Tax Tips for End of the Year

It is that time again, the end of the year is approaching and then it is tax time, but why wait to think about taxes in January, when there is still time this year for some last minute adjustments. By using last year’s tax return as a starting point, you can evaluate and make changes that could positively change your taxes for 2014. The following at steps and planning strategies to consider when review finances at the end of the year.

  • Double Check Withholdings: You do not want to pay the IRS anymore that you have to. Adjust your withholdings so just enough comes out and you break even. If you can live without the extra pay coming in, put it in a savings account or add it to you retirement account.
  • Refinance Debt: Lowering your mortgage interest rate, not only give you a lower interest rate and payment, but if you use any of the proceeds to make physical improvements to your home, the amount could be subjected to alternative minimum tax (AMT).
  • Prepay Taxes: If you are not subject to ATM, consider prepaying estimated quarterly state taxes and property taxes. If you are able to prepay, the deductions can be taken for the 2013 return if paid before December 31.
  • Avoid ATM: If you live in a high tax state, have a duel income, and have children you might want to look at your chances of paying the alternative minimum tax. To avoid paying this tax, you should talk to you tax professional, but also consider deferring payments of state and local taxes until the new year, and accelerate you income to the point where you are no longer subjected to the tax. In many situations, this is a multiyear planning, so now is a good time to start.
  • Check up on Portfolios: Harvest any losses to help offset capital gains, rebalance any tax-deferred retirement accounts by allocating funds for the accounts, and consider your cash flow.

It is important to act before the end of the year if you are wanting the deductions for January taxes, then now is the time to act. Anything paid on or after January 1 will be on next year’s taxes.


Changes to Innocent Spouse Relief

With today’s divorce rate of first marriages at 50%, the ‘happily ever after’ that most people seek can be elusive. If things go sour in a marriage then they could go sour in other areas also, including jointly filed tax returns. When a couple files jointly they can be many benefits, but they are also both fully responsible for any taxes owed, interest and penalties. This also applies to any couple that lives in a community property state even if they file separately. This can detrimental to anyone going through a divorce financially if the person filing the return underreports or over deducts.

There is relief for the innocent spouse. The IRS has three ways to help innocent spouses with joint return that have gone awry, and they include:

  • Innocent Spouse Relief: which provides you relief from additional taxes that you may owe that your spouse failed to report, improperly reported, or if they claimed credits or too many  deductions.
  • Separation of Liability Relief: allocates additional taxes owed between you and your former or current but separated spouse on items not reported correctly. It allows you to pay what you owe.
  • Equitable Relief: may be applied for when you do to qualify for either innocent spouse relief or separation of liability for something not reported properly on a joint return, or for the right amount, but the payment remains unpaid.

In the past, the IRS has allowed a two year window to file for relief, but this has recently changed. Now as long as the statute of limitations has not expired then you can still file for relief, the two year window no longer applies. With this change, if you have applied for relief and were denied solely on the two year window, then you may reapply using the Form 8857 as long as the statute of limitations has not expired.


End of Tax Season, Start Planning for Next Year!

Now that the tax season has ended, most people think “Yeah! I am done until next year.” The reality is that now is the time to start on next year’s taxes. There are a few things that can be done to help plan and prepare for next year’s taxes before January 1 starts knocking at the door.

Organize Now

You want to make tax time next year as stress-free as possible. The best way to accomplish this is to stay organized. It is extremely annoying to hunt for all the documents and receipts when it is time to start filing taxes. Start now. Have a specific location where all tax documents and receipts are kept for the year. This is where only successful if documents and receipts are filed on a regular basis. Take time to make sure that everything is in the file immediately in a file labeled for this year’s taxes.

Adjust Withholdings

Monitor payment withholding from paychecks. The goal is to withhold just enough to cover what is owed to the government. If you received a large refund, consider reducing withholdings to reduce the amount of your refund. This will cause an immediate increase in gross pay, but you can take that “extra” money and increase your IRA or 401(k) savings. This will help you prepare for your future retirement and lowers you taxes at the same time.

If you are the opposite and had to pay in a large sum to the government, consider increasing the amount deducted from your paycheck. You can do this by resubmitting the W4 form to your employer. You can choose to take out at a higher single rate or designate a specific amount to withhold from your paycheck for taxes each paycheck. If you need help figuring this amount out there are several places that offer ways of calculating anticipated taxes based on the last tax return filed.

