On May 14, 2021 at 12:30 pm, A&A Accounting held a “live” raffle to draw a winner from our clients names who left a Google Review. The winner received a 65″ Samsung TV. Here is the drawing!
Why was I notified by the IRS?
When the IRS sends notices and letters for the following reasons:
- You have a balance due.
- You are due a larger or smaller refund.
- They have a question about your tax return.
- They need to verify your identity.
- They need additional information.
- They changed your return.
- They need to notify you of delays in processing your return.
Each notice or letter contains a lot of valuable information, so it’s very important that you read it carefully. If the IRS changed your tax return, compare the information they provided in the notice or letter with the information in your original return.
If your notice or letter requires a response by a specific date, there are two main reasons you’ll want to comply:
to minimize additional interest and penalty charges.
to preserve your appeal rights if you don’t agree.
Pay as much as you can, even if you can’t pay the full amount you owe. You can pay online or apply for an Online Payment Agreement or Offer in Compromise. Visit our payments page for more information.
Keep a copy of your notice or letter
It’s important to keep a copy of all notices or letters with your tax records. You may need these documents at a later date.
And, if you feel overwhelmed by any of these, please contact us for support or more information. 508-514-1488
Beware of ‘ghost’ preparers who don’t sign tax returns
WASHINGTON – The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.
Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.
Unscrupulous tax return preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to qualify their clients for tax credits.
- Claim fake deductions to boost the size of the refund.
- Direct refunds into their bank account, not the taxpayer’s account.
The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.
No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.
Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.
Tax Tips for New Business Owners
Owning your own business can be a very rewarding experience. The process of starting a business, however, can seem overwhelming to the uninitiated. There are so many choices to consider – from business plans to market strategies and tax responsibilities.
The IRS has put together a quick list of items any new owner of a business will have to determine. While the list may be the most benefit to first-time business owners, it can help owners of any new enterprise get off to a good start.
- Choose a business structure. The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:
- Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
- Partnership: An unincorporated business with ownership shared between two or more people.
- Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
- S Corporation: A corporation that elects to pass corporate income, losses, deductions, and credits through to the shareholders.
- Limited Liability Company: A business structure allowed by state statute.
- Choose a tax year. A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:
- Calendar year: 12 consecutive months beginning January 1 and ending December 31.
- Fiscal year: 12 consecutive months ending on the last day of any month except December.
- Apply for an employer identification number. An Employer Identification Number or EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need an EIN.
- Have all employees complete these forms:
- Form I-9, Employment Eligibility Verification
- Form W-4, Employee’s Withholding Allowance Certificate
- Pay business taxes. The form of business determines what taxes must be paid and how to pay them.
Taxpayers interested in starting a business can find information for some industries on the IRS’ Industries/Professions Tax Centers webpage. Each state has additional requirements for starting and operating a business. Prospective business owners should visit their state’s website for info about state requirements.
Now that the end of year is here, it’s time to get ready for tax season and next year’s bookkeeping. We are passionate about helping your business grow and succeed.
Bookkeeping and Accounting go hand in hand.
15 Reasons Why Bookkeeping Is Important
Bookkeeping is important for helping you maintain accurate financial records. Yet still, many businesses fail to implement this integral process. Besides the fact you are required under law to maintain accurate books and records, doing so will save you frustration later on.
In fact, “poor accounting” is one of the top reasons businesses fail. Without bookkeeping or accounting, you are blindly driving your business.
- Bookkeeping Helps You Budget
Bookkeeping is important because it helps you budget. When income and expenses are properly organized, it makes it easier to review financial resources and expenses.
- Tax Preparation
In most cases, your business has to file a tax return every year. And every year, millions of business owners are scrambling through their desk to find missing paperwork. Sound familiar? The tax filing process can be made more efficient by simply having a bookkeeping function within your company.
Being organized is a skill every business owner should have. You should be able to find information regarding your business at any time.
Bookkeeping is important because it helps with business analysis. It is a tool used by management to
Bookkeeping Helps With Decision Making
With analysis comes better decision making. In order to make the best decisions possible, you need to have access to all available information. Bookkeeping provides this information.
- Planning Purposes
Bookkeeping presents the past financial performance of your company. In order to plan for the future, you have to have a good understanding of the past. Bookkeeping will give you the clear picture of what exactly works or doesn’t work.
- Easy Reporting to Investors
Investors want to know the financial performance of your business to be able to want to quantify the value of their investment. Financial statements do just that. The balance sheet, income statement, and cash flow statement all present the value of your business.
