Author Archives: Patrick LeClaire

About Patrick LeClaire

After 15 years in corporate finance and Tax Preparation, I formed a company as an Enrolled Agent. I insist on superior customer service and the highest standards available as I embark on a journey to resolve one case at a time at New Life Tax Resolution.

What Exactly are My Rights When It Comes to the IRS?

Almost 20 years have gone by since the passage of the Taxpayer Bill of Rights. Today it is now codified into the Internal Revenue Code.

Numerous complaints made their way to Congress of abusive behavior by IRS Agents. Because of the hard work, and courageous effort by numerous people and organizations the Bill of Rights survives today.

What is a little surprising are the numbers of taxpayers who don’t realize they have rights and this is evident when faced with an IRS tax controversy.

I have reproduced your Taxpayer Bill of Rights. Understand you have them and when you need to remind the IRS, contact me at 407-287-6638.

  1. The Right to Be Informed.

Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.

  1. The Right to Quality Service.                                                                                            

Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.

  1. The Right to Pay No More than the Correct Amount of Tax.

Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.

   4.  The Right to Challenge the IRS’s Position and Be Heard.

Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.

   5. The Right to Appeal an IRS Decision in an Independent Forum.

Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.

  1. The Right to Finality.

Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.

  1. The Right to Privacy.

Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.

  1. The Right to Confidentiality.

Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.

  1. The Right to Retain Representation.

Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

  1. The Right to a Fair and Just Tax System.

Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

At New Life Tax Resolution we believe that exercising taxpayer rights are fundamental to a favorable outcome to a tax controversy. If you want to learn more about how to resolve your own tax case pick up a copy of my book Taxation with Representation. Call Patrick LeClaire @ 407-287-6638, I can help you end your IRS troubles.

 

Money Management Corner: Always Pay Yourself First.

I live by these words; “Pay Yourself First”. They are the foundation of wealth accumulation. The logic is quite easy to understand. If you pay everyone else before you pay yourself the most probable outcome will be the absence of any money left to pay yourself.

After getting up close and personal with the finances of hundreds of different business owners—all with definite money habits and philosophies—I can safely say that there are 5 different money personalities.  We all know people that fall into these categories and, as a professional who helps people to keep more money in their pockets, I can tell you that identifying your own personality and your relationship with money is critical to building wealth in ways that feel “safe.”  Let’s take a look at the 5 different money personalities to see if you can spot yourself.

The Saver is great at putting money away, but not great at enjoying life along the way. They find it difficult to spend money and focus on reduction—cutting back and sacrificing—as a method for building wealth. They also focus more on worry and scarcity than abundance and production, and this leads to stunted business growth.

A good way for the saver to overcome self-sabotage is to allocate a percentage of their income—maybe 3 percent – to spend guilt-free.  This a lesson I needed to learn. More important when you have a family who is impacted with this philosophy.

The Spender gets into debt very easily. They are focused on enjoying life, not just at any cost, but at all costs. I can always tell when I’m working with a spender because they typically have 5-10 credit cards with 12 other loans and little savings. They tend to fund their consumptive expenses with credit cards, which is a recipe for going into debt.

If you are a spender, I recommend reading The Richest Man in Babylon. Pay special attention to paying yourself first. Set 10-15 percent of your income aside before you pay your bills, and then don’t touch it for consumptive expenses. You can spend every penny of the rest of your paycheck but putting that first 10-15 percent away every month will lead you to wealth.

The Avoider doesn’t want to pay attention to money. Money is a source of frustration for them, so they avoid looking at it.

The best thing an avoider can do is to find someone to keep themselves accountable. That might be a business partner, a supportive spouse with a different personality, or fostering a great relationship with their CPA.

The Giver enjoys helping others and being charitable. Many times this comes from a belief system that if they have too much money, then others don’t have enough, which economists refer to as the Fixed-Pie Fallacy.

Being generous and charitable can be a strength, but it can work against the giver and impact their finances. It’s a good idea for Givers to focus on getting their finances set before they start giving – and once their finances are stable automatically transfer a set percentage of money into a designated account each month. This money can then be given away without undermining the Giver’s own finances.

My Company focuses on resolving tax controversery for companies and individuals. We are here if you recieve a letter or notice from the IRS or state revenue dept saying you owe back taxes. Tax liabilities can be expensive because the IRS makes it extremely expensive to owe them. I can help by getting the IRS off your back giving us time to work out a proper settlement.

Call New Life Tax Resolution at 407-287-6638 and ask for Parick LeClaire. My exerience is here to benefit you, your business and your family.

Loan Corner: Term Loans and How to Use Them…

You or your business needs an infusion of fresh cash to keep the business or family on solid ground.  The next question would be; where to obtain the financing.

