Homeowner Records: What to Keep and How Long

Keeping full and accurate homeowner records is not only vital for claiming deductions on your tax return, but also for determining the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis.

Here are a few examples:

  • Putting an addition on your home
  • Replacing an entire roof
  • Paving your driveway
  • Installing central air conditioning
  • Rewiring your home
  • Assessments for local improvements
  • Amounts spent to restore damaged property

In addition, you should keep track of any decreases to the basis such as:

  • Insurance or other reimbursement for casualty losses
  • Deductible casualty loss not covered by insurance
  • Payment received for easement or right-of-way granted
  • Value of subsidy for energy conservation measure excluded from income
  • Depreciation deduction if home is used for business or rental purposes

How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. You must also keep these records for as long as they are important for the federal tax law.

Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. A period of limitations is the limited period of time after which no legal action can be brought.

For assessment of tax, the period of limitations is generally three years from the date you filed the return. When filing a claim for credit or refund, the period of limitations is generally three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.

You may need to keep records relating to the basis of property longer than the period of limitations. For example, basis is needed to determine gain on home sale. Any gain on sale of a home is tax-exempt for amounts up to $250,000 ($500,000 for married couples). Basis is also important in figuring casualty loss, on conversion of the home to business use, or where there’s a gift of the home (in this case, it is important to the donee). You should keep these records for as long as needed because they are important in figuring the basis of the property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.

If you have any questions as to what items are to be considered in determining basis, don’t hesitate to call.

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

IRS Issues Warning On New Email Tax Scam

IRS Issues Warning On New Email Tax Scam

Tax season may be at an end for most taxpayers, but scammers aren’t letting up. The Internal Revenue Service (IRS) recently warned taxpayers and tax professionals about a new IRS impersonation scam email. 

The email subject line may vary, but according to the IRS, recent examples use phrases like “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.” The emails include links that are meant to look like the IRS website with details about the taxpayer’s refund, electronic return or tax account. The emails contain a “temporary password” or “one-time password” that purports to grant access to the files. However, these are actually malicious files. Once the malware files are installed on your computer, scammers may be able to secretly download software that tracks every keystroke, giving the bad guys access to information like passwords to your financial accounts.

Don’t be fooled: the IRS does not send unsolicited emails and never emails taxpayers about the status of refunds.

The IRS doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information. This includes requests for PIN numbers or passwords used to access your credit cards, banks, or other financial accounts. The IRS also doesn’t call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer (more on those scams here). The IRS will typically send a bill to a taxpayer who owes taxes. 

For help with your taxes, contact 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

Facts to help taxpayers understand Individual Retirement Arrangements

Facts to help taxpayers understand Individual Retirement Arrangements

Individual Retirement Arrangements – better known simply as IRAs – are accounts into which someone can deposit money to provide financial security when they retire. A taxpayer can set up an IRA with a:

  • bank or other financial institution
  • life insurance company
  • mutual fund
  • stockbroker

 Here are some terms and definitions related to IRAs to help people learn more about how the arrangements work:

Traditional IRA: Contributions to a traditional IRA may be tax-deductible. The amounts in a traditional IRA are not generally taxed until you take them out of the account.

Savings Incentive Match Plan for Employees: commonly known as a SIMPLE IRA. It allows employees and employers to contribute to traditional IRAs set up for employees. It is ideal as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

Simplified Employee Pension: Better known simply as an SEP-IRA, it is a written plan that allows an employer to make contributions toward their own retirement and their employees’ retirement without getting involved in a more complex qualified plan. An SEP is owned and controlled by the employee.

Roth IRA: An IRA that is subject to the same rules as a traditional IRA with certain exceptions. For example, a taxpayer cannot deduct contributions to a Roth IRA. However, if the IRA owner satisfies certain requirements, qualified distributions are tax-free.

Contribution: The amount of money someone puts into their IRA. There are limits to the amount that someone can put into their IRA annually. These limits are based on the age of the IRA holder and the type of IRA they have.

Distribution: Essentially a withdrawal. This is the amount someone takes out from their IRA.

Required distribution: A taxpayer cannot keep retirement funds in their account indefinitely. Someone with an IRA generally must start taking withdrawals from their IRA when they reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.