- Financial Management
Bookkeeping is important because it allows you to take control of your business’ finances. Bookkeeping paints a clear picture of how you spend money. You can see outstanding invoices owed by you or your customers. You will benefit from paying your bills on time and receiving payment for your products or services on time too. Its this delicate balance of cash inflow and outflow that will keep your business going.
- Peace of Mind
Disorganized books can weigh heavy on your mind as a business owner. With all of the other factors of running a business, your bookkeeping should not be keeping you up at night.
- Track Profit and Growth
Bookkeeping is important because it shows your business’ profitability. For example, the income statement is one of the financial statements that is prepared from your bookkeeping. On the income statement, you can see if your business is profitable or not. Without this information, it is impossible to know how well (or not so well) you’re doing.
- Better Cash Flow
Bookkeeping improves your cash flow. The routine recording of revenues, expenses, liabilities, and receivables, will allow you to track when your customer and vendor invoices are paid. As a business, you want to ensure that your customer invoices are being paid in a timely manner. The sooner, the better. Paying your vendor invoices should also be done in a timely manner, to avoid any late fees.
- Greater Focus on Strategy
Tactical and strategic planning is the core of what you do as a business owner. You’re always thinking of ways to grow and develop your business. With bookkeeping as a tool, you are closer to your short and long-term goals.
- Provides a Snapshot of Your Business
Bookkeeping provides financial information about your company in the form of financial statements. Financial statements like the balance sheet, income statement, and cash flow statement all provide financial information for a set period of time. Together these statements take a snapshot of your business allowing you the ability to see how well your business performed.
- Easier IRS Audit
In the unfortunate circumstance, you are audited by the IRS, you want to make sure your books are in order. Messy books prolong the auditing process, making your business more susceptible to fees and penalties.
- Requirement Under Law
Last, but certainly not least, the law requires you to keep financial records for your company. Depending on your legal structure, the law requires you to keep financial records separate from your personal expenses. Failing to do so, can lead to termination of your business.
Taxpayers should be on the lookout for new version of SSN scam
Taxpayers should be on the lookout for new variations of tax-related scams. In the latest twist on a scam related to Social Security numbers, scammers claim to be able to suspend or cancel the victim’s SSN. It’s yet another attempt by con artists to frighten people into returning ‘robocall’ voicemails.
Scammers may mention overdue taxes in addition to threatening to cancel the person’s SSN. If taxpayers receive a call threatening to suspend their SSN for an unpaid tax bill, they should just hang up.
Make no mistake…it’s a scam.
Taxpayers should not give out sensitive information over the phone unless they are positive they know the caller is legitimate. When in doubt –hang up. Here are some telltale signs of this scam. The IRS and its authorized private collection agencies will never:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, iTunes gift card or wire transfer. The IRS does not use these methods for tax payments.
- Ask a taxpayer to make a payment to a person or organization other than the U.S. Treasury.
- Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
- Demand taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
- Taxpayers who don’t owe taxes and have no reason to think they do should:
- Report the call to the Treasury Inspector General for Tax Administration.
- Report the caller ID and callback number to the IRS by sending it to email@example.com. The taxpayer should write “IRS Phone Scam” in the subject line.
- Report the call to the Federal Trade Commission. When reporting it, they should add “IRS Phone Scam” in the notes.
Taxpayers who owe tax or think they do should:
- View tax account information online at IRS.gov to see the actual amount owed and review their payment options.
- Call the number on the billing notice
- Call the IRS at 800-829-1040.
Tax planning should include a Paycheck Checkup
Year-round tax planning is important for everyone. Just because a taxpayer already filed their tax return doesn’t mean they don’t need to think about taxes for the rest of the year. In fact, what they do now may affect any tax they might owe next year. It could also affect the refund they expect.
Since federal taxes operate on a pay-as-you-go basis, taxpayers need to pay most of their tax during the year as they earn the income. Taxpayers should make sure they’re having the correct amount of tax withheld from their paychecks. It’s a good idea for taxpayers to do a Paycheck Checkup for these reasons:
- Having too little withheld could lead to a smaller than expected refund.
- Having too little withheld could even lead to an unexpected tax bill.
- Employees who have too much tax withheld will see less money in each paycheck. Having more money in each paycheck may be more helpful than getting a large refund when they file.