One of the biggest challenges for anyone is understanding what financial options are open to you when you suddenly need a little extra money.  Some folks will break out the savings account, pull some money from an IRA or 401(k) and take the tax consequences, or bite the bullet by using a credit card.

A lot of people forget about a simple term loan from a local bank.  Why?  Plenty of reasons, but a lot of the issues arose from years past – higher interest (back when interest rates really were high), strict repayment guidelines, and a long, drawn out approval process are, today, non-issues.

So what, exactly, is a term loan?  In the simplest of terms, a term loan is a lump sum borrowed from a lender and paid off at certain intervals over a set period of time.  Term loans are typically paid back on a bi-weekly or monthly basis, over a period of one to five years.  If you’ve bought a car or a house, you’re probably at least a little familiar with term loans.

The basic mechanics of term loans are simple: Once the application is approved and the offer is agreed upon, the borrower receives the loan, or “principal” amount as a lump sum upfront (minus any fees charged by the lender). The borrower is then responsible for repaying the principal amount in full over the term period, plus interest.

There are two key terms to know that will help you to better understand the cost of a term loan: the interest rate and the annual percentage rate (APR.)

The interest rate is the percentage of the principal amount that the lender charges you to take out the loan. Interest rates can vary from loan to loan, and that variance generally can be understood as a reflection of the loan’s riskiness to the lender.

Interest rate alone won’t tell you the full story, however. The APR is a more effective tool for getting a holistic view of the loan’s total cost. The APR reveals the bottom line of what the loan will actually cost you each year by tallying up the average of the total interest you will pay, including fees and service charges.

Pros and cons of term loans

-Lower interest rates: Term loans are offered at lower interest rates compared to other shorter-term financing options.

-Straightforward budgeting: Term loans are repaid in fixed amounts on a regular basis, so it’s simple to project the required budget for the duration of the loan period.

Term loans have a few different requirements that may not be ideal for all borrowers, including:

-Requires a guarantee: There’s always risk involved in borrowing capital, as most lenders require the borrowers personal guarantee to repay a term loan.

-Requires good credit: Lenders will check your personal financial history and credit score when you apply for a loan.

-Requires demonstrated income: Lenders will also require a demonstrated history of income in order to assess your qualifications for a loan—usually around two years’ worth of financial history.

The general principle you should have in mind when considering whether or not a term loan is right for you is, “Will the solution the loan provides me outpace the APR I expect to repay over the term period?”

There are a lot of different ways to find funding for financial shortcomings, and a term loan isn’t always the right answer – on the other hand, it can often be a competitive way to get the money you need quickly and easily and have, depending on the loan, a tax write off in the process.

New Life Tax Resolution is here for you.

Need a Team to solve a Federal or state tax controversy? Give me a call: Patrick LeClaire at 407-287-6638. I will make every effort to solve your issues. If you choose to go solo,  point you in the right direction.

Team Corner: Sucessfully Lead In Your Own Company

Are you part of the team, or do you lead it?  For small businesses with a small staff, the answer is often “both.”  That becomes a challenge when aspects of one role come into conflict with the other.  Being a member of the team can make it awkward to take charge. But as long as you sign the checks, it’s important to maintain your identity as the leader, even when you’re also a hands-on member of the team.  Here are three tips to help you wear both hats more effectively.

  1. Balance visibility and blending in

“We know that leaders need to be seen by followers—from formal presentations and announcements, to a crisis, to simple ‘managing by walking around,'” writes Brian Evje for Time Business. “The less-obvious occasions, however, are easily overlooked. They can be lost opportunities, or powerful expressions of leadership.” Bearing unpopular news and mediating disputes are occasions when it should be clear who is in charge, but at the same time, great leaders also know how to blend into the team.  In the case of mediation or training, you need to make it clear that even though you are the leader, the issue at hand is more critical.   Take a step back to make sure that your staff and team understands that they can bring you issues and challenges and get a real solution for them.

  1. Set the sense of purpose

A common sense of purpose is the core of any team.  Clearly setting and maintaining that mission marks you as the leader, even while you’re working elbow-to-elbow with employees.  Regardless of business type, your company’s purpose can and should be articulated to the team.  Sell machine parts?  Then you and your team are helping your customers to keep their equipment running.  The receptionist at an insurance company helps protect people from financial catastrophe.  Always take the time to clarify the big-picture importance of what your people – and make it a habit to teach them that importance from their first day on the job.  This will help them to stay focused and committed, even when the demands are great.

  1. Be right or be wrong, but be in charge

As a business owner, you are a leader.  As a result, you are expected to be right most of the time, but occasionally, guess what?  You’ll be wrong.  You need to own that and make sure that your team understands that you are human and, on occasion, will make mistakes.

