Tax Partners Northwest LLC
Your partners in tax

Recent News Updates

Is my social security taxable?
11/30/15, 2:31AM

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. We can help you determine whether or not you need to pay taxes on your benefits.

 

• Form SSA-1099.  If you received Social Security in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.  If you received social security disability, you will also receive a form SSA-1099.  Supplemental security income (SSI) is not taxable, and you will not receive a form.

 

• Only Social Security.  If Social Security was your only income in 2015, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.

 

• Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.

 

• Base Amounts.  The three base amounts are:

 

o $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2014

 

o $32,000 – if you are married filing jointly

 

o $0 – if you are married filing separately and lived with your spouse at any time during the year

 

People receiving social security payments want to be extra careful about planning ahead for taxes.  Give us a call today to schedule your free tax planning session!

 


Tips for Gamblers
10/19/15, 4:56PM

Is your vision of the ideal Friday night a trip to the casino with friends?  If you play the ponies, cards or slots, your gambling winnings are taxable. You must report them on your tax return. If you gamble, these tips can help you at tax time next year:

 

1. Gambling income.  Income from gambling includes winnings from the lottery, horse racing and casinos. It also includes cash and non-cash prizes. You must report the fair market value of non-cash prizes like cars and trips.

 

2. Payer tax form.  If you win, the payer may give you a W-2G, Certain Gambling Winnings. The payer also sends a copy of the W-2G to the IRS. The payer must issue the form based on the type of gambling, the amount you win and other factors. You’ll also get a form W-2G if the payer must withhold income tax from what you win.

 

3. How to report winnings.  You normally report your winnings for the year on your tax return as “Other Income.” You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G.

 

4. How to deduct losses.  You can deduct your gambling losses as an itemized deduction. The amount you can deduct is limited to the amount of the gambling income you report on your return.

 

5. Keep gambling receipts.  You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.

 

If gambling is something you do on a regular basis, we can help you decide whether to have tax withheld from your winnings, and how much.  Call your tax professional today to schedule a free planning session!

 


Should you itemize deductions on your tax return?
9/6/15, 8:51PM

 Standard or Itemized: Choose the Deduction Method That’s Best for You

 

Most people claim the standard deduction when they file their federal tax return. But did you know that you may lower your taxes if you itemize your deductions? When we do your taxes, we compare your total itemized deduction to the standard deduction.  The number we choose to use is subtracted from the amount you have to pay tax on, so we select the largest number, ensuring you pay a lower amount of tax.  Here are some of the things we consider when we’re deciding which one to use:

 

1. First, we figure your itemized deductions.  This means we add up deductible expenses you paid during the year. These may include expenses such as:  

 

  • Home mortgage interest
  • State and local income taxes or sales taxes (but not both)
  • Real estate and personal property taxes
  • Gifts to charities
  • Casualty or theft losses
  • Unreimbursed medical expenses
  • Unreimbursed employee business expenses

 

2. Once we’ve figured out your itemized deductions total, we compare it to your standard deduction.  Your basic standard deduction for 2014 depends on your filing status:     

 

  • Single $6,200
  • Married Filing Jointly $12,400
  • Head of Household $9,100
  • Married Filing Separately $6,200
  • Qualifying Widow(er) $12,400             

 

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

 

3. Check the exceptions.  There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction.

 

To itemize your deductions, we use Form 1040 and Schedule A, Itemized Deductions. If you take the standard deduction, we can use 1040, 1040A or 1040EZ, whichever is most appropriate for your situation.

 


Oh no, it's a letter from the IRS!
5/13/15, 5:19PM

The IRS mails millions of notices and letters to taxpayers each year. There are a variety of reasons why you might receive a notice. Here are things we want you to know in case you get one.

1.    Don’t panic, and don’t grab your checkbook.  Call your tax professional to review the letter.  We can help you determine whether there is an issue, and help you respond.

2.    An IRS notice typically will be about your federal tax return or tax account. It will usually be about a specific issue. It may ask you for more information. It could also say that you owe tax and that you need to pay the amount that is due.  Let us check it before you send anything!  In our experience, about half the time people who receive letters asking for more money don’t actually owe anything, and some of the rest don’t owe as much as requested.

3. The IRS typically gives you 30 days to respond to their letters, and they expect you to stay within that deadline.  Never toss a letter from the IRS into your tax file and figure you’ll show it to us when you come to do your taxes in the spring.  Something that is a very small matter that would only take a few minutes to correct in June may have turned into a huge problem by the following March.  We are here year-round, and we want to hear from you if you need us.