Taxpayers should do a Paycheck Checkup ASAP if they haven’t already done so in 2019. Some taxpayers should do another Paycheck Checkup even if they already did one this year. This includes anyone whose personal or financial information changes due to a life event. Some life events that can affect withholding are:
- Having a baby
- Getting a new job
- Getting a raise at work
Contact us at 508-514-1488, for assistance or more information!
IRS has begun sending letters to virtual currency owners advising them to pay back taxes, file amended returns; part of agency’s larger efforts
The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.
“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” said IRS Commissioner Chuck Rettig. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”
According to the IRS, when a taxpayer successfully “mines” Bitcoin and has earnings from that activity whether in the form of Bitcoin or any other form, he or she must include it in his gross income after determining the fair market dollar value of the virtual currency as of the day you received it. If a bitcoin miner is self-employed, his or her gross earnings minus allowable tax deductions are also subject to the self-employment tax.
For more information, contact us!
Tips for taxpayers who make money from a hobby
Many people enjoy hobbies that are also a source of income. From painting and pottery to scrapbooking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.
If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity.
If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive. Contact us to learn more!
Tips to help taxpayers recognize tax scams
New versions of well-known tax-related scams appear every year…and 2019 is no different. No matter what time of year, taxpayers should be on the lookout for scams. Here are some things taxpayers should remember to help them spot scams and avoid becoming a victim.
The IRS does not leave pre-recorded, urgent or threatening messages.
In many versions of phone scams, potential victims are told if they do not call back, a warrant will be issued for their arrest. Other verbal threats include law-enforcement agency intervention, deportation and revocation of licenses.
Criminals can fake or “spoof” caller ID numbers to appear to be anywhere in the country. Scammers can even spoof an IRS office phone number, or the numbers of various local, state, federal or tribal government agencies.
Email phishing scams
The IRS does not initiate contact with taxpayers by email to request personal or financial information.
The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
There are special circumstances when the IRS will call or come to a home or business. These visits include times when a taxpayer has an overdue tax bill, a delinquent tax return, or a delinquent employment tax payment.
If a taxpayer receives an unsolicited email that appears to be a scam, they should report it to the IRS. They can forward the email message to firstname.lastname@example.org. They should not open any attachments, click on any links, reply to the sender, or take any other actions that could put them at risk.
Telltale signs of a scam
Taxpayers should remember that the IRS generally first mails a bill to a taxpayer who owes taxes. The IRS and its authorized private collection agencies will never:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments.
- Ask for checks to third parties. The IRS has specific instructions on how to pay taxes. All tax payments should only be made payable to the U.S. Treasury.
- Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
- Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
If a taxpayer receives a phone call, but doesn’t owe taxes and has no reason to think they do, they should:
- Hang up immediately.
- Contact the Treasury Inspector General for Tax Administration to report the call.
- Report the caller ID and callback number to the IRS by sending it to email@example.com.
- Report the call to the Federal Trade Commission.
If a taxpayer owes tax or thinks they do, they should:
- View tax account information online at IRS.gov to see the actual amount owed.
- Review their payment options.
- Call the number on any billing notice they receive or call the IRS at 800-829-1040.
- Remain on guard against scams and know that the IRS has a specific collection process.
Taxpayers should be on the lookout for new versions of these two scams
With scam artists hard at work all year, taxpayers should be on the lookout for a surge of evolving phishing emails and telephone scams.
Taxpayers should watch for new versions of two tax-related scams. One involves Social Security numbers related to tax issues. The other threatens taxpayers with a tax bill from a fictional government agency. Here are some details about these scams to help taxpayers recognize them:
The SSN scheme
- The latest twist includes scammers claiming to be able to suspend or cancel the victim’s Social Security number. This scam is similar to and often associated with the IRS impersonation scam.
- It is yet another attempt by con artists to frighten taxpayers into returning robocall voicemails.
- Scammers may mention overdue taxes in addition to threatening to cancel the taxpayer’s SSN.
Fake tax agency
- This scheme involves a letter threatening an IRS lien or levy.
- The scammer mails the letter to the taxpayer.
- The lien or levy is based on bogus overdue taxes owed to a non-existent agency.
- The fake agency is called the “Bureau of Tax Enforcement.” There is no such agency.
- The lien notification scam also likely references the IRS to confuse potential victims into thinking the letter is from a legitimate agency.
Both these schemes show classic signs of being scams. The IRS and its Security Summit partners – the state tax agencies and the tax industry – remind everyone to stay alert to scams that use the IRS or reference taxes. Being alert is especially important in late spring and early summer as tax bills and refunds arrive.