Is there a “right” way to be wrong?  Yes!  Do your homework on the subjects and stay on top of the facts in any given area, but acknowledge that you don’t need to be an expert on a subject, that’s why you hire experts.  As one famous restaurant owner once said to his Executive Chef, “I don’t need to know how to cook the steak, I just need to know how YOU cook the steak!”  Manage your team’s expectations, show respect, and be happy you learned something on the (rare) occasion you’re wrong.

Each of these points is about creating and leading a team and balancing both leadership skills and your ability to be a team player.

New Life Tax Resolution is here for you.

Need a Team to solve a Federal or state tax controversy? Give me a call: Patrick LeClaire at 407-287-6638. I will make every effort to solve your issues. If you choose to go solo,  point you in the right direction.

Best Practices Corner: Handle your Business Credit Card to Win

Every year, as we prepare small business tax returns, we see some of the same mistakes with credit cards.  At the same time, for most small businesses, a credit card is an indispensable resource for managing procurement – after all, who can deny that a credit card, managed properly, allows many small companies the chance to:

  • Pay vendors quickly and easily
  • An easy way to purchase for the business on the spot
  • Easily manage your expenses against your cash flow
  • Most business credit cards offer perks and rewards that can add value to your business
  • Properly used, they can also improve your company’s business credit rating

While often seen as a necessity, business credit cards are not without risks. If you mishandle your company credit card, you could run into some real trouble.

  • It’s tempting to buy everything up front rather than waiting until you can afford it, which could leave you in deep debt
  • Credit card interest should be money in your pocket, not the bank’s
  • Bad credit card habits can have tax implications (failing to keep receipts, commingling funds, etc.)
  • Business credit cards aren’t covered by the same consumer protections as personal credit cards, which could increase your risk
  • Properly handled credit cards can help your credit rating, mishandled credit cards can damage it

In order to reap the benefits and reduce the risks of small business credit cards, follow these best practices:

Pay your full balance

Most business credit cards allow you zero interest as long as you maintain a zero balance each month. The day you allow your business to carry a balance, is the day you start paying interest. It can also make it harder to pay down the balance next month, which could lead to a slippery slope of growing credit card debt.

Pay on time

Miss the payment due date, and you’ll trigger a late fee in addition to the interest. On top of that, you’ll risk your interest rate going up and a ding on your credit. The remedy is to be organized. Don’t let your bills build up. Instead, establish a rhythm for paying bills. For example, designate every even-numbered Friday as a payday for any outstanding bills.

Do not commingle funds

As a business owner—especially if you’re a sole proprietorship—it can be tempting to use your business credit card for personal purchases. Commingling business and personal funds has the potential to negatively impact contracts and grants, cross ethical boundaries, make tax reporting difficult, or in some cases, may even be against the law. It’s sound business practice to avoid commingling funds altogether.

Keep it secure

With all the other things on your plate, do you really want to deal with credit card fraud, too? When not in use, be sure to keep your business credit card in a secure location. While it seems obvious, many small business owners forget that physical security of your office is important.

From an accounting perspective, I’ll have to admit, well-documented credit card usage is often easier to handle in tax preparation than bank statements.  Using your credit wisely and paying off each month’s debt on time can allow you to easily handle payments and procurement.  Even better?  Properly managed, you are effectively able to operate your business outside of regular cashflows, so you have, at least in theory, extra financial resources at your disposal each month to grow your business. You always have an emergency fund…………just in case.

NLTR says:

Don’t get caught by surprise by the IRS. Be Informed and prepared. If you receive a letter or notice from the IRS call New Life Tax Resolutions. We specialize in tax controvery. Our team is dedicated to resoving tax issues that arise in your business or individual life. Don’t run scared, run to the phone and call me Patrick LeClaire @407-287-6638.

Report Virtual Currency Transactions, IRS Reminds Taxpayers.

Virtual currency transactions are taxable by law just like transactions in any other property.  The Internal Revenue Service has once again reminded taxpayers that income from virtual currency transactions is reportable on their income tax returns.

Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest. (Call New Life Tax Resoutions @407-287-6638)

In extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.

Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency. There are currently more than 1,500 known virtual currencies. Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.

In an IRS notice: provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.
  • Payments using virtual currency made to independent contractors and other service providers are taxable, and self-employment tax rules generally apply.  Normally, payers must issue Form 1099-MISC.
  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2 and are subject to federal income tax withholding and payroll taxes.
  • Certain third parties who settle payments made in virtual currency on behalf of merchants that accept virtual currency from their customers are required to report payments to those merchants on Form 1099-K, Payment Card and Third Party Network Transactions.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.

Don’t get caught by surprise by the IRS. Be Informed and prepared. If you receive a letter or notice from the IRS call New Life Tax Resolutions. We specialize in tax controvery. Our team is dedicated to resoving tax issues that arise in your business or individual life. Don’t run scared, run to the phone and call me Patrick LeClaire @407-287-6638.