 

4.  If you do not agree with the notice, it’s important to respond. We will help.  We’ll write a letter to explain why you disagree, and include any information and documents we want the IRS to consider. The IRS says that they will consider your response within 30 days.  Know that frequently it takes much longer than that.  If it is a complex matter, we may ask you to sign a power of attorney giving us the right to talk to the IRS for you.  That allows us to contact IRS on your behalf while you go about your day.

 

5.  Even if you do agree with what the IRS says, it's important to let us review your information.  Frequently we can save you money by requesting that penalties be waived, if you qualify. 


6.  Be sure to keep copies of any notices you receive with your other tax records for the year in question.

7.  Be alert for tax scams.  The IRS sends letters and notices by mail. The IRS does not contact people by phone, email or social media to ask for personal or financial information.


Time for Tax Planning!
5/6/15, 6:21PM

You may be tempted to forget all about your taxes once you’ve filed your tax return. Do not give in to that temptation. If you start your tax planning now, you may avoid a tax surprise when you file next year. Now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are some tips to give you a head start on next year’s taxes:

 

  • Take action when life changes occur.  Some events in your life can change the amount of tax you pay. If you change your marital status, or have a baby, or go back to college, or retire, give us a call.  We provide a half hour of free tax planning for our clients, and can help you figure out whether you need to make changes in the amount of tax you have withheld from your pay. 
  • Report changes in circumstances to the Health Insurance Marketplace.  If you enroll in insurance coverage through the Health Insurance Marketplace in 2015, you should report changes in circumstance to the Marketplace when they happen. Report events such as changes in your income or family size. Doing so will help you avoid getting too much or too little financial assistance in advance.
  • Keep records safe.  Put your 2014 tax return and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid. You should use your tax return as a guide when you do your taxes next year.
  • Stay organized.  It makes tax time easier. Designate a large envelope to collect tax information, and have your family put tax records in it all year long. That way you won’t have to search for misplaced records when you file next year.
  • Think about itemizing.  If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings.  Check with your tax professional if you are unsure whether it would be worth itemizing on your taxes.


Planning now can pay off with savings at tax time next year.  Remember, we are here year round and we are happy to help you understand your situation and plan ahead.  No one likes tax surprises!

 


Tips for Picking a Tax Preparer
1/30/15, 5:38AM

Many people pay to have their taxes prepared. You need to be careful when you pick a preparer to do your taxes. You are legally responsible for all the information on the tax return even if someone else prepares it. Here are nine tips to help you choose a tax preparer:

 

1. Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN.  An Enrolled Agent focuses on taxes and has passed a series of tests administered by the IRS to allow them to practice.  CPAs and Attorneys have taken tax classes – look for one who focuses on tax rather than other areas of accounting or law.

 

Enrolled Agents, CPAs and Attorneys can represent you before the IRS, so you don’t have to deal with them yourself.  They are required to take many hours of continuing tax education and ethics.   

 

You may see a preparer with RTRP or AFSP after their names.  These people have passed a test on taxes and made the commitment to take continuing education each year.  They have limited representation rights in dealing with the IRS, can only deal with some departments and only about returns they have prepared.

 

2. Check the preparer’s history.  You can check with the Better Business Bureau to find out if a preparer has a questionable history. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status.

 

3. Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. You should not have your refund deposited into a preparer’s bank account.

 

4. Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns generally must e-file their clients’ returns. The IRS has safely processed more than 1.3 billion e-filed tax returns.

 

5. Make sure the preparer is available.  You need to ensure that you can contact the tax preparer after you file your return. That’s true even after the April 15 due date. You may need to contact the preparer if questions come up about your tax return at a later time.

 

6. Provide tax records.  A good preparer will ask to see your records and receipts. They ask you questions to report your total income and the tax benefits you’re entitled to claim. These may include tax deductions, tax credits and other items. Do not use a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

 

7. Never sign a blank tax return.  Do not use a tax preparer who asks you to sign a blank tax form.

 

8. Review your return before signing.  Before you sign your tax return, review it thoroughly. Ask questions if something is not clear to you. Make sure you’re comfortable with the information on the return before you sign it.

 

9. Preparer must sign and include their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.  If the preparer gives you a return that says it is self-prepared, they are not following the rules and probably don’t have a PTIN.


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