Get ready for taxes: Here’s what to know about getting a tax refund

Get ready for taxes: Here’s what to know about getting a tax refund

Tax returns, like snowflakes and thumbprints are unique and individual. So too, is each taxpayer’s refund. This is something for taxpayers to remember next year when someone they know says or posts on social media about receiving a federal tax refund.

Even though the IRS issues most refunds in less than 21 days, it’s possible a taxpayer’s refund may take longer. Several factors can affect the timing of a taxpayer’s refund after the IRS receives their tax return. Here are a few things taxpayers should keep in mind if they are waiting on their refund but hear or see on social media that other taxpayers have already received theirs.The IRS and its partners in the tax industry continue to strengthen security reviews. This helps protect against identity theft and refund fraud. This means some tax returns need additional review, taking longer to process them.

It can take longer for the IRS to process a tax return that has errors. Therefore, taxpayers should consider filing their return electronically. The e-file software walks the taxpayer through the steps of filling out the return and does all the math.

E-file software can also help make sure a tax return is complete. This is important because it can also take longer to process an incomplete return. The IRS contacts a taxpayer by mail when more info is needed to process the return.

It can take banks or other financial institutions time to post the refund to the taxpayer’s account. It can take even longer for a taxpayer to receive their refund check by mail.

By law, the IRS cannot issue refunds for people claiming the earned income tax credit or additional child tax credit before mid-February. The law requires the IRS to hold the entire refund. This includes the portion of the refund not associated with EITC or ACTC.

For tax preparation call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Using strong password is a strong defense against identity thieves

Two things taxpayers can do to prevent themselves from identity theft is to use strong passwords and keep those passwords secure.

While many people use fingerprint or facial recognition technology to protect their devices, sometimes it’s still necessary to use a password. In recent years, cybersecurity experts’ recommendations on what constitutes a strong password has changed. With that in mind, here are four tips for building a better password:

  • Use word phrases that are easy to remember rather than random letters, characters and numbers that cannot be easily recalled.
  • Use a minimum of eight characters; longer is better.
  • Use a combination of letters, numbers and symbols, i.e., XYZ, 567, !@#.
  • Avoid personal information or common passwords.

Writing strong passwords isn’t the only way to keep data secure. Here are a few more tips for folks to remember. People should:

  • Change default and temporary passwords that come with accounts or devices.
  • Not reuse passwords. Rather use a completely different password for every account and device.
  • Give a password a total makeover when changing it. For example, simply changing Bgood!17 to Bgood!18 is not good enough.
  • Not use email addresses as usernames, if that’s an option.
  • Store any password list in a secure location, such as a safe or locked file cabinet.
  • Not disclose passwords to anyone for any reason.
  • Use a password manager program to track passwords if you have numerous accounts.

Whenever it is an option for a password-protected account, users also should opt for a multi-factor authentication process. Many email providers, financial institutions and social media sites now offer customers two-factor authentication protections.

Two-factor authentication helps by adding an extra layer of protection. Often two-factor authentication means the returning user must first enter credentials like a username and password. Then they must do another step, such as entering a security code texted to a mobile phone.

For any tax question, call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

It’s time again for folks to renew their ITINs…here are some things to remember

It’s time again for folks to renew their ITINs…here are some things to remember

Taxpayers with individual taxpayer identification numbers should find out if their number expires this year.  If it does, they should renew it now to avoid delays with their refund when they file their taxes next year.

An ITIN is a tax ID number used by taxpayers who don’t qualify for a Social Security number. Here’s what these taxpayers need to know about which numbers are expiring and how to renew them.

Which numbers are expiring at the end of this year?

Any ITIN with middle digits 83, 84, 85, 86 or 87.
Any ITIN not used on a tax return in the past three years.

What about numbers that expired in the last few years?
ITINs with middle digits 70 through 82 that expired in 2016, 2017 or 2018 can also be renewed.

How does someone renew their number?

Taxpayers with expiring ITINs need to complete renewal application, Form W-7, Application for IRS Individual Taxpayer Identification Number. They should include all required ID and residency documents. Failure to do so will delay processing. until the IRS receives these documents.

When should someone submit their renewal applications?

As soon as possible. With nearly 2 million taxpayer households affected, applying now will help avoid the rush.

What are some tips to avoid common mistakes that are made when submitting their renewal?

  • Indicate the reason for the ITIN on the Form W-7.
  • Mail the proper identification documents. Taxpayers mailing their ITIN renewal applications must include original identification documents or copies certified by the issuing agency and any other required attachments.
  • Include all supporting documentation, such as U.S. residency or official documentation to support name changes.
  • Complete the new W-7 application.

If you need help renewing your ITIN call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

New variation of Tax-related scams

New variation of Tax-related scams

Taxpayers should be on the lookout for new variations of tax-related scams. In the latest twist on a scam related to Social Security numbers, scammers claim to be able to suspend or cancel the victim’s SSN. It’s yet another attempt by con artists to frighten people into returning ‘robocall’ voicemails.

Scammers may mention overdue taxes in addition to threatening to cancel the person’s SSN. If taxpayers receive a call threatening to suspend their SSN for an unpaid tax bill, they should just hang up.

Make no mistake…it’s a scam.

Taxpayers should not give out sensitive information over the phone unless they are positive they know the caller is legitimate. When in doubt –hang up. Here are some telltale signs of this scam. The IRS and its authorized private collection agencies will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, iTunes gift card or wire transfer. The IRS does not use these methods for tax payments.
  • Ask a taxpayer to make a payment to a person or organization other than the U.S. Treasury.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.

