Taxpayers Who Receive an IRS Notice

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Baldwin NY Tax Preparation service Pat Tax Inc. and Patrick White, Enrolled Agent . Please feel free to contact us with any questions or concerns.

Read Taxpayers Who Receive an IRS Notice Here

Tips for Taxpayers Who Receive an IRS Notice
Receiving a notice from the Internal Revenue Service is usually no cause for alarm. Every year the IRS sends millions of letters and notices to taxpayers. In the event one shows up in the mailbox, here are ten things you should know.

Don’t panic. Many of these letters can be dealt with very simply.
Don’t ignore it. Most of these letters have a “reply by” date. Inaction can lead to additional interest and penalties or more aggressive action from the IRS.
Call your tax professional. Your tax professional is available to help you, is familiar with your situation, and has experience dealing with the IRS. Utilize his or her expertise. He or she will generally want to see a copy of the letter to determine the next course of action. Some letters can be resolved simply by having you contact the IRS directly. Other, more complicated issues may require you to sign Form 2848, power of Attorney and Declaration of Representative, to allow your tax professional to deal with the IRS on your behalf.
There are a number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account, or request additional information. The notice you receive normally covers a very specific issue about your account.
Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
If you receive a notice about a correction to your tax return, you should review the correspondence and compare it with the information on your return.
If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
If you do not agree with the correction the IRS made, it is important that you respond as requested. Respond to the IRS in writing to explain why you disagree. Be courteous and respectful. Include any documents and information you wish the IRS to consider,
along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left corner of the notice. Allow at least 30 days for a response from the IRS.
Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. When you call, have a copy of your tax return and the correspondence available.
Keep copies of any correspondence with your tax records. As with any tax issue, contact your tax professional to help you navigate your own unique situation.

Read Taxpayers Who Receive an IRS Notice Here

Any accounting, business or tax advice contained in the Tax E Man Blog or www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax, Inc. would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

The Tax E Man Blog, along with our website http://www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax, Inc. . Please feel free to contact us with any questions or concerns.

Read Taxpayers Who Receive an IRS Notice Here

Services We Provide Include
Income Tax Preparation for individuals and small businesses
Electronic filing of all Federal and State returns with direct deposit of refunds
Scheduled electronic payment of balance due
Income Tax Consulting
IRS Tax Representation
Preparation of Delinquent Tax Returns
Amended Tax Returns

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Identity Theft and Your Taxes

Identity Theft and Your Taxes

Your identity and money can be stolen in a tax-related scam via email (“phishing”), fax, phone, or letters. Some recent examples of identity theft scams are:

Refund scam. A bogus email, claiming to come from the IRS, tells you that you are eligible to receive a tax refund for a given amount if you just follow the instructions
in the email.
Inherited funds, lottery winnings, and cash consignment scams. A bogus email, claiming to come from the U.S. Department of the Treasury, notifies you that you
will receive millions of dollars if you follow the instructions in the email. This may be a multi-step scheme that includes instructions for you to deposit taxes on
the funds before they can be paid out or the issuance of a phony check on which you must pay 10% tax before the check can be deposited.
EFTPS scam. A bogus email, claiming to come from the IRS, contains a realistic-looking screenshot of the IRS website with a message about fraud attempts regarding your bank account. The email states that the bank account can be unblocked if you just click a link and provide information. EIN scam. A bogus fax, claiming to be from the IRS, informs you that you have failed to submit required bank account details. You are asked to fax back a form that requests your EIN, bank information, and officer signatures.

Read 2016 Identity Theft and Your Taxes Here

Notify the IRS
If you receive a tax-related phishing email, do not click on the links or open any attachments. Forward the email to phishing@irs.gov or call the IRS at 800-829-1040.

Read 2016 Identity Theft and Your Taxes Here

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Consumer Credit-Protection and Management

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Victims of Credit Card Fraud or Identity Theft

Report the crime to the police immediately. Get a copy of the police report or case number. Credit card companies, the bank, or insurance companies may ask for the reference to verify the crime.
Immediately contact the credit card issuers. Get replacement cards with new account numbers and ask that the old account be processed as “account closed at consumer’s request” for credit record purposes. Follow up with a letter to the credit card company that summarizes the request in writing.
Call the fraud units of the three credit reporting bureaus to report the theft. Ask that the accounts be flagged. Also, add a victim’s statement to the report requesting contact to verify future credit applications

Read 2016 Consumer Credit Here

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Cancellation of Debt — Insolvency, Is it Taxable?

