Tax Tacklers Blog for Taxes | Phoenix Tax Consultants - Part 3

Tax Scams

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.

Small Business Owners: Filing Quarterly Taxes

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

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.

Taxes For The Homeowner

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 1st, 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 15th, 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 15th, 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 1st, 2017 and December 31st, 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.

Filing Taxes as a Widow or Widower

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 1st, 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.

How Seismic Changes In Tax Law Will Affect Your 2019 Tax Return

As the end of the year approaches, so to does tax time and preparation for filing one’s tax return. Here, Julie Brufke Wenger, owner of Phoenix Tax Consultants (AKA “the tax tacklers”), shares thoughts on the seismic changes in tax law from the new Tax Cuts and Jobs Act and how it will directly affect your 2019 tax return. In this video, she advises on the importance of taking “a look at how you can reduce your taxable income so you can realize some great benefits now available to tax payers [because] both on the personal side and the business side, it’s a whole new world.”

Key changes in tax law that will affect 2019 tax returns

Doubling of the standard deduction

The standard deduction reduces your taxable income and can be taken by you if you do not itemize. With the new tax laws though, the standard deduction is nearly doubling, making it harder for taxpayers to be able to itemize. A tax advisor can help figure out which one is best for you.

No more personal exemptions

Taxpayers will no longer be able to claim themselves, their spouses or their children. There are, however, new family tax credits that can help offset this and still get you deductions. It will take careful planning along with a tax advisor to figure out how to do this, such as whether or not to file jointly with a spouse. Also, state and local taxes will be limited to $10,000. It’s very crucial to plan in advance and look at ways to reduce your taxable income to fully realize the benefits now available for taxpayers. Working with a qualified tax advisor is the best way to develop a strategy for these new tax laws.

Mortgage interest deductions are decreasing

Mortgage interest deductions are decreasing from $1,000,000 to $750,000. Home equity loan interest is only available now when it’s used for certain purposes. A tax advisor can help you figure out how to do this. As Julie explains, “We don’t want to see any of our clients trip up and anticipate that deduction because they weren’t smart about it.”

Alimony and children’s account earnings are changing

Alimony payers will no longer be able to deduct alimony payments from their return and recipients will lose the ability to contribute alimony funds to an IRA because it is no longer considered earnings for them. Children’s account earnings will now be taxed at trust tax rates, which are very aggressive, especially once you reach over $12,500. A tax advisor can help you decide whether a penalty may actually work in your favor.

Introduction of the qualified business income deduction

The qualified business income deduction is newly available for business owners and is dependent on type of business and amount of taxable income shown on their return. In the Journal of Financial Planning, Julie advised, “this credit is subject to phaseouts based on taxable income. Any client with a business may be impacted, from the sole proprietor selling at home parties to the client who is a professional or owner of a startup.”

Taking the time to learn about these seismic changes in tax law with your tax advisor will help ensure you develop a solid strategy moving forward for your taxes in 2019. There are sunset provisions imbedded in these new laws so it’s very important to think ahead now to plan for your best future. For more information about Julie and her company, Phoenix Tax Consultants, visit today!


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