Anyway, it is important to be thinking about what to prepare for next tax season. Stop the annual tax prep hunt and stay organized. Do not procrastinate, start now!

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


Tax Season is Finished! What to Know for Next Year

Phew! Tax Season is over, but now is not the time to sit back and relax. There is next tax season to prepare for, and there are a few simple tasks that can help make next year easier and less stressful.

Stay Organized

It may be simple, but staying organized is critical to a stress-free tax season next year. Keep all tax documents and receipts in one place so they are easy to find. Label a folder with “Taxes 2013” and use it to keep all receipts and other documents in throughout the year. No one wants to play “Look and Find” in January and February. Save yourself time by taking the time to file it now. Label what the receipt was for, especially if it is for business purposes. If the receipt is for a charitable donation, list what was donated. Take the time to file it right away so it will not be lost.

Adjust Withholdings

Believe it or not, you should not be getting a large refund from the IRS each year. The goal is to break even or only have a few hundred in a refund. If you are receiving a large refund consider adjusting your W4, which can be re-filed with your employer, to have less taken out. This will mean an immediate increase in your gross income. That “extra” money could be added to you IRA or 401(k) savings. This will help you reduce you taxes and save for your future retirement at the same time.

If you had to pay in more money to the government, then consider increasing the amount taken out of your paycheck. You can figure this amount by using a tax calculator on the IRS website. This will help you figure out how much extra will need to be withheld from your paycheck so you will not have to pay in any extra, or at least not as much as before.

Remember it is important to start now. Procrastinating will not help make tax time any easier, and being prepared will make it less stressful for you. Stay organized and make your adjustments. This will put you on the right path to a better tax season next year.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


Tips for Getting Your Taxes Done Now

You’ve waited until the last minute to file your taxes. You know it is time to roll up your sleeves and get it done. Without being rushed to meet the April 15th filing deadline, you’ll need to set aside a couple of hours of time to file your 1040. Whether you do it on your own or allow our team of tax professionals to do it for you, the following tips will help you to get through those seemingly difficult hours and just get this done.

Updating Software and Documents

The IRS didn’t release all of the tax filing documents until late this year. To make matters worse, various tax filing programs were not set up in time to meet the changes. The IRS even detailed some types of filing while it worked out the process. The bottom line is that, before you file, you need to ensure you have the right documents or the most up to date software programs. You can get what you need at the IRS website if you plan to do this on your own. Submitting the wrong return or lacking key tax information while completing it could cost you big time. You do not want to make these mistakes.

Take Advantage of Big Deductions

One of the easiest but most often overlooked ways to get a tax break is to open an IRA. Even if you have other types of savings accounts, maximizing the amount of money in these accounts to meet the limits set by the IRS could mean more money in your pocket and less money in the pocket of the government. Let’s say you owe this year. By opening up an IRA and depositing some funds into it, those funds become a tax deduction for you. That means you save those funds for retirement (and they start helping you to earn money through compounding interest) and you don’t have to repay them to the government.


Once you sort through all of the tax documents, you’ll want to e-file rather than mailing your documents. First off, even if you owe money, e-filing is effective because it allows you to receive a confirmation that the IRS received your return. If you are expecting a refund this year, be sure to sign up for direct deposit. This will help you to get your money faster. It is also completely safe to do.
The bottom line: Don’t wait to file your taxes any longer. You also don’t have to try and do the work yourself. Contact us for tips and help getting your return in fast.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


Things to Consider With a Tax Extension

When it comes to filing yearly income tax returns, you find all types. There are those who are itching to file right after the New Year’s champagne toast, and those who trudge toward April 15 as if it were Armegeddon. And of course there are plenty of people who fall somewhere in between.

Because income can come from many different sources, and at all sorts of different levels, filing taxes is much more of a strain for some than others. Some may wind up with a quick and easy return, while others struggle to find the time, and sometimes the money to meet the deadline.

For those who see April 15 approaching a little too quickly, there is the option of filing the IRS form 4868 to get an extension. By filing an extension, taxpayers have an additional six months to file their taxes. But although there may be extra time, there may also be an extra expense. An extension allows a tax payer extra time to file, but not extra time to pay. If you are one of those who has to pay into the IRS or your state’s revenue department, holding off could mean that you’ll have to pay more. With an extension there is more time to file, but not more time to pay.