Tax Corner: What are the biggest tax benefits to business owners?

Shoeboxes filled with receipts, lost documents, and wild-eyed business owners who forgot to send out a 1099 or file a W3 all pepper tax accountants  with questions. This year, with the passing of the new tax law, those questions got a lot harder to answer and they started much earlier.

Pundits like to talk about April 15th, but March is when the real excitement usually hits.

In honor of that , we’ve spent a lot of time looking at the different tax breaks that are available to businesses and in this issue, we’ve decided to make our own list of the ones that may have the biggest benefit to business owners for 2017. The way we see it, anyone who was feeling optimistic about getting a return would have filed as soon as possible so if you’re just now getting around to filing, you need all the help you can get. Think extension?

Here’s a few ways that business owners and entrepreneurs can still keep more money in their pockets – and, of course – if you have questions about how these can work in your favor, NOW is the time to ask them! With all the talk about how the Tax Bill affects everyone, we’re concentrating on the fact that so many of our clients fall into the middle class when it comes right down to it – and these are virtually guaranteed to give you a hand when you get ready to file this year.

Retirement Savings – Anyone with earned income (meaning income from work rather than investments) can contribute to a traditional IRA, but not everyone who contributes can claim a tax deduction. That’s a no-no for the rich if they’re covered by a retirement plan at work.

Here’s how the deduction rules operate for traditional IRAs: First, there’s a limit on how much you can contribute each year—$5,500 ($6,500 if you’ll be at least 50 years old by the end of the year) or 100% of your earned income, whichever is less. If you’re not enrolled in a 401(k) or some other workplace retirement plan, you can deduct your IRA deposits no matter how high your income. But if you’re enrolled in such a plan, the right to the IRA deduction is phased out as 2017 income rises between $62,000 and $72,000 on a single return or between $99,000 and $119,000 if you’re married and file jointly with your spouse. The limits only apply if one spouse participates in an employer plan. If neither does, there are no income limits for taking a deduction.

One bit of really good news that is often neglected – Spouses with little or no earned income can also make an IRA contribution of up to $5,500 ($6,500 if 50 or older) as long as the other spouse has sufficient earned income to cover both contributions. For 2017, the contribution is tax-deductible as long as income doesn’t exceed $186,000 on a joint return. You can take a partial tax deduction if your combined income is between $184,000 and $194,000.

Capital Gains – For most people, long-term capital gains (and qualified dividends) are taxed at 15% or 20%—a bargain by historical standards.

That’s why some people get so exercised about a rule that allows hedge-fund managers to pay tax at the capital-gains rate rather than at rates for ordinary income, which top out at 39.6% (for 2017) and 37% (for 2018).

But investors in the two lowest income tax brackets pay no tax at all on their capital gains and dividends. That could be a boon to retirees, who have a higher standard deduction than younger taxpayers and who are not taxed on some or all of their Social Security benefits, and the unemployed, who may have had to tap their investments to make ends meet.

To take advantage of the 0% capital-gains rate for 2017, your taxable income can’t exceed $37,950 if you are single; or $75,900 if you are married filing jointly. Note that this is taxable income. That’s what’s left after you subtract personal exemptions—worth $4,050 each in 2017 for you, your spouse and your dependents—and your itemized deductions or standard deduction from your adjusted gross income.

For 2018, the 0% rate for long-term gains and qualified dividends will apply for taxpayers with taxable income under about $38,600 on individual returns and about $77,200 on joint returns.

The “American Opportunity” Tax Credit –  For a lot of our clients that own their own business, they’ve got older children who are enrolled in college.  This tax credit is available for up to $2,500 of college tuition and related expenses (but not room and board) paid during the year. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less ($160,000 or less for married couples filing a joint return). Single taxpayers with MAGI above $90,000 and married couples with MAGI above $180,000 are ineligible for the credit.

The American Opportunity Credit covers all four years of college. And if the credit exceeds your tax liability (whether derived from the regular income tax or the alternative minimum tax), up to 40% of it is refundable. For example, suppose you owe $1,900 in federal taxes and qualify for the full credit. The nonrefundable portion of the credit will reduce your tax bill to $400, and the first $400 of the refundable portion will lower your bill to zero. You’ll receive the remaining $600 as a tax refund.

…And here some other ones!

The Lifetime Learning Credit – This is another tidy little bit for business owners and entrepreneurs who are going back to school to “keep the saw sharp”.  If you want to get additional education—for virtually any reason and at virtually any school—you can tap the Lifetime Learning Credit. The credit is calculated as 20% of up to $10,000 of qualified expenses, so you can get back $2,000 per year.