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Baldwin NY Tax Preparation service Pat Tax Inc. and Patrick White, Enrolled Agent . Please feel free to contact us with any questions or concerns.

Cancellation of Debt — Insolvency

Taxpayers with cancelled debt can often exclude the cancellation of debt income to the extent they were insolvent immediately before the cancellation. If a cancelled debt is excluded from income, it is nontaxable.

Cancellation of Debt

Cancellation of debt (COD) is settlement of a debt for less than the amount owed. A debt may be cancelled by a lender voluntarily or through bankruptcy or other legal proceedings and may result in ordinary income, income from the sale of assets, or both.

Read Cancellation of Debt – Insolvency 2016 here

Cancelled Debt Situation	Tax Treatment
Debt owed by a taxpayer is cancelled or forgiven.	Amount cancelled or forgiven is generally taxable as ordinary income from cancellation of debt.
Property that is security for a debt is taken by the lender in full or partial satisfaction of that debt.	The transaction is treated as a sale of the property, which may result in a gain or loss.
Property that is security for a debt is taken by the lender, and lender cancels recourse debt in excess of FMV of property taken.	Excess of cancelled debt over FMV is ordinary income from cancellation of debt, in addition any gain or loss from the sale.
Cancelled debt is intended as gift.	Amount cancelled is not income.*

*Gift tax may apply.

Form 1099-C, Cancellation of Debt

If a lender cancels or forgives a debt of $600 or more, it must provide the borrower with Form 1099-C, showing the amount of cancelled debt to be reported as income. Generally, individual taxpayers must include all cancelled amounts, even if less than $600, as Other Income on line 21, Form 1040.

Read Cancellation of Debt – Insolvency 2016 here

Any accounting, business or tax advice contained in the Tax E Man Blog or http://www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

Read Cancellation of Debt – Insolvency 2016 here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Prepare Now to Avoid Surprises at Tax-Time Next Year

Even though April 18th marked the end of tax filing season, you still have time to act so you aren’t surprised at tax-time next year. You should take steps now to avoid overpaying your taxes. Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:

Adjust your withholding. If you’re an employee and you think that your tax withholding will fall short of your total 2016 tax liability, you may be able to avoid an unexpected tax bill by increasing your withholding. If you are having too much tax withheld, you may get a larger refund than you expect. In either case, you can complete a new Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Enter the added amount you want withheld from each paycheck until the end of the year on Line 6 of the W-4 form. You usually can have less tax withheld by increasing your withholding allowances on line 5. You can use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.

Report changes in circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may receive advance payments of the premium tax credit in 2016. It is important that you report changes in circumstances to your Marketplace so you get the proper type and amount of premium assistance. Some of the changes that you should report include changes in your income, employment, or family size. Advance credit payments help you pay for the insurance you buy through the Marketplace. Reporting changes will help you avoid getting too much or too little premium assistance in advance.

Change taxes with life events. You may need to change the taxes you pay when certain life events take place. A change in your marital status or the birth of a child can change the amount of taxes you owe. When they happen you can submit a new Form W–4 at work or change your estimated tax payment.

Be accurate on your W-4. When you start a new job you fill out a Form W-4. It’s important for you to accurately complete the form. For example, special rules apply if you work two jobs or you claim tax credits on your tax return. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.

Pay estimated tax if required. 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, 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 the tax four times a year.

We can discuss with you the tax effects of any changes in income anticipated for the coming year, to help eliminate the guesswork involved with figuring out what your tax situation will be in future years.

Pat Tax can make recommendations for changing withholding at work to help put you in the position you want to be in when it comes time to file next year’s return.

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Month: April 2016

Taxpayers Who Receive an IRS Notice

Identity Theft and Your Taxes

Consumer Credit-Protection and Management

Cancellation of Debt — Insolvency, Is it Taxable?

Prepare Now to Avoid Surprises at Tax-Time Next Year

“Empowering clients through education, a stress free transaction and an excellent service experience”

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