In order to limit fees, penalties, and interest taxpayers are best off paying their taxes at the time that they file for the extension. This can be tricky for some who don’t necessarily know what they owe. In order to make the process a bit easier, your tax accountant can estimate what you might owe. While not guaranteed to be accurate, these estimates will give you a place to start when it comes to knowing your tax bill.

If paying the whole amount is not feasible, pay what you can. Any penalties and interest will be calculated based on what you owe after April 15. If you’re due a refund, you won’t be charged penalties or interest. The following situations can make your tax obligation creep upwards: failing to file on time (your 4868 should take care of this), failing to pay, and Interest.

Failing to file can bring you a penalty of as much as 25% of your tax bill. For each month your return is late, 5% is added to your tax bill. This maxes out at 25%. The failure to pay penalty is less per month — only .5%, however this does not max out so delaying that payment too long could really add up. Interest charges can vary somewhat, but is currently around 4% of the amount that was underpaid.

If you’re feeling rushed or overwhelmed, knowing that there is an option to file an extension can bring some peace of mind, but still even with that extension it is always in the taxpayers best interest to get their taxes in order as soon as they can.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal..


Innocent Spouse Tax Filing

In the United States, married couples usually file a joint tax return. This means that both are responsible for payment of taxes to and the accuracy of the information filed on the tax return. While in most marriages this is a fair arrangement, there are times when the spouse keeps secret information that should have been filed with the tax return or lies to the spouse about payments.

Starting in 1971, the United States Internal Revenue Service began to realize that sometimes a spouse was kept in the dark for about taxable income and told by the spouse the taxes were paid when they weren’t. In 1971, the IRS wrote the first regulations for its “innocent spouse” program. Under certain limited conditions, a spouse was not held accountable for the other spouse’s actions.

In 1984, and again in 1998, the tax code was revised to give further protection to innocent spouses. This relief was badly needed, as spouses planning divorce would knowingly mislead their spouse so that both would share the tax liability when property was divided during property settlement. In 2013, the IRS announced that it was eliminating the two-year rule for request relief under innocent spouse. In fact, the rule can be applied retroactively and any taxpayer denied relief because of the two-year limitation may refile.

In addition, criminals often cheat on their taxes without their spouse’s knowledge. This is not only true of organized crime members but also people who engage in white-collar crime. The tax code provisions separate the liability so that the innocent spouse is not held responsible for the deceitful acts of their marriage partners.

In addition, a divorced spouse may elect to take an option known as the “separation of liability.” Once this option is taken, the spouse must prove that they had no knowledge of fraudulent activity. If successful, they are relieved of responsibility for falsified joint tax return.

To get relief you need to file IRS Form 8857. You only have to file a single copy of the form even if you are seeking relief for multiple years. If you want to give the IRS more information concerning your request just attach a letter with your name, address, social security number, and filing year. Send the form and any attachments to:

Internal Revenue Service
Innocent Spouse
Stop 840-F
P.O. Box 120053
Covington, KY 41012

The IRS makes it hard to get innocent-spouse relief. Over 50,000 innocent-spouse applications were filed in the past year with less than half of them getting approval. But, more than 1,500 denials were due to the two-year time limit that has been amended.

Your tax accountant is a good resource for help in filing for this relief.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


5 Tips To Get Your Tax Return Quickly

You’ve been loaning your income to the government for the past year, and now is the moment you have been waiting for — tax season. This is the time of year where that lovely tax return is deposited in your account. Whether you are paying off a bill, taking a vacation or splurging on a fun purchase, you will want to be sure to get your tax return as quickly as possible. These tips will help you make sure the money gets back in your hands where it belongs in no time.

5 Tips To Get Your Tax Return Quickly

1. Ditch the pencil and paper forms, and e-file your taxes. Electronically filing your taxes is quick, easy and it is less expensive. You don’t have to worry about them getting lost in the mail, and the entire process is quicker — from preparing your taxes to receiving your return.

2. Opt for direct deposit. Direct deposit returns are processed much quicker than those who are waiting for a check in the mail. It can literally mean the difference between getting your return in a few days versus receiving it a few weeks after you file your taxes.

