If You Work, The Earned Income Tax Credit Can Work For You!

Since 1975, the Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break each year. Four out of five eligible workers claim EITC, but the IRS wants everyone who is eligible to claim this credit. Here are some things you should know about this valuable credit:

Review your eligibility.  If you worked and earned under $52,427, you may qualify for EITC. If your financial or family situation has changed, you should review the EITC eligibility rules. You might qualify for EITC this year even if you didn’t in the past. If you qualify for EITC you must file a federal income tax return and claim the credit to get it. This is true even if you are not otherwise required to file a tax return. Don’t guess about your EITC eligibility. Use the EITC Assistant tool on IRS.gov. The tool helps you find out if you qualify and estimates the amount of your EITC.

Know the rules.  You need to understand the rules before you claim the EITC, to be sure you qualify. It’s important that you get this right. Here are some factors you should consider:

  • Your filing status can’t be Married Filing Separately.
  • You must have a Social Security number that is valid for employment for yourself, your spouse if married, and any qualifying child listed on your tax return.
  • You must have earned income. Earned income includes earnings from working for someone else or working for yourself.
  • You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules. If you have a child who lived with you for more than six months of 2014, the child must meet age, residency, relationship and the joint return rules to qualify.
  • If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

Lower your tax or get a refund.  The EITC reduces your federal tax and could result in a refund. If you qualify, the credit could be worth up to $6,143. The average credit was $2,407 last year.

Ten IRS Tips to Help You Choose a Tax Preparer

Many people pay to have their taxes prepared. You need to be careful when you pick a preparer to do your taxes. You are legally responsible for all the information on the tax return even if someone else prepares it. Here are 10 IRS tax tips to help you choose a tax preparer:

1. Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. The IRS will soon offer a new Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on IRS.gov. You will be able to use this tool to help you find a tax return preparer with the qualifications that you prefer. The Directory will be a searchable and sortable listing of certain preparers with a valid PTIN for 2015. It will include the name, city, state and zip code of:

  • Attorneys.
  • CPAs.
  • Enrolled Agents.
  • Enrolled Retirement Plan Agents.
  • Enrolled Actuaries.
  • Annual Filing Season Program participants.

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

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

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

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

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

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

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

9. Preparer must sign and include their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS.  You can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.

Top 10 Tax Facts about Exemptions and Dependents

Nearly everyone can claim an exemption on their tax return. It usually lowers your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions to help you file your tax return.

1. E-file your tax return.  Filing electronically is the easiest way to file a complete and accurate tax return. The software that you use to e-file will help you determine the number of exemptions that you can claim. AFS Taxsavers E-files your return!

2. Exemptions cut income.  There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $3,950 for each exemption you claim on your 2014 tax return.

3. Personal exemptions.  You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. If you file a separate return, you can claim an exemption for your spouse only if your spouse: had no gross income, is not filing a tax return, and was not the dependent of another taxpayer.

4. Exemptions for dependents.  You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return.

5. Report health care coverage. The health care law requires you to report certain health insurance information for you and your family. The individual shared responsibility provision requires you and each member of your family to either:

• Have qualifying health insurance, called minimum essential coverage, or

• Have an exemption from this coverage requirement, or

• Make a shared responsibility payment when you file your 2014 tax return.

6. Some people don’t qualify.  You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

7. Dependents may have to file.  A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like the amount of their income, whether they are married and if they owe certain taxes.

8. No exemption on dependent’s return.  If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person on your tax return. This rule applies because you can claim that person is your dependent.

9. Exemption phase-out.  The $3,950 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income.

10. Try the IRS online tool.  Use the Interactive Tax Assistant tool on IRS.gov to see if a person qualifies as your dependent.

Six Tips on Who Should File a 2014 Tax Return

Most people file their tax return because they have to, but even if you don’t, there are times when you should. You may be eligible for a tax refund and not know it. This year, there are a few new rules for some who must file. Here are six tax tips to help you find out if you should file a tax return:

1. General Filing Rules.  Whether you need to file a tax return depends on a few factors. In most cases, the amount of your income, your filing status and your age determine if you must file a tax return. For example, if you’re single and 28 years old you must file if your income was at least $10,150. Other rules may apply if you’re self-employed or if you’re a dependent of another person. There are also other cases when you must file. Go to IRS.gov/filing to find out if you need to file.

