Tax Partners Northwest LLC
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Recent News Updates

I got a letter from the IRS, what now?
10/8/14, 5:50PM

This is the time of year when the IRS sends out notices about things they've noticed in your tax return. It's easy to feel your heart beating faster when you see that letter in your mailbox. Here are some tips to follow if you get one of those dreaded notices.

 

  1. Don’t panic. You often only need to respond to take care of a notice. Contact your tax professional immediately, he or she always wants to know if you're hearing from IRS. An Enrolled Agent or CPA can even represent you if necessary.
     
  2. There are many reasons why the IRS may send a letter or notice. Typically it is about a specific issue on your federal tax return or tax account. A notice may tell you about changes to your account or ask you for more information. It could also tell you that you must make a payment. Please consult your tax professional before you send any money.
     
  3. Each notice has specific instructions about what you need to do.
     
  4. You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return. Again, let your tax professional help you.
     
  5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.
     
  6. If you do not agree with the notice, it’s important for you to respond. Your tax professional will write a letter to explain why you disagree. Be sure to mail the response within the time frame shown on your letter, and allow at least 30 days for a response.|
     
  7. Keep copies of any notices you receive with your other tax records.
     
  8. The IRS sends letters and notices by mail. They do not contact people by email or social media to ask for personal or financial information. Never provide any information to someone who calls you or emails you asking for your financial information.

 

Remember, your tax professionals are here to help you year round! We specialize in dealing with these letters and giving you peace of mind.


Time to think about a midyear checkup!
8/1/14, 9:46PM

When it comes to filing a federal tax return, many people discover that they either get a larger refund or owe more tax than they expected. But this type of tax surprise doesn’t have to happen to you. One way to prevent it is to change the amount of tax withheld from your wages. You can also change the amount of estimated tax you pay. Here are some tips to help you bring the amount of tax that you pay in during the year closer to what you’ll actually owe:

 

  • New Job. When you start a new job, you must fill out a Form W-4, Employee's Withholding Allowance Certificate. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.
     
  • Estimated Tax. If you get income that’s not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year.
     
  • Life Events. Make sure you change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. You can usually submit a new Form W–4 anytime.
     
  • Changes in Circumstances. If you receive advance payment of the premium tax credit in 2014 it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

 

Summer is an excellent time to check in with us to make sure you're on track for the year. We can look at a recent paystub and tell you if you're looking at a refund in the spring. We also want to talk to you about any big changes you may be contemplating, such as getting married, or buying a house, or taking money out of retirement.

 

Every client is entitled to a half hour of tax planning, absolutely free! Give us a call today to schedule your appointment.


Should I make estimated payments?
4/30/14, 5:44PM

If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.

 

Here are some tips you should know about estimated taxes:

 

  1. You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.
     
  2. Estimate the amount of income you expect to receive for the year to determine the amount of taxes you may owe. Make sure that you take into account any tax deductions and credits that you will be eligible to claim. Life changes during the year, such as a change in marital status or the birth of a child, can affect your taxes.
     
  3. You normally make estimated tax payments four times a year. The dates that apply to most people are April 15, June 16 and Sept. 15 in 2014, and Jan. 15, 2015.
     
  4. You may pay online or by phone. You may also pay by check or money order, or by credit or debit card. If you mail your payments to the IRS, use the payment vouchers that come with Form 1040-ES, Estimated Tax for Individuals.

 

We offer a half hour of free tax planning when we prepare your tax return. Give us a call for an appointment, and we'll help you figure out whether making estimated payments is a good idea for you.


What if I owe and I can't pay?
4/13/14, 6:51PM

Every year about this time, we get the panicked calls. "I owe and I can't pay! I need to file an extension!"

 

An extension is going to give you extra time to file, not extra time to pay. If you owe, IRS wants you to pay by April 15th. Even people who file an extension are expected to send in a payment with it if they are going to owe.

 

If you find you owe more than you can pay with your tax return, here are your options.

 

Make sure to file on time. That way you won’t have a penalty for filing late. The penalty for faling to file a return on time is much higher than the penalty for not paying right away.

 

If you can’t pay all your taxes by the due date:

 

  1. File on time and pay as much as you can. This will reduce interest charges and any late payment penalty. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.
     
  2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov. There is a charge to pay your taxes with a credit card, it's usually between two and three percent of the total due.
     
  3. Use the Online Payment Agreement tool. You don’t need to wait for IRS to send you a bill before you ask for a payment plan. The best way is to use the Online Payment Agreement tool on IRS.gov. You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month. It also means you won’t miss payments that could lead to more penalties.
     
  4. Don’t ignore a tax bill. If you get a bill, don’t ignore it. The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering a financial hardship, the IRS will work with you.

 

In short, remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can.  Finally, talk to your tax professional about how to adjust your withholding and payments to make sure this doesn't happen again next year!


To itemize, or not to itemize?
3/29/14, 6:11PM

When you file your tax return, you usually have a choice whether to itemize deductions or take the standard deduction. Before you choose, it’s a good idea to figure your deductions using both methods. Then choose the one that allows you to pay the lower amount of tax. The one that results in the higher deduction amount often gives you the most benefit.

 

First, figure your itemized deductions. 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

 

Next, look up your standard deduction. If you don’t itemize, your basic standard deduction for 2013 depends on your filing status:

 

Single $6,100
Married Filing Jointly $12,200
Head of Household $8,950
Married Filing Separately $6,100
Qualifying Widow(er) $12,200

 

Your standard deduction is higher if you’re over 65, or blind. If someone can claim you as a dependent, that can limit the amount of your deduction.

 

Finally, check the exceptions. Some people don’t qualify for the standard deduction and therefore should itemize. This includes married couples who file separate returns and one spouse itemizes.

 

Once you know your standard deduction and your itemized deductions, you want to choose the higher number. This number will be subtracted from the income you have to pay tax on, so the higher the number, the less tax you will pay! If you choose to itemize, use the 1040 long form with Schedule A. If you use the standard deduction, you may be able to use one of the shorter forms to complete your taxes.


Deducting medical expenses
3/7/14, 4:22PM

If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the medical and dental expense deduction:

 

  1. Higher limts. Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of income in prior years. That means that if your total income is $100,000, you need to have medical expenses out of pocket of more than $10,000, and you can only deduct the amount over $10,000.
     
  2. Temporary exception for age 65. The income threshold is still 7.5 percent of your income if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016. In the above example, that means you would need to have out of pocket expenses of more than $7500 to use any of them.
     
  3. You must itemize. You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.
     
  4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment. If you paid by credit card, the date you put the charge on the card is considered the date you paid, even if you didn't pay off the credit card the same year.
     
  5. Costs to include. You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.
     
  6. Expenses that qualify. You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. Vitamins don't qualify. Some things, like a hot tub or a weight loss program, might qualify if a doctor recommends it to treat a health problem.
     
  7. Travel costs count. You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.
     
  8. No double benefit. You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

 

When you're adding up your receipts, be sure to include dental, vision and all your prescription costs. Many people with insurance don't pay much out of pocket for medical, but dental can add up fast. Also remember things like batteries for hearing aids and test strips for diabetes, those are deductible as well.


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