Category Archives: IRS

Tax-Related Identity Theft: What You Need to Know

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Identity theft continues to be a growing problem, with instances of tax-related identity theft increasing every year. This can be a frustrating, time-consuming issue for taxpayers. Here are some things you need to know about tax-related identity theft.

Tax-Related Identity Theft - Ramsay & Associates
What is Tax-Related Identity Theft?

Tax-related identify theft occurs when a social security number is stolen and used to file a tax return for a fraudulent refund. Many victims of tax-related identity theft are unaware that it has occurred until they file a return and discover that one has already been filed under their social security number. In other cases, taxpayers may receive a letter from the IRS stating that they have identified a suspicious return.

For 2017, the IRS, state agencies, and the tax industry enacted new safeguards and actions to combat tax-related identity theft.

Warning Signs

It is important to know the warning signs of possible tax-related identity theft. This is especially important if the IRS or your tax professional contact you regarding:

  • Use of your social security number for more than one return
  • Additional tax owed or a refund offset, as well as collection actions taken against you, for a year that you did not file a tax return
  • IRS records that indicate wages received or other income from an unknown employer

If You Become a Victim

The Federal Trade Commission recommends these steps if you become a victim of identity theft:

  • File a complaint with the FTC at www.identitytheft.gov
  • Contact one of the three major credit bureaus to place a “fraud alert” on your credit record
  • In addition, contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identity thieves

If you know or suspect that you are a victim of tax-related identity theft, the IRS recommends that you:

  • Respond immediately to any IRS notices by calling the number provided
  • Complete IRS Form 14039, Identity Theft Affidavit
  • File your tax return and pay any taxes that you owe; you may also need to mail paper tax returns

Ways to Protect Yourself

  • Always use security software with firewall and anti-virus protections in addition to using strong passwords
  • Learn to recognize and avoid phishing or suspicious emails, threatening phone calls or text messages from thieves posing as legitimate organizations, such as credit card companies, financial institutions, and the IRS
  • Do not follow links or download attachments from suspicious or unknown email addresses
  • Protect your personal data by securing your tax records, social security number, and credit card and banking information
  • Do not carry your social security card with you
  • Finally, remember that the IRS does not initiate contact with taxpayers to obtain personal or financial information

Find more information from the IRS Taxpayer Guide to Identity Theft.

Minnesota Department of Revenue

With an increase in scams and stolen personal information, the Minnesota Department of Revenue has stated that it is taking the time necessary to ensure that the correct refund goes to the correct person. The department reviews every return to verify information provided, and therefore, the length of time to process that return may vary from year to year.

Learn more from the Minnesota Department of Revenue. For Wisconsin, visit the website of the State of Wisconsin Department of Revenue.

 

Tax-related identity theft may also occur when thieves use a stolen Employee Identification Number from a business to create fraudulent W-2s. The accounting and tax professionals at Ramsay & Associates can assist taxpayers with individual and business tax-related identity theft – both with taking preventive actions and correcting any issues after identity theft occurs. Contact us for more information or to schedule an appointment.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Prepare Now for 2017 Tax Returns

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Prepare for 2017 Tax Returns

With the April 18 Tax Day deadline behind us, you may be of the mindset that the last thing you want to do is start preparing for your 2017 income taxes. But there’s really no better time than now, when your most recent tax experience is still fresh. Here are a few things you can do now to prepare for 2017 tax returns. You’ll be glad you did.

File, Don’t Pile

Come tax season, a pile of receipts and documents shoved into a drawer or folder can be completely overwhelming. If you don’t already have an organized filing system in place, create one now. Mobile filing folders, boxes, or totes work well if you don’t have a filing cabinet and are available at office supplies stores. If possible, keep this separate from your non-tax related filing, such as credit card statements or correspondence. Take a look at your documents and receipts from your 2016 return to determine which categories you’ll need for each file folder, and keep up with your filing on a weekly or monthly basis. Next January and February when you receive your W-2, 1099s, mortgage interest statements, and other important documents, you’ll be ready to file them, and they’ll be easily accessible when the time comes.

