Bankruptcy is a big choice to make for several reasons. The biggest challenge with filing for bankruptcy is that it does not take away your Federal and State obligations.

Another challenge with filing for bankruptcy is that when your debt is cancelled you will get a 1099-C.  This means that the I.R.S. gets one too.  How does that I.R.S. see this? They see it as income and yes, it must be claimed as “other income”.

Are you considering filing for bankruptcy because of your Federal and State obligations, work with your Tax Preparer to  help you with an Offer and Compromise.  Your Tax Preparer has a better understanding of your financial situation.  If you have been paying up to $2500.00 in taxes over the past three years it is time to find one that can offer more tax strategies for your individual situation.    

Medicare has a flat tax rate of 2.9%.  Half is paid by your employer. The other half is paid by you.

This tax pays for your hospital insurance when you turn 65.  It also covers hospital stays, skilled nursing facilities, and some health care services.  

Social Security is a flat tax rate of 12.4%.  Half is paid by your employer. The other half is paid by you.  This provides your Social Security Benefit in addition to any IRA’s or pensions you may have when you retire.  

The beauty of the flat tax rate is that it is predictable.  What is not predictable are your Federal Taxes.  Your Federal Tax Rate has so many contributing factors to it that it can be a small exercise to get it right and it can be a source of frustration when you get it wrong.  

On top of that we have a progressive tax system that can also be a challenge to factor.  Add to the fact that you may have more than one job.  Your HR department is only withholding based on what you earn with the company.  It cannot factor in what you are earning from your other jobs.  Your Tax Preparer is one of your best resources to help you utilize the worksheet on the W-4.  

In 2017, the Senate passed the Tax Cuts and Jobs Act.  This resulted in doubling the Standard Deduction for Individuals.  What does this mean for homeowners?

Homeowners who want to itemize using the Schedule A need to exceed the Standard Deduction of $30,000.00 for married filing joint or $15,000.00 filing single.  Most software programs will automatically adjust to the appropriate filing.  

The most important thing to keep in mind is that if you do make home improvements ( Energy Credits will be discussed in a different topic) it does benefit to retain good receipts to substantiate the basis of the home along with the Fair Market Value only when you intend to sell.

The ability to write off Mortgage Insurance Premium expired in 2021.Home Affordable Modification Program is not taxable.  First Time Homebuyer Credit also expired and there is nothing in the pipes to extend this credit.  Home Equity Lines of Credit otherwise known as HELOC are only deductible to the extent it was used for home improvement. Keep in mind this only applies to the interest and not the loan itself.

Mortgage Debt Forgiveness also expired last year.  

The good news is that the State and Local Taxes are still deductible on our State Return.  When we input these taxes on our 1040 the program moves it to the 540.  

Can a tax preparer fine tune your business?

The problem with expecting your tax preparer to give you good input on how to take advantage of tax breaks is that you only see your tax preparer once a year for approximately one hour.

How can one reasonably expect anyone to provide a quality assessment of your business under those circumstances?  The problem with expecting your tax preparer to give you good input on how to take advantage of tax breaks is that you are only paying your tax preparer to prepare taxes.  In this day and age with ads for free tax software it is easy to want to take advantage of free.  But is it really free?  If you are not getting a real time tax strategy how much are you really paying in taxes because you did not capture all the cost of goods sold or all the expenses related to business but not a part of COGS?  

We know that we get what we pay for.  Tax Assessment is no different.  Who is your tax consultant?

The best way for you to work alongside your tax consultant is to give them your time that they need to ask pertinent questions.  Your expenses are a dollar for dollar reimbursement for an ordinary and necessary business expense.  Are you leaving money on the table?

Are you looking to pay less in taxes?  You should.  The IRS has set up tax rules for us to do just that.  

Is it too early to start planning for your tax year? No, we are already into the 2nd Quarter of the year.  Business owners have made their first quarterly payment.  

Did you get a big refund?  That was not a refund!  That was a return.  A return of your hard earned tax dollars that you overpaid to an institution and allowed them to use your money interest free.

What did you LIne 11 look like? This line is referred to as an “above the line”. The amount on this line is also called your Adjusted Gross Income.  Anything you can do above the line to minimize your gross income is your best option to shelter money like the Big Guys.