The income limits for the Lifetime Learning Credit are $65,000 if single and $130,000 if married, and you can’t claim both this credit and the American Opportunity Credit for the same student in the same year. Also, no double dipping allowed: Expenses paid with funds from other tax-favored tuition programs, such as a Coverdell ESA, don’t count when figuring either credit.

Just In Case – If neither the American Opportunity Credit nor the Lifetime Learning Credit works for you, there are still other ways the government offers favorable tax treatment for learning—and limits the breaks to the middle class and below.

1) Got a student loan around your neck? You can deduct up to $2,500 of interest paid on the loan each year, so long as your modified adjusted gross income (MAGI) is less than $80,000 ($160,000 if filing a joint return). The former student can deduct this even if it’s actually Mom and Dad who are paying the bill.

2) Interest on savings bonds is usually subject to federal income tax. However, interest on Series EE and I bonds issued after 1989 can be tax-free when used to pay for qualified education expenses, if you meet certain requirements. This benefit phases out gradually as your 2017 MAGI rises between $117,250 and $147,250 for those filing jointly, and between $78,150 and $93,150 for singlefilers. Important note: If you’re using savings bonds to pay for a child’s education, the bonds must be in your name to qualify for the exclusion. Savings bonds in the child’s name aren’t eligible.

Expensing At Home – Business owners—including those who run businesses out of their homes—have to stay on their toes to capture tax breaks for buying new equipment. The rules seem to be constantly shifting as Congress writes incentives into the law and then allows them to expire or to be cut back to save money. Take “bonus depreciation” as an example. Back in 2011, rather than write off the cost of new equipment over many years, a business could use 100% bonus depreciation to deduct the full cost in the year the equipment was put into service. For 2013, the bonus depreciation rate was 50%. The break expired at the end of 2013 and stayed expired until the end of 2014 … when Congress reinstated it

retroactively to cover 2014 purchases. Then, the provision expired again … but near the end of 2015, Congress revived the break. The 50% bonus applies for property purchased in 2017, too.

Perhaps even more valuable, though, is another break: supercharged “expensing,” which basically lets you write off the full cost of qualifying assets in the year you put them into service. This break, too, has a habit of coming and going. But as part of the 2015 tax law, Congress made the expansion of expensing permanent. For 2017, businesses can expense up to $500,000 worth of assets. The half-million-dollar cap phases out dollar for dollar for firms that put more than $2 million worth of assets into service in a single year.

Business Owners and Social Security Taxes – This doesn’t work for employees. You can’t deduct the 7.65% of pay that’s siphoned off for Social Security and Medicare. But if you’re self-employed and have to pay the full 15.3% tax yourself (instead of splitting it 50-50 with an employer), you do get to write off half of what you pay. That deduction comes on the face of Form 1040, so you don’t have to itemize to take advantage of it.

Retiring?  Check these out…

Waiver of Penalty for the Newly Retired – This isn’t a deduction, but it can save you money if it protects you from a penalty. Because our tax system operates on a pay-as-you earn basis, taxpayers typically must pay 90% of what they owe during the year via withholding or estimated tax payments. If you don’t, and you owe more than $1,000 when you file your return, you can be hit with a penalty for underpayment of taxes. The penalty works like interest on a loan—as though you borrowed from the IRS the money you didn’t pay. The current rate is 3%.

There are several exceptions to the penalty, including a little-known one that can protect taxpayers age 62 and older in the year they retire and the following year. You can request a waiver of the penalty—using Form 2210—if you have reasonable cause, such as not realizing you had to shift to estimated tax payments after a lifetime of meeting your obligation via withholding from your paychecks.

Amortizing Bond Premiums – If you purchased a taxable bond for more than its face value—as you might have to capture a yield higher than current market rates deliver—Uncle Sam will effectively help you pay that premium. That’s only fair, since the IRS is also going to get to tax the extra interest that the higher yield produces.

You have two choices about how to handle the premium.

You can amortize it over the life of the bond by taking each year’s share of the premium and subtracting it from the amount of taxable interest from the bond you report on your tax return. Each year you also reduce your tax basis for the bond by the amount of that year’s amortization.

Or, you can ignore the premium until you sell or redeem the bond. At that time, the full premium will be included in your tax basis so it will reduce the taxable gain or increase the taxable loss dollar for dollar.

The amortization route can be a pain, since it’s up to you to both figure how each year’s share and keep track of the declining basis. But it could be more valuable, since the interest you don’t report will avoid being taxed in your top tax bracket for the year—as high as 43.4%, while the capital gain you reduce by waiting until you sell or redeem the bond would only be taxed at 0%, 15% or 20%.

If you buy a tax-free municipal bond at a premium, you must use the amortization method and reduce your basis each year . . . but you don’t get to deduct the amount amortized. After all, the IRS doesn’t get to tax the interest.