Identify Areas of Weakness

Were there any specific items that caused delays or other issues with your 2016 tax returns? For example, were your mileage records incomplete? Did you neglect to thoroughly document clothing or household goods donations with photographs and receipts? If you haven’t already logged your mileage or documented donations for 2017 – or any other items that you may have missed – start now.

Electronic Documentation

Spreadsheets provide another excellent method of tracking expenses, tax deductible donations, mileage, and other important information. The more detailed the information captured, the better. If you have online receipts, include the hyperlink for easy access. Scan and save paper receipts electronically. Be sure to back up all your files.

Review Taxable Income

Did you withhold too little in 2016? Too much? Now is the time to review your taxable income and make necessary adjustments to your current withholdings, 401(k) contributions, and other components that determine your taxable income – and subsequently, your tax bracket. If you’re unsure of the best course of action to most positively impact your 2017 income tax return, contact Ramsay & Associates. Our tax planning services – for both individuals and businesses – allow you to make the best financial decisions for your family or your business. Contact us for more information or to set up a tax planning appointment.

Take the stress out of tax season – a little preparation now will go a long way in early 2018.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

IRS Tax Compliance & Enforcement

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IRS Tax Compliance and Enforcement - Ramsay & Associates

Recent years have brought about budget cuts and downsizing within the Internal Revenue Service. However, the agency’s priority remains tax compliance and enforcement in an effort to close the nation’s tax gap.

What is a tax gap?

A tax gap is the difference between the amount of taxes owed by taxpayers and the amount that the IRS actually collects. Each year, the government loses about $458 billion due to underreported income, underpaid taxes, or people not filing returns at all. International noncompliance adds to that total.

A 2010 IRS study shows that taxpayer filing and payment compliance, known as the voluntary compliance rate, is approximately 82 percent. This year’s voluntary compliance rate target is 86 percent.

Tax compliance by the numbers

  • 7.5 million people who receive information statements (such as a W-2 or 1099) do not file their required tax return each year.
  • The number of cash-based workers and small business non-filers (who don’t receive 1099s or W-2s and are “off the grid”) is unknown. However, the IRS may renew interest in obtaining this information based on recent studies.
  • 19 million individuals and businesses owe $398 billion to the IRS.
    • One-third of these have payment or deferral arrangements with the IRS.
    • One-third owe taxes and have not paid; the IRS is actively pursuing payment.
    • The IRS is not pursuing payment from the remaining one-third.
  • 24 million Forms 1040 do not report all income.
  • The IRS issues 40 million penalties to 27 million taxpayers each year. The most common penalties are:
    • Failure to pay (56%)
    • Estimated tax (30%)
    • Failure to file (10%)
  • The IRS audits fewer than one percent of returns.
  • The IRS conducts three out of every four audits through correspondence.

Despite budget cuts to the IRS as well as its declining audit rate, the IRS will continue its efforts to close the tax gap with improved compliance. At Ramsay & Associates, our tax services go beyond preparing an accurate and timely tax return. We can assist both businesses and individuals with any compliance issues, should they arise. Contact us to learn more about our business and personal tax preparation and planning services.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

Deducting Business Expenses

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Deducting Business Expenses - Ramsay & Associates

 

As you prepare tax documents and receipts for your 2016 income tax returns, pay close attention to the items that you’ll need for business expense deductions. Deducting business expenses can lower your taxable income. Even if you aren’t self-employed or a small business owner, you can take certain business-related deductions as an individual.

Individual Tax Returns

If you are an employee, you may be able to deduct work-related expenses as miscellaneous itemized deductions. These deductions must exceed the standard deduction as well as 2 percent of your adjusted gross income. This is commonly known as the “2 percent floor,” meaning you may only deduct expenses above that amount. All deducted expenses must be from the 2016 calendar year, be business-related, and be “ordinary and necessary.”

