by Fresh Start Tax | Dec 9, 2014 | Tax Help
Year-End IRA Reminders
Individual Retirement Accounts are an important way to save for retirement.
If you have an IRA or may open one soon, there are some key year-end rules that you should know.
Here are the top four reminders on IRAs from Fresh Start Tax LLC;
1. Know the limits.
You can contribute up to a maximum of $5,500 ($6,500 if you are age 50 or older) to a traditional or Roth IRA. If you file a joint return, you and your spouse can each contribute to an IRA even if only one of you has taxable compensation.
In some cases, you may need to reduce your deduction for traditional IRA contributions. This rule applies if you or your spouse has a retirement plan at work and your income is above a certain level.
You have until April 15, 2015, to make an IRA contribution for 2014.
2. Avoid excess contributions.
If you contribute more than the IRA limits for 2014, you are subject to a six percent tax on the excess amount.
The tax applies each year that the excess amounts remain in your account.
You can avoid the tax if you withdraw the excess amounts from your account by the due date of your 2014 tax return (including extensions).
3. Take required distributions.
If you’re at least age 70½, you must take a required minimum distribution, or RMD, from your traditional IRA.
You are not required to take a RMD from your Roth IRA. You normally must take your RMD by Dec. 31, 2014.
That deadline is April 1, 2015, if you turned 70½ in 2014.
If you have more than one traditional IRA, you figure the RMD separately for each IRA. However, you can withdraw the total amount from one or more of them.
If you don’t take your RMD on time you face a 50 percent excise tax on the RMD amount you failed to take out.
4. Claim the saver’s credit.
The formal name of the saver’s credit is the retirement savings contributions credit. You may qualify for this credit if you contribute to an IRA or retirement plan.
The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples.
The credit you receive is often much less, due in part because of the deductions and other credits you may claim.
by Fresh Start Tax | Dec 9, 2014 | Tax Help
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If you owe back payroll taxes, please understand that IRS treats payroll taxes tougher than individual tax simply because it is monies held in trust.
If you do not pay your payroll taxes the IRS can impose section 6672 trust fund penalty against individuals who were responsible to pay IRS for the back payroll taxes.
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by Fresh Start Tax | Dec 9, 2014 | Tax Help
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I am a former IRS agent and teaching instructor who knows the system.
The IRS Collection Process
IRS will require a full financial statement that is verified with bank statements and copies of monthly expenseson any case in which back taxes are owing.
Once IRS verifies your income and monthly expenses they will be prepared to settle your case and take your case off the IRS enforcement computer CADE2.
As a general rule, the Internal Revenue Service after a careful review of your financial statement will usually put a taxpayer or business in a tax hardship or ask them to make a monthly payment agreement.
Approximately 40% of all taxpayers who owe tax have their cases put into an economic tax hardship.
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by Fresh Start Tax | Dec 9, 2014 | Tax Help
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by Fresh Start Tax | Dec 9, 2014 | Tax Help
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So, what is an IRS audit?
An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate.
IRS Publication 556, Examination of Returns, Appeal Rights and Claims for Refund explains the audit process in more detail.
When IRS selects a tax return for audit does not always suggest that an error has been made.
Returns are selected using a variety of methods, including:
- Random selection and computer screening – sometimes returns are selected based solely on a statistical formula.
- Document matching – when payor records, such as Forms W-2 or Form 1099, don’t match the information reported.
- Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
IRS Tax Audit Methods
An audit may be conducted by mail or through an in-person interview and review of the taxpayer’s records.
The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit).
The IRS will tell you what records are needed. Audits can result in no changes or changes. Any proposed changes to your return will be explained.
IRS Tax Audit Notification
Should your account be selected for audit, you will be notified in two ways:
In the case of a telephone contact, the IRS will still send a letter confirming the audit. Please note, E-mail notification is not used by the IRS.
Your Rights During an IRS Tax Audit
Publication 1, Your Rights as a Taxpayer, explains your rights as a taxpayer as well as the examination, appeal, collection, and refund processes.
These rights include:
• A right to professional and courteous treatment by IRS employees.
• A right to privacy and confidentiality about tax matters.
• A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
• A right to representation, by oneself or an authorized representative.
• A right to appeal disagreements, both within the IRS and before the courts.
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