Remember New Life Tax Resolution is here to help you resolve the confusion and bring peace bachk into your life so you can get on with your business and personal life. Call me Patrick LeClaire Enrolled Agent at 407-287-6638 for a review of your tax case.

Scams Targeting Taxpayers : IRS Urges Taxpayers to Watch Out

Thousands of people have lost millions of dollars and their personal information to tax scams. Scammers use the regular mail, telephone, or email to set up individuals, businesses, payroll and tax professionals.

The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. Recognize the telltale signs of a scam.

Scams Targeting Taxpayers

Scam Alert: IRS Urges Taxpayers to Watch Out for Erroneous Refunds; Beware of Fake Calls to Return Money to a Collection Agency

The Internal Revenue Service recently warned taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. The IRS also offer a step-by-step explanation for how to return the funds and avoid being scammed.

The IRS issued this additional warning about the new scheme after discovering more tax practitioners’ computer files have been breached. In addition, the number of potential taxpayer victims jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division will continue its investigation into this scheme.

These criminals have a new twist on an old scam. After stealing client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers’ real bank accounts for the deposit.

Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.

IRS-Impersonation Telephone Scams

A sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be IRS employees, using fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.

Victims are told they owe money to the IRS and it must be paid promptly through a gift card or wire transfer. Victims may be threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn’t answered, the scammers often leave an “urgent” callback request.

Some thieves have used video relay services (VRS) to try to scam deaf and hard of hearing individuals. Taxpayers are urged not trust calls just because they are made through VRS, as interpreters don’t screen calls for validity.

Limited English Proficiency victims are often approached in their native language, threatened with deportation, police arrest and license revocation, among other things. IRS urges all taxpayers caution before paying unexpected tax bills.

Note that the IRS doesn’t:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand payment without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone.

Scams Targeting Tax Professionals

Increasingly, tax professionals are being targeted by identity thieves. These criminals – many of them sophisticated, organized syndicates – are redoubling their efforts to gather personal data to file fraudulent federal and state income tax returns.

Recent scams targeting the tax professional community include:

  • Tax Professionals Urged to Step Up Security as Filing Scheme Emerges
  • Tax Professionals Warned of e-Services Scam.
  • Tax Professionals Warned of New Scam to “Unlock” Tax Software Accounts.
  • A phishing scheme mimicking software providers targets tax professionals.
  • Criminals target tax professionals to steal data such as PTINs, EFINs or e-Service passwords.
  • Bogus email asks tax professionals to update their IRS e-services portal information and Electronic Filing Identification Numbers (EFINs).

Soliciting Form W-2 information from payroll and human resources professionals.

The IRS has established a process that will allow businesses and payroll service providers to quickly report any data losses related to the W-2 scam currently making the rounds. If notified in time, the IRS can take steps to prevent employees from being victimized by identity thieves filing fraudulent returns in their names. There also is information about how to report receiving the scam email.

Report these schemes:

  • Email dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type “W2 Data Loss” so that the email can be routed properly. Do not attach any employee personally identifiable information.
  • Email the Federation of Tax Administrators at StateAlert@taxadmin.org to learn how to report victim information to the states.
  • Businesses/payroll service providers should file a complaint with the FBI’s Internet Crime Complaint Center (IC3.gov). Businesses/payroll service providers may be asked to file a report with their local law enforcement.
  • Notify employees so they may take steps to protect themselves from identity theft. The FTC’s www.identitytheft.gov provides general guidance.
  • Forward the scam email to phishing@irs.gov.

Employers are urged to put protocols in place for the sharing of sensitive employee information such as Forms W-2. The W-2 scam is just one of several new variations that focus on the large-scale thefts of sensitive tax information from tax preparers, businesses and payroll companies.

Tax professionals who experience a data breach also should quickly report the incident to the IRS.

Surge in Email, Phishing and Malware Schemes

Phishing (as in “fishing for information”) is a scam where fraudsters send e-mail messages to trick unsuspecting victims into revealing personal and financial information that can be used to steal the victims’ identity.

The IRS has issued several alerts about the fraudulent use of the IRS name or logo by scammers trying to gain access to consumers’ financial information to steal their identity and assets.

Scam emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. These phishing schemes may seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

Be alert to bogus emails that appear to come from your tax professional, requesting information for an IRS form. IRS doesn’t require Life Insurance and Annuity updates from taxpayers or a tax professional. Beware of this scam.

Variations can be seen via text messages. The IRS is aware of email phishing scams that include links to bogus web sites intended to mirror the official IRS web site. These emails contain the direction “you are to update your IRS e-file immediately.” These emails are not from the IRS.

