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It's that time of year again!  The holidays have come and gone and the New Year is firmly planted in our sights.  For many of us this means tax season is right aroud the corner.  Whether you are excited about tax time because you are anticipating a refund, or are one of the many who dread this time of year because it means sending more money to the government, there is one common ground.  Organization!  

From envelopes stuffed with receipts, to desk drawers crammed with paper, your tax professional has probably seen it all.  If you are one of the many who throw everything into an envelope or draw and pull it out when tax time comes around there are a few things you should know about how tax time organization can work to your benefit:

• Many CPAs, Accountants and Tax Professionals will charge extra to sift through all of your paper to see if any of it can be used on your return.  Being well organized can save you precious tax preparation dollars!  This leave more money in your pocket during a time when the holidays have many individuals short on cash.
• The more detailed your return is, if you are not organized, you could end up making countless trips to deliver more information to your tax professional.  The longer it takes to get your information together the longer it takes to get your refund.  Time is valuable to both you are your tax professional especially this time of the year.  There are many firms who will charge extra the longer they are waiting on items from you, or charge extra everytime they have to open your return to add additional information.  
• If you are unorganized you could be missing out on all of your credits and deductions you are allowed because you are missing the information.  Missing information such as mileage logs, nights out calendars, medical expenses, taxes paid, unemployment etc. can cost you. Not only will you miss the deductions and credits on the return but in some cases you will have to file an Amended Tax Return to correct the oversight.  Amended returns cost you more money to be prepared then having all the information on the original return the first time.  Save yourself some money, have everything ready for your appointment the first time!

As you can see, being organized when it comes to taxes can save you time and money!  So, what can you do to become organized for the tax season or to keep yourself organized throughout the year?  In the digital age we are living in everything you need to get and stay organized is at your fingertips.  From planners, to organizers, to logs and reminders you can find it all online or as an App on your phone.  Not great with all the technology?  Your tax professional, accountant or Enrolled Agent may offer a service that helps!  Give them a call and see what they have to offer.

Here at Excel Tax and Consulting Services we offer printable trackers for your charitable contributions, gambling logs, mileage logs, income and expense logs as well as a yearly client organizer all on our website http://www.exceliowa.com/client-forms  If digital is more your style, give us a call and we have some great recommendations on Apps you can download to your phone or tablet.

Tax Planning and Tax Organization go hand in hand.  How can you know what you need without knowing what your tax plan is?  Excel Tax and Consulting Services offers many handouts right on our website http://www.exceliowa.com/handouts  Don't see what you looking for?  Give us a call and we can email you specific handouts for your situation.  

We wanted to keep this week's blog short and to the point so you can get to work becoming more organized for your upcoming tax appointment!  Excel Tax and Consulting Services wishes everyone a Happy and Safe New Year!  

Excel Tax and Consulting Services

Denison, Iowa 51442

712-263-8032

Guide Dog or Other Service Animal

You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties.

Low to middle income taxpayers who contribute to a retirement plan may be able to take the Retirement Savings Contributions Credit or Saver's Credit, for short.  This credit is taken on form 8880 and is worth 10%-50% of your eligible contributions to IRAs and other retirement plans up to a maximum credit of $1000 ($2000 on a Married Filing Joint Return).  This credit is based on the smaller of eligible contributions or $2000 per taxpayer.  The credit rates vary based on your Modified Adjusted Gross Income.

Ineligible Taxpayers:

Those under the age of 18, claimed as a dependent on another person return, or was a full time student during any part of 5 calendar months of the year.

Eligible Contributions:  

Contributions considered for the credit include: 1) Traditional and Roth IRA contributions, 2) Elective deferrals to a 401k, 403b, governmental 457, SEP, or SIMPLE plans. 3)Voluntary employee contributions to a qualified retirement plan defined in the IRC section 4974c which includes the Federal Thrift Savings Plan, 4) Contributions to a 501c18d plan.

The most common plans are the IRAs, both Traditional and Roth, 401K and 403B plans.  The items in box 12 of your W2 will show amounts to a qualified plan.  

Your contributions may need to be reduced by certain items such as distributions from any of the above plans.  This is an area where we advise you to see your tax professional so that the correct amounts are used on your return since there are some items that you do not need to reduce your contributions by.  Maximumizing your credit is what your knowledgeable tax professional can do!

