Archive for the ‘Individual Taxpayers’ Category

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You Just Received A Letter From The IRS-What Should You Do?

Friday, May 10th, 2024

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

If you just received a letter from the IRS, and you’re not sure what action you should take.  Among the possibilities are:

  1.  Ignore it  (Never a good idea.  One of the worst decisions to make)
  2.  Shred it (Never a good idea.  See #1 above)
  3.  Open it  (Best decision to make)

In todays world anything is possible, especially with “Artificial Intelligence” (AI).  Specifically, the IRS does not communicate with taxpayers via telephone (at this stage), e-mail, text message, Facebook, or any other electronic methods.  The next step is to determine if it’s authentic (not a scam, phishing, imposter, fraud, etc.)  Verification can be easily accomplished using the information provided in the upper right-hand corner of page one of the letter.

The fact that you did receive a letter does not necessarily mean that your tax return is being audited.  It could indicate that the IRS needs additional information to support and approve data that you included in your income tax return:

“The IRS sends notices and letters when it needs to ask a question about a taxpayer’s federal tax return, let them know about a change to their account or request a payment. Don’t panic if something comes in the mail from the IRS – they’re here to help.”

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When Should A Taxpayer File An Amended Federal Income Tax Return?

Thursday, April 25th, 2024

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

There are several situations in which a taxpayer, after filing their tax return, determines that there is information available now that was not available when the original tax return was prepared. While this often occurs when third parties notify taxpayers that they are providing the taxpayer with a “Corrected” form (Form W-2, Form 1099 B, 1099 INT, 1099 DIV, etc.).  There are also additional circumstances:

When a taxpayer realizes that their federal tax return has a math error, missing income or other mistake, they should file an amended tax return.

A taxpayer must file an amended return if they need to correct:

  • Filing status
  • Income
  • Deductions
  • Credits
  • Tax liability

Generally, a Federal income tax return can be “Amended” up until three years after the original tax return due date.

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Qualified Charitable Deduction (QCD)-A Tax Benefit For Senior Americans

Saturday, November 19th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

There is a provision in the income tax laws for American taxpayers who are 70 1/2 years old and older.  It’s the “Qualified Charitable Distribution” or QCD.  It works or provides tax benefits for taxpayers who have an annual “Required Minimum Distribution” or “RMD” and make donations to charitable organizations.  This tax benefit became really important with the “Tax Cuts and Jobs Act” that was enacted on December 17, 2017.  The TCJA became effective on January 1, 2018, and if not extended, will expire on December 31, 2025.

Prior to the enactment of the TCJA taxpayers made their charitable donations and entered the data on Schedule A (“Itemized Deductions”) of their individual tax returns, usually a Federal Form 1040, along with medical expenses, state and local taxes, mortgage interest, etc.  Then the taxpayer compared the itemized deductions total to the standard deduction total and used the higher amount.  However, the TCJA substantially increased the standard deduction for all taxpayers wherein, it may no longer be beneficial to use the actual itemized deductions. To illustrate, I’ll provide examples for two different taxpayers, both are “Married Filing Jointly”, have an RMD of $100,000, donate a total of $15,000 for all of their charities.  Their “Standard Deduction” is $25,100.  Their “Taxable Income” is $200,000 without the tax benefit of the QCD.

Taxpayer A– does not use the QCD.  Receives the required $100,000 RMD, records the $15,000 in donations on Schedule A.  However, the total “Itemized Deductions” are less than the “Standard Deduction”  His/Her “Taxable Income” is $200,000.

Taxpayer B-has his/her IRA Custodian send checks directly to each of the charitable organizations.  He/she receives the full benefit of the QCD.  However, his/her “Taxable Income” is now reduced by $15,000 (the QCD) to $185,000.  He/she also used the “Standard Deduction”.

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What Can You Do To Expedite Your Income Tax Refund?

Thursday, April 7th, 2022

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

The information that I am seeing on the Internet states that the IRS goal for having your tax refund in to your bank account is twenty-one days.  While this could be “business days”, I am thinking that it’s “calendar days”.  There are decisions that you can make and actions that you can take that will facilitate this process:

  1.  File your tax return electronically!  It has been said that “paper” is to the IRS as Kryptonite was to Superman!
  2.  Check, double-check, and triple-check your tax return for errors BEFORE you e-file!  From your correct name (that is in the Social Security Administration records) and social security number to the birth dates of your dependents to the numbers that you have entered throughout your tax return.  All numbers can be transposed.
  3. If your tax software includes this function run “Error Checking” multiple times.
  4. Be sure that the “Routing Number”, “Your Full Bank Account Number” and “Bank Name” are all correct.
  5. If you are applying for the “Child Tax Credit”, or the “Earned Income Credit”, or if you received payments for the “Economic Recovery Rebate”  be sure that you provide all of the correct information.  If you received advance child tax credit payments last year, or the Economic Recovery Credit you should receive two separate letters from the IRS stating the amounts that you received.
  6. If you have questions, use https://irs.gov or the Internet to obtain information from the Frequently Asked Questions (FAQs) or search for the instructions for your forms.

After you have filed your tax return you can use the IRS “Where’s My Refund” hyperlink to obtain the status of your refund ( Refunds | Internal Revenue Service (irs.gov) )

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