The sites may ask for information used to file false tax returns or they may carry malware, which can infect computers and allow criminals to access your files or track your keystrokes to gain information.

Unsolicited email claiming to be from the IRS, or from a related component such as EFTPS, should be reported to the IRS at phishing@irs.gov.

Fraudsters Posing as Taxpayer Advocacy Panel

Some taxpayers receive emails that appear to be from the Taxpayer Advocacy Panel (TAP) about a tax refund. These emails are a phishing scam, trying to trick victims into providing personal and financial information. Do not respond or click any link. If you receive this scam, forward it to phishing@irs.gov and note that it seems to be a scam phishing for your information.

TAP is a volunteer board that advises the IRS on systemic issues affecting taxpayers. It never requests, and does not have access to, any taxpayer’s personal and financial information.

Additional Recent Tax Scams

Email Scam Targeting Hotmail Users

FBI Themed Ransomware Scam

Last-Minute Email Scams

Fictitious “Federal Student Tax” scam targeting students and parents and demanding payment.

Automated calls requesting tax payments in the form of iTunes or other gift cards

 Pretending to be from the tax preparation industry

 You should report instances of IRS-related phishing attempts and fraud to the Treasury Inspector General for Tax Administration at 800-366-4484.

What Could Go Wrong if I Don’t Resolve My Tax Issue? War Stories

It never ceases to amaze me that so many people end up in jail for improper and criminal behaviour related to tax preparation and payment of taxes. A person or company that will  persistently and continuously misbehave and ignore all the warning signs, seem to be surprised when the justice dept comes knocking on their door.

Here are a few for your reading enjoyment:

Case of “Bad Tax Prep”: Tax Preparer Evelyn Johnson, 56, has been sentenced to 18 months in prison following her conviction for 29 counts of aiding and assisting in the preparation of false federal returns.

Johnson operated the E.J. Johnson Tax Service, which offered “refund guarantee” and where an IRS undercover agent was sent to have her taxes prepared after the service detected a potential pattern of fraudulent returns. Johnson prepared a false return for the agent that falsified Schedule A deductions.

The tax loss to the U.S. was established to exceed $769,000.

Doctor you forgot to pay your Taxes: Dr. Nicholas Garritano, 55, has been sentenced to six months in jail and ordered to pay $105,673 after failing to pay over Social Security, Medicare and employment taxes collected from his employees.

During 11 quarters spanning 2009 through 2012, Garritano was president and sole shareholder of the corporation Dr. N.M. Garritano Inc., and was responsible for the corporation’s business and financial operations. He caused the corporation to pay taxable wages and salaries to its employees, from which federal income and FICA taxes were withheld, according to court documents.

Garritano, who previously pleaded guilty in the case, filed quarterly federal forms on behalf of the corporation relating to the employment taxes. Although the corporation withheld substantial employment taxes from the wages of its employees for each quarter, he failed to pay over the full amount of the withheld taxes to the IRS, according to court documents.

Call my CPA: Former CPA Mark Beckham, 62, has been sentenced to 36 months in prison for obstructing the administration of the internal revenue laws.

Beckham, found guilty in September of one felony count of attempting to interfere with the administration of the internal revenue laws, had his license to practice as a CPA revoked after a federal mail fraud conviction in 2006.

Evidence showed that Beckham prepared 2009 and 2010 individual and corporate federal income tax returns for a client that were subsequently audited by the IRS. During this audit, Beckham provided his client’s dayplanner calendar to the IRS after altering the book to reflect that Beckham’s client worked for a company that had large tax losses. In fact, Beckham’s client had not worked for the company. The dayplanner was given to the IRS to support deductions for non-passive losses on the returns Beckham prepared for his client.

She makes the IRS sick: Business owner Maria Larkin, 55, has been sentenced to a year and a day in prison for evading payment of employment taxes and penalties.

According to evidence. Larkin owned and operated Five Star Home Health Care Inc. and was responsible for collecting and paying over income, Social Security, and Medicare tax withheld from her employees’ wages. From 2004 through 2009, Larkin did not pay over to the IRS the employment taxes she withheld and the IRS assessed trust fund recovery penalties against Larkin for these years.

Larkin concealed her assets and income to evade paying the penalties and to obstruct the IRS’s efforts to collect the outstanding taxes. She lied to the IRS regarding her ability to pay, changed the name of her business, placed her business in the name of a nominee, had her employees cash checks for her and bought a home in the name of a nominee.

She evaded more than $1.6 million in taxes.

Larkin was also sentenced to three years of supervised release and ordered to pay $1,153,633.50 in restitution to the IRS.

She spelled her name correctly: Preparer Marie E. Sherrill, 57, has been sentenced to four years in prison for wire fraud and tax fraud.