3. Be prepared for your tax appointment. Don’t try to jump the gun and file your taxes before you have all of your forms. Wait for everything to arrive in the mail, and recognize that some tax forms may not come until February. Have everything in a neat and tidy folder so your accountant can quickly and easily prepare your taxes.

4. Don’t wait until the last minute to submit your taxes. The longer you wait to file, the longer it will take you to get your return.

5. Double check your work. Mistakes will slow down the process for everyone, so make sure your taxes are correct before you submit them.

If you come prepared for your appointment and you are open-minded to technology, you will find that you will get your tax return much quicker than you have in past years. For some people who e-file, their return arrives in their account within a week. Years ago when everyone relied on pencil and paper to file their taxes, it could be several weeks before the tax return check arrived in the mail. Times have changed drastically, and it’s never been easier to get your tax return quickly. Take these steps today and start thinking of what you will do with that tax return when it arrives quicker than ever before.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


Tax Season is Here Again– Are You Ready?

Are you one of those who wait till the last minute to do your taxes? Tax season has started; to be precise, on January 30, 2013, and that’s when our friends at the IRS begin to process personal tax or business tax returns. This is the right time to file your taxes, and this year, you have the added advantage of preparing and filing your taxes by the deadline on April 15th. Unless you get your documents in place, you will need to race to the meet deadline and then have to deal with stress that can be avoided in the first place.

So, here are some pointers to share with you about what the 2013 tax season brings in, right from the horse’s mouth, so you can get yourself organized.

A brand new, easy to navigate and redesigned is out there to welcome you. It has service options that are ready to wow you–additional video-conferencing guidance as well as tools on social media. You can easily get all the latest tax info out there, and if you are keen on learning more, you are directed to the IRS YouTube channel that you can see right here at IRS has further intensified its efforts to protect you, dear taxpayer, from any frauds or identity thefts.

Did you know that you could actually check the status of your tax refunds on your smartphone? With the IRS smartphone application, IRS2Go which is available for both Apple and Android users, you can also clarify any other tax related doubts when you are on the go.

While this year’s late legislation has affected several forms, details of which are listed on the IRS website, they hope to begin accepting these forms later this month and in March as well. Watch this space to find out more.

Another favorable change is in the tracking system that you would use after you have filed your returns on the “Where’s my refund” section of the IRS site. From this year onwards, you can look forward to an exact refund date, rather than the estimated date used up until last year, and this information is available after your tax returns have been processed and approved by the department.

So, let us all begin the laborious task of getting our records in place–receipts that depict your income, like your bank deposit slips, receipt books and your credit card charge slips; your purchases as well as your expenses and extend a warm welcome to the whole new tax season 2013.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.


A Delay to Tax Season

Since Congress made changes to the tax laws under the American Taxpayer Relief Act (ATRA), the IRS has announced that there will be a delay in the start of tax season. The Internal Revenue Service plans to open the 2013 filing season on January 30. At that time, they will begin processing individual income tax returns.

With the new changes enacted on January 2, the IRS needs time to update forms and complete testing on the processing system. The forms will reflect many of the changes made to tax laws by Congress. This means that for the majority of taxpayers, more than 120 million households, will be able to start filing their taxes January 30, 2013.

The remaining households will be able to start filing in late February or March due to the extensive forms and processing changes that need to be made to the system. The groups that this late start will affect the most are households claiming residential energy credits, depreciation of property, or general business credits. This should not cause too many problems because this group of individuals tend to file closer to the April 15th deadline or even file for extensions.

While the IRS has been working hard to open the tax season for individuals as soon as possible, they want to ensure that the forms and processes are updated. The IRS is required to update forms and instructions as well as making critical processing changes to the system adjustments before accepting tax returns.

The IRS believes that the vast majority of taxpayers will be able to start filing tax returns, regardless of whether they are paper or electronic, on January 30. Anyone affected by the Alternative Minimum Tax (AMT) along with anyone claiming state and local sales tax deduction, higher education tuition and fees deduction, and educator expenses deduction will be able to file on January 30.

The IRS will post more information on the other forms as they become available.

Here at Crowley & Halloran CPA’s, our consultants would be happy to help you plan and manage your business budget. Click here to request a proposal.