2. New for 2014: Premium Tax Credit.  If you bought health insurance through the Health Insurance Marketplace in 2014, you may be eligible for the new Premium Tax Credit. You will need to file a return to claim the credit. If you purchased coverage from the Marketplace in 2014 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year you must file a federal tax return. You will reconcile any advance payments with the allowable Premium Tax Credit. You should receive Form 1095-A, Health Insurance Marketplace Statement, by early February. The new form will have information that you need to file your tax return.

3. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

4. Earned Income Tax Credit.  Did you work and earn less than $52,427 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,143.

5. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit.

6. American Opportunity Credit.  The AOTC is available for four years of post secondary education and can be up to $2,500 per eligible student.  You or your dependent must have been a student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify.

Average Tax Prep Fee Inches Up to $273

The average fee for preparing a tax return, including an itemized Form 1040 with Schedule A and a state tax return, will increase a few dollars to $273 this year, a 4.6 percent increase over the average fee of $261 last year, according to a survey by the National Society of Accountants.

The figure also represents an 11 percent increase from two years ago when the survey was conducted.

The average cost to prepare a Form 1040 and state return this season without itemized deductions is expected to be $159, also a 4.6 percent increase over the average fee last year, which was $152. It is an 11.2 percent increase from two years ago.

“When you consider that it takes the average taxpayer five hours to complete a tax return, this is a very strong value,” said NSA executive vice president John Ams in a statement. “The tax code continues to become more complex each year, including some new Affordable Care Act reporting requirements. Professional tax preparers may also be able to find tax deductions and credits that may taxpayers might not notice.”

The NSA collected the fee information during a survey of preparers. The tax and accounting firms surveyed are owners, principals, and partners of local “Main Street” tax and accounting practices who have an average of more than 27 years of experience.

NSA member tax preparers typically hold multiple credentials that demonstrate their expertise, including Enrolled Agent, CPA, Accredited Tax Preparer, Accredited Tax Advisor, and others.

The survey also reported the average fees for preparing additional Internal Revenue Service (IRS) tax forms, including $174 for a Form 1040 Schedule C (business), $634 for a Form 1065 (partnership), $817 for a Form 1120 (corporation), $778 for a Form 1120S (S corporation), $457 for a Form 1041 (fiduciary), $688 for a Form 990 (tax exempt), $68 for a Form 940 (Federal unemployment), $115 for Schedule D (gains and losses), $126 for Schedule E (rental) and $158 for Schedule F (farm).

The NSA noted that the fees vary by region, firm size, population, and economic strength of an area.

The average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return in each U.S. census district are:

  • New England (CT, ME, MA, NH, RI, VT) — $246
  • Middle Atlantic (NJ, NY, PA) — $314
  • South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) — $268
  • East South Central (AL, KY, MS, TN) — $262
  • West South Central (AR, LA, OK, TX) — $205
  • East North Central (IL, IN, MI, OH, WI) — $240
  • West North Central (IA, KS, MN, MO, NE, ND, SD) — $198
  • Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) — $256
  • Pacific (AK, CA, HI, OR, WA) — $348

Most accounting firms offer prospective clients a free consultation, the NSA pointed out, which can be worth well over $100 based on the hourly fees of most tax preparers.

All the fees cited assume a taxpayer has gathered and organized all the necessary information.

Taxpayers should also make sure they provide information on time to avoid additional fees, the NSA noted. Many tax preparers will charge an average fee of $114 for dealing with disorganized or incomplete files.

Some will charge an average fee of $42 to file an extension, an average fee of $88 to expedite a return, and an average fee of $93 if information is not provided in advance of an agreed-upon deadline. For taxpayers who are audited by the IRS, the average hourly fee to handle the audit is $144.


From accountingtoday.com

By Michael Cohn

January 14, 2015

 

Discounts offered by AFS Taxsavers

January 2015

We want to make your task of filing and gathering information as simple as possible. In order to assist you we are offering:

Senior Citizen / Retiree Discount
Schedule your appointment, or drop off your information and receive a 25% discount. Must be at least 65 years old and retired. Offer expires March 6th.

