Key Tax Tips on the Tax Effects of Divorce or Separation

On August 25, 2015   /   IRS  

Income tax may be the last thing on your mind after a divorce or separation. However, these events can have a big impact on your taxes. Alimony and a name change are just a few items you may need to consider. Here are some key tax tips to keep in mind if you get divorced or separated.

  • Child Support.  If you pay child support, you can’t deduct it on your tax return. If you receive child support, the amount you receive is not taxable.
  • Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony. This applies only if the payments qualify as alimony for federal tax purposes. If the decree or agreement does not require the payments, they do not qualify as alimony.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it. Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty. To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA. You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change. File Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov or call 800-772-1213 to order it. The name on your tax return must match SSA records. A name mismatch can delay your refund.

Health Care Law Considerations

  • Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return. Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, you should report changes in circumstances to your Marketplace throughout the year. Changes to report include a change in marital status, a name change and a change in your income or family size. By reporting changes, you will help make sure that you get the proper type and amount of financial assistance. This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation. If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf. Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

For help with any income 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,    Saginaw 989.782.1985,    St. Clair Shores 313.371.6600

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If You Get an IRS Notice, Here’s What to Do

On July 17, 2015   /   IRS  

Each year the IRS mails millions of notices and letters to taxpayers. If you receive a notice from the IRS, here is what you should do:

  • Don’t Ignore It. You can respond to most IRS notices quickly and easily. It is important that you reply right away. 
  • Focus on the Issue. IRS notices usually deal with a specific issue about your tax return or tax account. Understanding the reason for your notice is important before you can comply.
  • Follow Instructions. Read the notice carefully. It will tell you if you need to take any action to resolve the matter. You should follow the instructions.
  • Correction Notice. If it says that the IRS corrected your tax return, you should review the information provided and compare it to your tax return. If you agree, you don’t need to reply unless a payment is due. If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.
  • Premium Tax Credit. The IRS may send you a letter asking you to clarify or verify your premium tax credit information. The letter may ask for a copy of your Form 1095-A, Health Insurance Marketplace Statement. You should follow the instructions on the letter that you receive. This will help the IRS verify information and issue the appropriate refund.
  • No Need to Visit IRS. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. You should have a copy of your tax return and the notice with you when you call.
  • Keep the Notice. Keep a copy of the notice you get from the IRS with your tax records.
  • Watch Out for Scams. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not initiate contact with taxpayers by email, text or social media.

For help with any income 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,    Saginaw 989.782.1985,    St. Clair Shores 313.371.6600

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IRS Withholding Calculator

On March 31, 2015   /   IRS  

The Withholding Calculator can help you determine whether you need to give your employer a new  Form W-4, Employee’s Withholding Allowance Certificate to avoid having too much or too little Federal income tax withheld from your pay. You can use your results from the calculator to help fill out the form.

Who Can Benefit From The Withholding Calculator?

  • Employees who would like to change their withholding to reduce their tax refund or their balance due;
  • Employees whose situations are only approximated by the worksheets on the paper W-4 (e.g., anyone with concurrent jobs, or couples in which both are employed; those entitled to file as Head of Household; and those with several children eligible for the Child Tax Credit);
  • Employees with non-wage income in excess of their adjustments and deductions, who would prefer to have tax on that income withheld from their paychecks rather than make periodic separate payments through the estimated tax procedures.

CAUTION:    If you will be subject to alternative minimum tax, self-employment tax, or other taxes; you will probably achieve more accurate withholding by following the instructions in Pub 505: Tax Withholding and Estimated Tax.

Ready to start? Make sure scripting is enabled before using this application. Continue to the Withholding Calculator

Tips For Using This Program

  • Have your most recent pay stubs handy.
  • Have your most recent income tax return handy.
  • Estimate values if necessary, remembering that the results can only be as accurate as the input you provide.
  • To Change Your Withholding:
  1. Use your results from this calculator to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate.
  2. Submit the completed Form to your employer.

For tax help or more information contact one of our offices:
   Plymouth 734.454.4100,    Allen Park 313.388.7180,    Grayling 989.348.4055,
Royal Oak 248.399.7331,    Saginaw 989.782.1985,    St. Clair Shores 313.371.6600

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The Health Care Law and Taxes: Reporting Coverage, Exemptions and Payments

On March 27, 2015   /   IRS  

Under the Affordable Care Act, you will need to report minimum essential coverage, report or claim a coverage exemption, or make an individual shared responsibility payment when you file your 2014 federal income tax return. If you are not required to file a tax return and don’t want to, you do not need to file a return solely to report your coverage or to claim an exemption.

If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ; no further action is required.

If you obtained a coverage exemption from the Marketplace or you qualify for an exemption that you can claim on your return, you will file Form 8965 with your tax return.

For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. The payment will be reported on Form 1040, line 61 in the Other Taxes section and on the corresponding lines on Form 1040A and 1040EZ.

See the Claiming and Reporting an Exemption and Individual Shared Responsibility Provision – Reporting and Calculating the Payment pages on IRS.gov for more information about figuring and reporting the payment. 