Did you want to improve the energy efficiency of your home?

Are you considering taking a loan our on your 401K or IRA?

Did you end up owing because you had multiple jobs and not enough withheld?

The tax season may be over but tax issues do not go away.  The IRS has a list of Life Events that have adverse effects on the individual return.  The choice you make in your tax preparer can mitigate this.  The free software that you used cannot help you.  Did you get a letter?  The choice you make in your tax preparer can assist you with this.  

Tax Season is Over.  Tax Issues do not go away.  Who do you go to for your tax consultation?

Ahh… The American Dream. To own your own business.  In California if you do not comply with a new government code initiated back in 09/30/2020 and you employ one or more in your company you are mandated to provide a Retirement Savers Program.  You can elect to do this on your own or to do this through the State of California.  It is much like the Californai Marketplace for Healthcare for lack of a better description.  If you do not provide a Retirement Program for employees to contribute to then you can be fined up to $250.00-$500.00 depending if you go past your 90 days after service of notice.  I do not need to go on about this.  Rather, read it for yourself by following the link below.  

Just keep in mind you do have other options.  If you want to consider other options please reach out to us so that we can put you in good hands.

Yes. Per Government Code Section 100033(b), each eligible employer that, without good cause, fails to allow its eligible employees to participate in CalSavers, on or before 90 days after service of notice of its failure to comply, shall pay a penalty of $250 per eligible employee if noncompliance extends 90 days or more after the notice, and if found to be in noncompliance 180 days or more after the notice, an additional penalty of $500 per eligible employee.

Employers may be subject to penalties for failure to register before their deadline or failure to complete other actions necessary to allow eligible employees to participate, including failure to upload employee information and failure to submit employee contributions under time frames established in state regulations.

Audit rates are highest for ones who claim the largest adjusted gross incomes.  Ironic, since most social media platforms are trying to get you to write just about everything off. After all, why shouldn’t we?  Lots of reasons.

While the IRS does not have the labor to analyze every return it does utilize triggers that rank returns for errors.  Here’s the list:

• If you received a W–2 or a 1099 of any sort, be assured, so did the IRS.  if their information does not match what you reported you can be sure to get a letter.
• Your itemized deductions exceed IRS targets.  Schedule A is where you claim Medical and Dental expenses, State and Local Taxes (SALT), Gifts to charity, Casualty and Theft Losses, and “Other Itemized Deductions”.
• Tax Shelter Losses such as Qualified Retirement Accounts, Insurance products, partnerships, municipal bonds, and real estate investments are all examples of potential tax shelters reducing one’s tax liability.  There are also phase out and rollovers that send red flags.
• Business expenses beyond stated income are a red flag.

The IRS has set up a “Taxpayer Bill of Rights”,  familiarize yourself with this.  The IRS also has an Independent Taxpayer Advocate Service.

Keep in mind the IRS uses 3 main criteria for audits:

1. Negligence: errors in entry.
2. Willful: intentional misstatement
3. Frivolous;  throwing something in there just to see if it sticks.

Each level has its won penalty and interest on monies withheld regardless of reason.

Keep in mind that there is no period of limitation for willful and frivolous.  These two are considered to be fraudulent and the IRS maintains that it can go back at any time to revisit this return.  You have three years to amend your return and the IRS has three years as well.  

When you fail to report an item which is more than 25% of the Gross Income, the IRS has 6 years after the return has been filed to assess additional taxes.  

The IRS always checks your return for computational accuracy and clerical errors, missing signatures, inaccurate Social Security Numbers, address, not checking boxes, (yes even that Presidential Campaign Box). not entering your occupation ( this is used by the IRS to determine what is reasonable or excessive). Not dating, incorrect banking information,  using a single account when filing MFJ, last but not least, the attachment sequence number found under the year,  those forms must be in order!!! The IRS will politely send those back and if you are not quick about it could result in a late return.  

Yes, You can file for free with the IRS,  When you do this is what you don’t get.  You dont get someone to represent you.  Did your electronic return get rejected? Can’t understand why? You are on your own.  Those letters you get, there is no one to go over them and help you understand the purpose behind them.  

There are three types of audits

1. Correspondence
2. Desk/Office
3. Field Examination

While you want to be expeditious about following through with the audits, do not allow the IRS agent to rush you before you are ready.  Always schedule at your convenience. 