According to court documents, Sherrill operated a bookkeeping and prep business under the name Sherrill Financial Services. Between January 2011 and December 2014, Sherrill prepared false returns for her clients containing false deductions to inflate refunds, which caused a loss to the IRS of some $255,900.

Sherrill also used the intimate financial knowledge she gained from her clients to identify victims she could lure into an investment fraud scheme. She told victims of this scheme that their money would be put into “pooled investments” with the money of other investors to earn a high rate of return.

The money was, in fact, never put into any investment, but was used instead to pay Sherrill’s personal expenses or to make lulling payments to earlier investors in order to make them believe their money was earning a profit. The victims were defrauded of at least $1.3 million.

She was ordered to pay more than $1.3 million to the victims and $255,900 to the IRS.

 

I was a teacher: Preparer Tawanda Denise Pitt has pleaded guilty to filing a false claim for refund with the IRS.

According to documents and court information, in early 2015 Pitt managed the prep business Integritax and falsified client returns with false dependents and education credits and fake businesses to seek refunds. Pitt also admitted that she trained other preparers to file fraudulent returns.

She caused a tax loss of $550,000 to $1.5 million; the total tax loss resulting from false education credits alone exceeded $780,000.

Sentencing is May 8, when Pitt faces a maximum of five years in prison, a period of supervised release and monetary penalties. She also agreed to pay $203,106 in restitution to the IRS.

Local resident Durand Micheau, 48, has been sentenced to 114 months in prison on convictions connected to a scheme to defraud the IRS.

A family affair: Micheau was convicted in May 2017 on numerous counts of conspiracy, mail fraud, aggravated ID theft and engaging in illegal monetary transactions. Micheau’s wife, Sharon Gandy-Michaeu, and two of her brothers, Anthony Gandy and Christopher Gandy, were convicted on the same charges in March. Anthony Gandy received 80 months in prison and Sharon Gandy-Micheau and Christopher Gandy six years each in prison.

Evidence established that the defendants participated in a scheme to defraud the federal government that centered on the filing of over 20 fraudulent 1041s. The returns requested more than $1.4 million in refunds based on income tax withholdings that never occurred. The IRS mailed 14 refund checks to the defendants that were payable to the trusts and totaled $940,000.

Transformation of a Small Business into a Big Business

Tom Watson created the colossus that is IBM. Have you ever studied how Tom did it?

For starters, he envisioned how IBM would look before he began making moves and changes. He spent a great deal of time trying to understand the role that IBM would play in the world of business and imagined how that would look.

No, It’s not that a new company should have a clear understanding and vision of what their workforce looks like before it is created, although he did create that as well.  Tom Watson’s ideas on what the “IBM Man” would look like is still in use today – the dark suit and the white shirt has become THE business uniform standard.

It is simply this:  There is no difference between a successful big business and a successful small business.  Tom Watson realized that if he could create the plan for IBM and put it into action as a fully realized company, then the overall size of the entity would never matter, because the systems never needed to be changed, no matter how big “Big Blue” got.

My question for you – does your company look like a successful large business?  If it doesn’t, then you aren’t running a successful small business.

Think about it – every single component that Watson put into place to create IBM was about creating the systems to sell business equipment, Not just selling business equipment.

The success of IBM when Watson took over in the Depression was predicated on designing and implementing the one thing that most business owners forget to ever put in place as they open their company up for business – the systems to support it.

In all this, you may find it fashionable to present yourself as the underdog or the new kid on the block who is looking to make a name for themselves and their company. It’s called differentiation.

Go ahead!  Differentiate away!  Make the customer experience so radically different that it helps your client  acquisition, drives your lead generation, and makes client fulfillment easy and fast … but while you do that, have the end goal of a replicable system in mind, so that any employee in your business can do it without you.

Today, it’s too easy to get caught up in the “trendiness” of online sales, of electronic gadgetry to create sales, and a sort of edginess on the part of the company to differentiate themselves from others.

In and of itself, that is all fine and well and good, but ask yourself this – “is it sustainable”, or is it really a selling point?  When your market ceases to be local or regional and your growth demands you play on the world stage, can you scale the model?  In short, is your “edgy” pitch something that you, as the CEO of a growing business, can actually pull off?  Ask yourself, is your business a big company that happens to be small right now or is it a small company that can never hope to be big?  Trendy gadgets and edgy pitches inevitably get replaced due to the fickle nature of the buying public, but a business designed from the start to play big has the ability to weather trends and redirect itself to venues and products that its customers want and need.

You may need to play small, but plan big.

New Life Tax Resolution has systems in place to help get you through the IRS Maze to find your back in control of your finances once again. So should you find yourself tired of taking on the IRS by yourself call me: Patrick LeClaire at 407-287-6638 and let’s talk about solutions and rsolutions to tax issues.