and can be confusing and emotional. Our team at Phoenix Tax Consultants is here to guide you through this process. Below we have outlined helpful information for filing taxes as a widow. 

“Qualifying widow or widower” is a tax filing status that allows you to claim the same benefits as the Married Filing Jointly status for 2 years after the year of your spouse’s passing. 

Interestingly, the full official name of this filing status is Qualifying Widow(er) with a Dependent Child so to file as a qualifying widow/widower, you must have a dependent child. If you meet the IRS requirements for this status, you can basically get the same tax breaks as people filing a joint return – but only for a particular duration after the death of your spouse. 

However, you’ll need to follow a few guidelines to meet the standards for qualifying widows/widowers.

Mandatory IRS Criteria for Qualifying Widows and Widowers

Here are some straightforward rules that will determine whether you can use the filing status of qualifying widow/widower:

• No more than 2 years have passed between the tax year for which you are filing the return and your spouse’s death.
• You did not remarry during the 2 years after the year your spouse died. For example, if your spouse passed away in 2016, and you did not remarry before January 1^st, 2019.
• Your (dependent) child or stepchild must have lived with you throughout the year (temporary absences are an exception and incidents like death, birth, or kidnapping count as exceptions).

If you have more questions about the qualifying widow/widower filing status, this IRS publication can be extremely helpful.

Short-Term Additional Tax Breaks for Qualifying Widows and Widowers

The IRS offers an additional tax break for a short duration in the case one spouse dies. If you have lost your beloved spouse and want to use the filing status of qualifying widow/widower, here are some things to keep in mind:

The First Year

You are still allowed to file a joint return the year your spouse passed away, only if the executor approved the joint return and you didn’t remarry. But you can’t file a joint return if either you or your spouse was a non-resident alien at any time during the year. 

If you decide to file a joint return, make sure you include all of your income and deductions for the entirety of the year. Also include the income and deductions of your spouse until the date of their demise. If your late spouse owes any taxes and the estate is unable to pay them, you – the surviving spouse – might be liable for those taxes. 

The Next 2 Years

After the year your spouse passed away, you can file as a qualifying widow/widower for 2 tax years. Filing this way will provide you a lower tax rate and a higher standard deduction than if you filed as a head of household or single person. 

As long as you meet the IRS criteria mentioned above, you can take advantage of this filing status for the next 2 years after the year in which your spouse died. This detailed IRS guide can help you learn more about the filing status of a qualifying widow or widower. 

Use the Tax Breaks You Deserve

Losing a spouse can be emotionally and financially devastating, especially if you are raising a child. By claiming these tax savings for qualifying widows and widowers, you may be able to soften the financial blow a little. 

If you have any questions about filing your income taxes this year, or want to talk to a skilled tax professional for a bit of free advice, please call us at 610-933-3507 or leave us a message here.