Rollover: This is when the IRA owner receives a payment from retirement plan and deposits it into a different IRA within 60 days.

For help with your taxes, contact 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

Here’s how the IRS contacts taxpayers

Everyone should know how the IRS contacts taxpayers. This will help people avoid becoming a victim of scammers who pretend to be from the IRS with a goal of stealing personal information.

Here are some facts about how the IRS communicates with taxpayers:

  • The IRS doesn’t normally initiate contact with taxpayers by email.
  • The agency does not send text messages or contact people through social media.
  • When the IRS needs to contact a taxpayer, the first contact is normally by letter delivered by the U.S. Postal Service.  Fraudsters will send fake documents through the mail, and in some cases will claim they already notified a taxpayer by U.S. mail.
  • Depending on the situation, IRS employees may first call or visit with a taxpayer. In some instances, the IRS sends a letter or written notice to a taxpayer in advance, but not always.
  • IRS revenue agents or tax compliance officers may call a taxpayer or tax professional after mailing a notice to confirm an appointment or to discuss items for a scheduled audit.
  • Private debt collectors can call taxpayers for the collection of certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice.
  • IRS revenue officers and agents routinely make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed, delinquent tax returns or a business falling behind on payroll tax deposits. IRS revenue officers will request payment of taxes owed by the taxpayer. However, taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury.
  • When visited by someone from the IRS, the taxpayers should always ask for credentials. IRS representatives can always provide two forms of official credentials: a pocket commission and a Personal Identity Verification Credential.

For help with your taxes, contact 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

Six things for extension filers to remember

Oct. 15 is almost here, and it’s the last day to file for most people who requested an automatic six-month extension for their 2017 tax returns. These taxpayers should remember that they can file any time before Oct. 15 if they have all their required tax documents. They can also pay their tax bill in full, or make a partial payment, anytime, by visiting IRS.gov/payments.

As extension filers prepare to file, here are some things they should know:

  • They can still use IRS Free File. Nearly everyone can e-file their tax return for free through IRS Free File. The program is available on IRS.gov now through October 15. IRS e-file is easy, safe and the most accurate way for people to file their taxes. E-file also helps people get all the tax benefits they’re entitled to claim.
  •  A refund may be waiting. Anyone due a refund should file as soon as possible to get their money. The sooner someone files, the sooner they’ll get it. Don’t forget to use Direct Deposit. It is the best and fastest way for taxpayers to get their tax refund electronically deposited for free into their financial account. 
  • They should consider IRS Direct Pay. Taxpayers who owe taxes can pay them with IRS Direct Pay. It’s the simple, quick and free way to pay from a checking or savings account. Taxpayers can just click on the ‘Pay’ at IRS.gov.
  • Here’s what taxpayers should do about a missed deadline. Anyone who did not request an extension by this year’s April 17 deadline should file and pay as soon as possible. This will stop additional interest and penalties from adding up. IRS Direct Pay offers a free, secure and easy way to pay taxes directly from a checking or savings account. There is no penalty for filing a late return for people who are due a refund. 
  • Taxpayers should remember the October 15 Deadline. Taxpayers who aren’t ready to file yet should remember to file by Oct. 15 to avoid a failure-to-file penalty. Taxpayers who owe and can’t pay their balance in full should pay as much as they can to reduce interest and penalties for late payment. They can use the Online Payment Agreement tool to apply for more time to pay or set up an installment agreement. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty.
  • More Time for the Military.  Members of the military and others serving in a combat zone get more time to file. These taxpayers typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.

For help with your unfiled 2018 taxes, contact 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

Here’s what taxpayers should know about the new IRS Tax Withholding Estimator

Here’s what taxpayers should know about the new IRS Tax Withholding Estimator

Taxpayers who haven’t yet checked their withholding this year should do so ASAP. All taxpayers can do this by using the new mobile-friendly Tax Withholding Estimator. This new tool can be used by workers, as well as retirees, self-employed individuals and other taxpayers. It’s a user-friendly step-by-step tool to help taxpayers effectively adjust the amount of income tax they have withheld from wages and pension payments. This helps them make sure that they are paying the right amount of tax as they earn it throughout the year.

Here are some things people should know about the new tool:

  • Using the tool to do a Paycheck Checkup can help taxpayers avoid an unexpected year-end tax bill and possibly a penalty when they file their 2019 tax return next year.
     