For tax help or more information contact one of our offices:
   Plymouth 734.454.4100,    Allen Park 313.388.7180,    Grayling 989.348.4055,
Royal Oak 248.399.7331,    Saginaw 989.782.1985,    St. Clair Shores 313.371.6600

 

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Still Time to Contribute to an IRA for 2014

On March 18, 2015   /   IRS  

Available in one form or another since the mid-1970s, individual retirement arrangements (IRAs) are designed to enable employees and self-employed people to save for retirement. Contributions to traditional IRAs are often deductible, but distributions, usually after age 59½, are generally taxable. Though contributions to Roth IRAs are not deductible, qualified distributions, usually after age 59½, are tax-free. Those with traditional IRAs must begin receiving distributions by April 1 of the year following the year they turn 70½, but there is no similar requirement for Roth IRAs. Most taxpayers with qualifying income are either eligible to set up a traditional or Roth IRA or add money to an existing account. To count for 2014, contributions must be made by April 15, 2015. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the saver’s credit when they fill out their 2014 returns. Eligible taxpayers can contribute up to $5,500 to an IRA. For someone who was at least age 50 at the end of 2014, the limit is increased to $6,500. There’s no age limit for those contributing to a Roth IRA, but anyone who was at least age 70½ at the end of 2014 is barred from making contributions to a traditional IRA for 2014 and subsequent years.
For tax help or more information contact one of our offices:                           
  Plymouth 734.454.4100,    Allen Park 313.388.7180,    Grayling 989.348.4055, 
  Royal Oak 248.399.7331,    Saginaw 989.782.1985,    St. Clair Shores 313.371.6600

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IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2011 Federal Income Tax Return

On March 11, 2015   /   IRS  

Federal income tax refunds totaling $1 billion may be waiting for an estimated one million taxpayers who did not file a federal income tax return for 2011, the Internal Revenue Service announced today. To collect the money, these taxpayers must file a 2011 tax return with the IRS no later than Wednesday, April 15, 2015.

“Time is running out for people who didn’t file a 2011 federal income tax return to claim their refund,” said IRS Commissioner John Koskinen. “People could be missing out on a substantial refund, especially students or part-time workers. Some people may not have filed because they didn’t make much money, but they may still be entitled to a refund.”

The IRS estimates half of the potential refunds for 2011 are more than $698.

In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. For 2011 tax returns, the window closes on April 15, 2015. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

The law requires the tax return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return that qualifies for a refund.

The IRS reminds taxpayers seeking a 2011 refund that their checks may be held if they have not filed tax returns for 2012 and 2013. In addition, the refund will be applied to any amounts still owed to the IRS, or their state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.

Current and prior year tax forms and instructions are available on the IRS.gov Forms and Publications page, or by calling toll-free: 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years: 2011, 2012 or 2013 should request copies from their employer, bank or other payer.

If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by going to IRS.gov. Taxpayers can also file Form 4506-T to request a transcript of their tax return.

Need help?  Contact one of our offices.

 

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What to Know About Tax Filing Statuses

On February 13, 2015   /   IRS  

The IRS gives 8 important facts about filing statuses. These will help you choose the best status option for your particular situation.

#1: Your marital status on the last day of the year determines your marital status for the entire year, for tax purposes.

#2: If more than 1 filing status applies to you, you may choose the one that gives you the lowest amount of tax due.

#3: The “Single” filing status generally applies to anyone who is unmarried, divorced, or legally separated according to state law.

#4: A married couple may file a joint tax return together. The couple’s filing status would be “Married Filing Jointly.”

#5: If your spouse passed away and you did not remarry during that year, usually you may still file a joint tax return with that spouse for the year of death.

#6: A married couple may elect to file their tax returns separately. Each person’s filing status would generally be “Married Filing Separately.”

#7: The “Head of Household” status generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to be able to use this filing status.

#8: You may be able to choose “Qualifying Widow(er) with Dependent Child” as your filing status if your spouse died within the past two years, you have a dependent child, and you meet certain other conditions.

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Where is my tax refund?

On February 11, 2015   /   IRS  

Want to know where your refund is?

More than 90 percent of refunds are issued in less than 21 days. IRS representatives will not provide individual refund information before then. Taxpayers can easily find information about their refund by using the Where’s My Refund? tool. It’s available on IRS.gov and on the Smartphone app, IRS2Go. Where’s My Refund? provides taxpayers with the most up-to-date information available. Taxpayers must have information from their current, pending tax return to access their refund information. Refund information is updated just once a day, generally overnight, so there’s no need to check more than once a day.

 

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Know your rights when dealing with the IRS

On February 6, 2015   /   IRS  

The IRS has adopted a Taxpayer Bill of Rights as proposed by National Taxpayer Advocate Nina Olson. It applies to all taxpayers in their dealings with the IRS. The Taxpayer Bill of Rights groups the existing rights in the tax code into ten fundamental rights, and makes them clear, understandable, and accessible.

They include:

For more information visit the Taxpayer Advocate Service.

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Phishing Remains on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season

On January 25, 2015   /   IRS  

WASHINGTON — The Internal Revenue Service today warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2015 filing season.

“The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Stop and Think before Clicking

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to [email protected].

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

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