Modified Adjusted Gross Income:

Modified Adjusted Gross Income is different for many tax credits.  In reference to the Saver's Credit this means your income from line 37 on form 1040 (2014) + excluded income from Puerto Rico+lines 45 or 50 from form 2555 (foreign income)+line 15 form 4563 (american Samoa residents).

https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Savings-Contributions-Savers-Credit" target="_blank">http://https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Savings-Contributions-Savers-Credit

The above link takes you to the IRS.GOV website with charts for the upcoming filing season pertaining to the Saver's Credit.

Excel Tax and Consulting Services suggest seeking tax advice from reputable, knowledgeable tax professionals such as Enrolled Agents and CPAs.  Our doors are always open for all clients new and returning.  Call or Stop by today!  Or visit us on FaceBook http://www.facebook.com/exceliowa 

Happy Thanksgiving from all of us at Excel Tax and Consulting Services!

When the IRS or a state finds that you either should have filed a return or the return that you filed was filed in error you may be hit with a penalty.  Which penalty and how much it will add to your balance due depends on what the taxing authority finds in error on your return.

Failure to File:

This penalty is for just what it says.  If you were required to file a tax return but did not file on the due date, including extension, you may be hit with the Failure to File penalty.

1. This is 5% of the unpaid balance per month with a maximum of 25%
2. If it is more than 60 days late the penalty is the smaller of $135 or 100% of the tax due on the return.
3. There is no Failure to File penalty if you are due a refund
4. This penalty is reduced by the Failure to Pay penalty if both apply to the return.

Failure to Pay:

This penalty is for any balance due that was not paid by the due date of the return.  

1. This is 0.5% of the unpaid balance per month to a maximum of 25%
2. 0.25% of unpaid balance per month during the terms of an installment agreement.

Fraudulent Failure to File:

If the IRS determines that your Failure to File was due to a fraudulent act they can access a penalty of 15% of the unpaid balance per month with a maximum of 75%

Underpayment of Estimated Tax (Individuals and Corporations):

This is accessed on any individual or corporation if they do not pay enough estimated taxes into the government.  The rates change for inflation.  For corporations the rate also changes due to the amount of the underpayment.

Accuracy Related Penalty:

This is a 20% of the underpayment due to:

1. Negligence
2. Substantial understatement of tax
3. Substantial valuation misstatement

Fraud:

If the IRS determines that you filed a fraudulent return there is a 75% of the understatement penalty due to the fraud.

Frivolous Tax Court Suits:

There is up to a $25,000 for the intentional delay, frivolous or groundless positions, and failure to pursue available administrative remedies to a tax issue.

Tax Evasion:

If you are hit with this, it is considered a willful attempt to evade tax and is a felony.  Maximum fine is $250,000 ($500,000 for corporations) and/or up to 5 years in prison.

Failure to Collect or Pay Over Tax:

Willful failure to collect, account for, and pay over tax is a felony with a maximum fine of $250,000 ($500,000 for corporations) and/or up to 5 years in prison.  These include payroll taxes for your employees that you have in a trust fund account.

Perjury and Fraud:

If you knowingly file or help file a false return or aid in the fraud, it is considered a felony.  This also carries a maximum fine of $250,000 ($500,000 for corporations).  The jail time can be added to include up to 3 years.

Earned Income Credit Claimed When Not Eligible:

1. If the error is due to recklessor intentional disregard for the rules.  The taxpayer is not allowed to take the credit for 2 years even when they are eligible for the credit.
2. If the error is due to fraud.  The taxpayer is not allowed to take the credit for 10 years, even if eligible.

As you can see there are many ways to be hit with a penalty on your tax return.  All of the penalties and amounts listed above are at the Federal level.  Each state has their own rates and penalties to consider.  It is always better to excercise the laws when filing your tax return then to be hit with any penalties at a later date.  The IRS can levy your home and business as well as garnish your wages until the unpaid amounts are paid in full.  My advice is to do your research, hire a knowledgeable tax preparer, or know that laws BEFORE filing your own return.  Getting out of a tax mess is more expensive then staying out of a tax mess to begin with!

There is a way to mitigate the noncriminal penalties.  This is can be done with "Reasonable Cause".  Reasonable cause is based on the facts and circumstances in each case.  Any reason that establishes that a taxpayer exercised ordinary care and prudence but still failed to comply with the tax law may be considered for relief.  

For more information on penalties see the IRS website and publication 17

https://www.irs.gov/pub/irs-pdf/p17.pdf" target="_blank">http://https://www.irs.gov/pub/irs-pdf/p17.pdf