  • The new tool allows taxpayers to separately enter pensions and other sources of income. Taxpayers who receive pension income can use the results from the estimator to complete a Form W-4P (PDF). They then give this form to their payer.
     
  • It’s important for anyone who had an unexpected tax bill or a penalty when they filed this year to do a checkup.
     
  • It’s also an important step for those who made withholding adjustments in 2018 or had a major life change.
     
  • The new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse.
     
  • At the end of the process, the tool makes specific withholding recommendations for each job and spouse. It also clearly explains what the taxpayer should do next.
     
  • Those most likely to owe tax because they’ve had too little tax withheld include:
    • Those who itemized in the past but now take the increased standard deduction.
    • Two-wage-earner households.
    • Employees with nonwage sources of income.
    • Those with complex tax situations.

For questions about your taxes, contact 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

These summer activities can affect next year’s tax returns

These summer activities can affect next year’s tax returns

Summertime activities often affect the tax returns people file the following year. Here are some things taxpayers do during the summer along with tips they should consider now:

  • Getting married.
    Newlyweds should report any name change to the Social Security Administration. They should also report an address change to the United States Postal Service, their employers, and the IRS. This will help make sure they receive documents and other items they will need to file their taxes.
  • Working part-time.
    While summertime and part-time workers may not earn enough to owe federal income tax, they should remember to file a return. They’ll need to file early next year to get a refund for taxes withheld from their checks this year.

    Normally, employees receive a Form W-2, Wage and Tax Statement, from their employer to account for the summer’s work. They’ll use this to prepare their tax return. They should receive the W-2 by January 31 next year. Employees will get a W-2 even if they no longer work for the summertime employer.

    Summertime workers can avoid higher tax bills and lost benefits if they know their correct status. Employers will determine whether the people who work for them are employees or independent contractors. Independent contractors aren’t subject to withholding, making them responsible for paying their own income taxes plus Social Security and Medicare taxes.

For questions about your tax return, contact 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

Last Chance to Claim Your tax refunds

Last Chance to Claim Your tax refunds

The law gives taxpayers who fail to file their income taxes three years to submit a return and claim a refund. Generally, the three-year countdown starts on the due date of the return, including extensions.

Over a million Americans fail to file a tax return every year. By not filing, many of these people risk losing any refund they’re owed, which averages more than $600, according to Internal Revenue Service estimates.

The law gives procrastinators three years to submit a return and claim a refund. The three-year countdown starts on the original due date of the return or the extension due date if an extension was filed. Late filers who owe no taxes don’t pay any penalty, and might even be eligible to get credits beyond the money withheld from their wages.

Time matters with tax refunds

April 15, 2020, is the last day to file your original 2016 tax return to claim a refund. If you received an extension for the 2016 return then your deadline is October 15, 2020.

If you miss the deadline, any excess in the amount of tax you paid every paycheck or sent as quarterly estimated payments in 2016 goes to the U.S. Treasury instead of to you. You also lose the opportunity to apply any refund dollars to another tax year in which you owe income tax.

Under certain conditions the IRS will withhold your refund check. It can be used to pay any past-due student loans, child support and federal tax debt you owe. The IRS can also hold refund checks when the two subsequent annual returns are missing. That means you should file returns for 2017 and 2018 as soon as possible. For the 2017 tax year, with a filing deadline in April of 2018, the three-year grace period ends April 15, 2021.

Obstacles to your tax refund

One of the hills you have to climb to claim your refund is gathering the necessary documents. If you kept your financial records, you have an easy ascent. If not, then you must build time into your filing schedule to obtain a copy of your W-2 from your employer and any 1099 forms you’re missing from your bank and other payers.The IRS can help if your document search fails. You can ask the agency for a transcript of these information returns by filing Form 4506T, “Request for Transcript of Tax Return,” and checking off Box 8. Allow 10 business days for a response.The IRS also accepts online requests (at irs.gov) and phone transcript requests (at 800-908-9946). The 1040 series of tax forms can be downloaded from the “Prior Year Returns” link on agency’s “Forms and Publications” web page or ordered by calling (800) 829-3676. You have the option of e-filing or mailing a paper return. Regardless of the filing method you choose, be sure you sign, as the IRS does not issue refunds to late filers without their signature.