Taxpayers who don’t owe taxes and have no reason to think they do should:

Taxpayers who owe tax or think they do should:

  • View tax account information online at IRS.gov to see the actual amount owed and review their payment options.
  • Call the number on the billing notice
  • Call the IRS at 800-829-1040.

For help with your taxes or anything tax related, call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Why it’s important for taxpayers to know their filing status

Why it’s important for taxpayers to know their filing status

When a taxpayer files their tax return, they need to know their filing status. What folks should remember is that a taxpayer’s status could change during the year. So, any time is a good a time for a taxpayer to learn about the different filing statuses and which one is best for them.

Knowing the correct filing status can help taxpayers determine several things about filing their tax return:

  • Is the taxpayer required to file a federal tax return or should they file to receive a refund?
  • What is their standard deduction amount?
  • Is the taxpayer eligibility for certain credits?
  • How much tax they should pay?

The taxpayer’s filing status generally depends on whether they are single or married on Dec. 31 and that is their status for the whole year.
 
Here’s a list of filing statuses and a description of who claims them:

  • Single. Normally this status is for taxpayers who are unmarried, divorced or legally separated under a divorce or separate maintenance decree governed by state law.
  • Married filing jointly. If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year.
  • Married filing separately. Alternatively, married couples can choose to file separate tax returns. It may result in less tax owed than filing a joint tax return.
  • Head of household. Unmarried taxpayers may be able file using this status, but special rules apply. For example, the taxpayer must have paid more than half the cost of keeping up a home for themselves and a qualifying person living in the home for half the year. Taxpayers should check the rules to make sure they qualify.
  • Qualifying widow(er) with dependent child. This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

More than one filing status may apply and taxpayers can generally choose the filing status the allows them to pay the least amount of tax.

Need tax help? Call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

Health Savings Account Limits for 2020

For many people, health savings accounts (HSAs) offer a tax-friendly way to pay medical bills. You can deduct your contributions to an HSA (even if you don’t itemize), contributions made by your employer are excluded from gross income, earnings are tax free and distributions aren’t taxed if you use them to pay qualified medical expenses. Plus, you can hold on to the account past your working years and use it tax-free for medical expenses in retirement. All-in-all, HSAs can be a great tool for covering your health care costs.

There are, however, a few HSA limitations and requirements that are adjusted for inflation each year. They apply to the minimum deductible for your health insurance plan, your annual out-of-pocket expenses and the amount you can contribute to an HSA for the year. If you’re not in compliance with the restrictions in place for any particular year, then you can say goodbye to the HSA tax savings for that year.

To contribute to an HSA, you must be covered under a high deductible health plan. For 2020, the health plan must have a deductible of at least $1,400 for self-only coverage ($1,350 for 2019) or $2,800 for family coverage ($2,700 for 2019).

The health plan must also have a limit on out-of-pocket medical expenses that you are required to pay. Out-of-pocket expenses include deductibles, copayments and other amounts, but don’t include premiums. For 2020, the out-of-pocket limit for self-only coverage is $6,900 ($6,750 for 2019) or $13,800 for family coverage ($13,500 in 2019). According to the IRS, only deductibles and expenses for services within the health plan’s network should be used to determine if the limit applies. Finally, your contributions to an HSA are limited each year, too. You can contribute up to $3,550 in 2020 if you have self-only coverage or up to $7,100 for family coverage ($3,500 and $7,000, respectively, for 2019). If you’re 55 or older at the end of the year, you can contribute an extra $1,000 in 2020 (same as in 2019). However, your contribution limit is reduced by the amount of any contributions made by your employer that are excludable from your income, including amounts contributed to your HSA account through a cafeteria plan.

Need tax help? Call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600

The earned income tax credit can put money in taxpayers’ pockets

The earned income tax credit can put money in taxpayers’ pockets

The earned income tax credit benefits working people with low-to-moderate income. Last year, the average credit was $2,445. EITC not only reduces the amount of tax someone owes, but may also give them a refund, even if they don’t owe any tax at all.

Here are a few things people should know about this credit:

  • Taxpayers may move in and out of eligibility for the credit throughout the year. This may happen after major life events. Because of this, it’s a good idea for people to find out if they qualify.
  • To qualify, people must meet certain requirements and file a federal tax return. They must file even if they don’t owe any tax or aren’t otherwise required to file.
  • Taxpayers qualify based on their income, the number of children they have, and the filing status they use on their tax return. For a child to qualify, they must live with the taxpayer for more than six months of the year.

Here’s a quick look at the income limits for the different filing statuses. Those who work and earn less than these amounts may qualify.

Married filing jointly:

  • Zero children: $21,370
  • One child: $46,884
  • Two children: $52,493
  • Three or more children: $55,952

Head of household and single:

  • Zero children: $15,570
  • One child: $41,094
  • Two children: $46,703
  • Three or more children: $50,162

The maximum credit amounts are based on the number of children a taxpayer has. They are the same for all filing statuses:

  • Zero children: $529
  • One child: $3,526
  • Two children: $5,828
  • Three or more children: $6,557

Taxpayers who file using the status married filing separately cannot claim EITC.

For help planning your taxes, call one of our offices:

Plymouth 734.454.4100, Allen Park 313.388.7180,
Grayling 989.348.4055, Royal Oak 248.399.7331, or St. Clair Shores 313.371.6600