Never volunteer records or provide information not requested.  Yes, loose lips just might sink your ship. Your representation (F2848), may sit for your audit.  The IRS must issue an Administrative Summons if they want you present.  Be organized. Be prepared.  Desk and Field Examinations can be recorded if you give a written notice no later than ten days of the appointment.

Remember, if your tax preparer talks you into a tax position that does not make sense or sounds too good to be true, it probably is.  At the end of the day you’re responsible for what goes in your return.  It is your obligation to provide your tax preparer all pertinent information to get the best options for a refund without being audited.  You also do not want to do anything that will cause a rejected return or hold up your refund.  

Finally,  the IRS has a list of the “Dirty Dozen”,  these are common tax scams that are still prevalent especially in this digital age.  Of these the Offer In Compromise or Resolution businesses you hear on the radio are one of the biggest most hurtful scams to the common Individual Tax Payer.  

Be diligent about keeping track of your records.  Please do not hesitate to reach out to us if you have any questions about a tax letter you received, if you want to understand your tax situation better, if you have had any life events that may impact your return at the end of the year.  

What’s in a name?  Everything.  

Does the name on your Social Security Card match your W-2 or 1099? Does the name match your ID?  Does your name match what the IRS has on file? If there are any discrepancies, it is in your best interest to rectify these before you file.  

Did you file MFS?  Be sure to include your spouse’s name below yours.  Did you file MFJ? Be sure to keep the same order that the name appears on last year’s return as this year’s return and that both of you sign. Did you get a name change through the court? You need to report this to Social Security.  Be sure that both names are on the joint account. 

While these seem like obvious things to check it is some of the most common reasons why returns are rejected, holding up your refund or worse causing you to file late.  And, BTW, if your return is rejected and you are not able to resolve these issues before April 15th, you are considered to have filed late and are subject to penalties and interest.  

The good news is that if for any reason these issues occur when you file with Jamison’s Tax Consulting we offer insurance that covers these expenses so that they do not come out of your pocket.  If you do your own taxes and your return is rejected for any reason.  You pay these fees out of your own pocket.  

I will never forget the time my grandmother was found unconscious in her front yard.  She was gardening and passed out.  She and her family spent the next two weeks in the hospital by her bedside.  She passed quietly.  This left the siblings in a very bad state.  Not only were they mourning they also had to figure out her arrangements.  When the estate was finally settled, and my mother received a lump sum I insisted that she make her burial arrangements ahead of time and that all the siblings were made aware of her wishes.  When she passed away everything was taken care of for us based on her wish and with all the kids supporting each other.  What a difference this made!

The Department of Consumer Affairs has a website for Cemetery and Funeral Services and has an advance planning checklist to make this process easier to start the conversation.  In the event of assets: cars, home, jewelry etc. can be handled easily with a living will.  For more complex estates it is best to consult an Estate Attorney.  Both recommendations are considered to be not only the best but also fair and reasonable.  

The death of a Taxpayer IRS

If a taxpayer died before filing a return for 2024, the taxpayer’s spouse or personal representative may have to file and sign a return for that taxpayer. A personal representative can be an executor, administrator, or anyone who oversees the deceased taxpayer’s property. If the deceased taxpayer didn’t have to file a return but had tax withheld, a return must be filed to get a refund. The person who files the return must enter “Deceased,” the deceased taxpayer’s name, and the date of death across the top of the return. If this information isn’t provided, it may delay the processing of the return. If your spouse died in 2024 and you didn’t remarry in 2024, or if your spouse died in 2025 before filing a return for 2024, you can file a joint return. A joint return should show your spouse’s 2024 income before death and your income for all of 2024. Enter “Filing as surviving spouse” in the area where you sign the return. If someone else is the personal representative, they must also sign. All payers of income, including financial institutions, should be promptly notified of the taxpayer’s death. This will ensure the proper reporting of income earned by the taxpayer’s estate or heirs. A deceased taxpayer’s social security number shouldn’t be used for tax years after the year of death, except for estate tax return purposes.

For more information regarding this matter please feel free to reach out for a consultation at Jamison’s Tax Consulting to help you navigate this tax journey.  .