Here are some common deductions and guidelines:

Vehicle and Travel

  • Although expenses for your regular daily commute, including parking, aren’t deductible, some local transportation costs qualify. For example, traveling from one workplace location to another would qualify, as well as from your home office to another workplace location if your home office is your primary place of business for your employer. Parking fees for a business meeting outside of your usual daily commute are deductible. More information about home offices and transportation costs is available from the IRS website.
  • Use standard mileage rates to calculate deductible costs if operating your personal vehicle for business purposes. 2016 mileage rates are 54 cents per mile for business miles, such as traveling to meet a client or attend a conference. If you do not use the standard mileage rate, you can deduct actual car expenses for the year.
  • While on a business trip, you can deduct costs incurred such as airline, train, or taxi fares, car rental, baggage fees, meals, lodging, and tips. Find more details here.

Entertainment Expenses

  • Business entertainment expenses are subject to certain limits. Generally, 50 percent of meal and entertainment expenses are allowed, with records to prove their business purpose. Learn more.

Home Office

Use of part of your home exclusively and regularly for conducting business may also allow for deductions of certain expenses, such as mortgage interest, property taxes, utilities, and home repairs. Learn more about the requirements to claim these deductions.

Other Potential Deductions

  • Memberships or dues to professional organizations
  • Job search expenses, including travel expenses
  • Work clothes or uniforms that are a condition of your employment, but that would not be suitable for everyday use

Small Business & Self-Employed

If you are self-employed or the owner of a small business, there are additional deductions and requirements to consider when filing your business taxes, excluding cost of goods sold, capital expenses, and personal expenses. Some deductible business expenses include:

  • Fees for professional services
  • Employee wages and benefits, such as health or life insurance, as well as contributions to retirement plans or profit-sharing
  • Advertising costs
    Education expenses, such as fees for seminars or courses to maintain professional certifications
  • Fees for banking, attorney, or accountant services
  • Federal, state, and local, payroll taxes

Refer to the IRS website for additional information on these and other business expenses deductions, or contact Ramsay & Associates with your questions. We provide tax preparation services businesses as well as individuals. Call us at 651.429.9111.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

2016 Income Tax Returns Information

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2016 Income Tax Returns - Ramsay & AssociatesThe calendar has turned to 2017. It’s time to start preparing for 2016 income tax returns if you haven’t already done so. We’ve put together some helpful information and dates to keep in mind as you prepare your return.

Tax Season Begins

Monday, January 23, 2017 is the official start of tax season, when the IRS will begin accepting electronic returns. Of the 153 million tax returns expected to be filed this year, the IRS estimates that four of five will be prepared electronically, using tax preparation software. The IRS will begin processing paper returns that day as well.

Tax Documents Mailing Deadlines

Tuesday, January 31, 2017 is the mailing deadline for most important tax documents, including Forms W-2 and 1099 and bank interest or retirement account distribution documents. The mailing deadline for Forms 1099-B (sales of stocks, bonds, or mutual funds), 1099-S (real estate transactions) and 1099-MISC is Wednesday, February 15, 2017.

Tax Return Deadline

Tuesday, April 18, 2017 is the deadline to submit your 2016 tax return or file an extension. The traditional tax deadline of April 15 falls on a Saturday this year. Typically, the deadline would be extended to the first Monday following the 15th; however, Monday, April 17 is Emancipation Day, a legal holiday in Washington, D.C., and federal offices will be closed.

Extended Tax Deadline

Monday, October 16, 2017 is the extended tax deadline for individual returns. Anyone can file for a six-month extension, which gives you additional time to file your return, but does not give you additional time to pay if you owe a balance. Form 4868, the application for an extension, has a submission deadline of April 17.

Refunds

According to the IRS, the fastest and safest way to file and receive a refund is to choose e-file and direct deposit. Typically, the IRS process nine out of 10 refunds in fewer than 21 days. In 2017, however, a new law goes into effect requiring the IRS to hold refunds until at least February 15 on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). The IRS cautions taxpayers that these refunds most likely will not arrive in bank accounts until the week of February 27.

The IRS offers two helpful tools for taxpayers to check the status of their refund: Where’s My Refund? via irs.gov, and the IRS2Go phone app.

Ramsay & Associates offers both personal and business tax preparation and planning services. We pride ourselves on our attention to detail and expert knowledge. Please contact us if you would like more information or to schedule an appointment. Call us at 651.429.9111.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.