If you haven’t filed your tax return yet, contact 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

How To Find Unclaimed Money

How To Find Unclaimed Money

If a business, government office, or other source owes you money that you don’t collect, it’s considered unclaimed.

The federal government doesn’t have a central website for finding unclaimed money. But you don’t need to hire a company to find unclaimed money for you. You can find it on your own for free, using official databases.

1. Search in Your State

Businesses send money to state-run unclaimed property offices when they can’t locate the owner. The money in state unclaimed funds is often from bank accounts, insurance policies, or your state government.

  • Start your search for unclaimed money with your state’s unclaimed property office.

  • Use the multi-state database to search for your name, especially if you’ve moved to another state.

  • Verify how to claim your money. Each state has its own rules about how you prove that you’re the owner and claim the money.

2. Search for Money from Employers

  • Unpaid Wages – The Department of Labor (DOL) may recover back wages for you if your employer broke labor laws. If you think you may be owed back wages from your employer:

    • Search DOL’s database of workers who have money waiting to be claimed. DOL holds unpaid wages for up to three years.  

  • Pensions from Former Employers – Search for unclaimed pensions from companies that went out of business or ended a defined plan.

3. Search for Money from Insurance

  • VA Life Insurance Funds – Search the U.S. Department of Veterans Affairs (VA) database for unclaimed insurance funds.

    • The VA may owe money to current or former policyholders or their beneficiaries.

    • This database doesn’t include funds from Servicemembers’ Group Life Insurance (SGLI) or Veterans’ Group Life Insurance (VGLI) policies from 1965 to the present. 

  • FHA-Insurance Refunds – If you had an FHA-insured mortgage, you may be eligible for a refund from the U.S. Department of Housing and Urban Development (HUD).

    • Search the HUD database with your FHA case number (three digits, a dash, and the next six digits—for example, 051-456789).

4. Search for Money from Tax Refunds

  • Tax Refunds – The Internal Revenue Service (IRS) may owe you money if your refund was unclaimed or undelivered.

5. Search for Money from Banking and Investments

  • Bank Failures – Search the Federal Deposit Insurance Corporation (FDIC) for unclaimed funds from failed financial institutions.

  • Credit Union Failures – Find unclaimed deposits from credit unions.

  • SEC Claims Funds – The Securities and Exchange Commission (SEC) lists enforcement cases in which a company or person owes investors money.

  • Replace a Savings Bond – Replace a lost, stolen, or destroyed paper savings bond.

For any kind of tax help, contact 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



People can act now to help others in their community next year

People can act now to help others in their community next year

Every year, hundreds of people volunteer their time to help other taxpayers. IRS volunteers provide free tax preparation in communities across the nation. While it might seem like the distant future, people who want to volunteer in 2020 can start taking action now.

The Volunteer Income Tax Assistance and the Tax Counseling for the Elderly programs offer free tax help across the country. These programs help people with low-to-moderate incomes, senior citizens, persons with disabilities, and those who speak limited English. Last year, VITA and TCE volunteers prepared millions of federal tax returns for qualified taxpayers at no cost. Anyone interested in volunteering can visit the sign-up page on IRS.gov.

Here are reasons people become an IRS-certified VITA or TCE tax volunteer:

Flexible hours. Volunteers serve an average of three to five hours per week. The programs are usually open from mid-to-late-January through the tax filing deadline in April. Some sites are even open all year.
 
VITA and TCE sites are often nearby. Each year there are thousands of sites set up in neighborhoods all over the country. These free tax help sites are in places like community centers, libraries, schools and shopping malls.
 
No prior experience needed. Volunteers receive special training and often serve in a variety of roles. VITA and TCE programs want volunteers of all backgrounds and ages. They also want people who are fluent in other languages.
 
Free tax law training and materials. Volunteers receive training materials at no charge. The tax law training covers how to prepare basic federal tax returns electronically. The training also covers tax topics like deductions and credits.
 
Continuing education credits for tax pros. Enrolled agents and non-credentialed tax return preparers can earn continuing education credits when volunteering as a VITA/TCE instructor, quality reviewer, or tax return preparer.

For any kind of tax help, contact 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