Drop Off Discount
Drop off your tax information allow us to complete your return, review it with you and prepare it for filing. Receive a 10% discount. Offer expires March 6th.

Military Personnel
If you were on active duty at any time during the year, you will receive a 25% discount. If you were stationed in a combat zone, we will do your Federal and Michigan returns for free. Offer expires April 1st.

Student Rates
o High school & College students earning less than $7.500 tax prep fee of $20.00
o High School & College students earning more than $7,500 but less than $20,000 and still being claimed on parents return, tax prep fee of $30.00
o College students no longer being claimed on parents return – 25% discount

Pick Up, Drop Off & Delivery
We will pick up your tax package, complete your return, review it with you and deliver it back to you for your signatures. For Seniors & Disabled Citizens this service is free. A nominal $20.00 (round trip) fee will be charge to all others. Please call for times. Distance applies.

Guaranteed 7 Days or Free
If we don’t complete your return within 7 working days, we’ll do it for free. Offer expires March 1st.

 

Ethics Presentation

Please Click the following link to either download or open Gary’s Ethics Power Point Presentation.

 

U of M Ethics Presentation

Better Brace Yourself for a Tax-Break Smackdown

There may be fewer changes to the federal tax code this year than in 2013, but the handful that exist could still impact what you owe. Some, like the new health insurance tax credit, could put more jingle in your pocket, while the expiration of more than four dozen temporary tax breaks that Congress has yet to renew might instead leave students, teachers, retirees and homeowners out in the cold.

ACA – Affordable Care Act (Obama Care)

First and foremost, all taxpayers this year will see a new check box on their 1040 federal tax return, where they’ll be required to disclose whether they have had qualified health insurance all year, per the Affordable Care Act mandate.

That is by far the biggest change this year, because this is the year when the individual mandate goes into effect.  If you purchased insurance through the health-care exchanges, or marketplace, you’re going to get a brand-new form in the mail called a1095A. Keep it in a safe place for filing your return.

If you or your dependents did not obtain minimal essential coverage, you will pay a penalty equal to 1 percent of your yearly household income, or a maximum of $95 per person, on your 2014 federal income tax return, due April 2015. That penalty increases to 2 percent of household income, or $325 per person, in 2015; and 2.5 percent of income, or $695 per person, in 2016.

A few exemptions exist. You may be able to avoid the penalty, for example, if you are uninsured for fewer than three months out of the year, if the lowest-priced coverage available to you exceeds 8 percent of your income or you don’t file a tax return because your income is too low.

Taxpayers with moderate income who obtain their health insurance through the Health Insurance Marketplace may also be eligible for a new premium tax credit to help defray the cost of coverage. Determining eligibility, however, is complicated and is calculated based on household income, the number of exemptions you already claim and the federal poverty line for your family size.

Foreign Bank / Investments

U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during part of the year, have long been required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.

In most cases, affected taxpayers must fill out and attach Schedule B to their tax returns. They may also have to fill out and attach Form 8938, Statement of Foreign Financial Assets.

That has been in effect for awhile now, but new this year is the reporting requirement imposed on foreign financial institutions. Be aware that a lot more information is likely to be coming to the Internal Revenue Service from foreign firms about U.S. account holders, so it’s best to report voluntarily before the IRS finds you.

Tax Breaks

Another new twist for 2014 is the uncertainty surrounding $85 billion worth of temporary tax breaks for individuals and businesses, also called extenders, that expired on Dec. 31, 2013.

In years past, Congress has reinstated those credits retroactively in the final weeks of the year, sometimes even waiting until January of the following year. And, indeed, there is a Senate bill aimed at doing just that.

That bill is now stalled until after the November congressional elections, leaving millions of taxpayers in limbo.

It seems every couple of years, we face this situation, and Congress eventually extends [temporary credits], but that may not happen until after the midterm election—or at all.

Among the expired tax breaks are the commuter subsidy for riding mass transit, which fell to $130 from $245; the 10 percent tax credit for building an energy-efficient home and purchasing energy-efficient appliances; and a $250 deduction for teachers who pay out of pocket for classroom expenses.

Gone, too, is the above-the-line deduction—meaning you need not itemize to claim it—for qualified higher-education expenses, often referred to as the tuition and fees deduction. The tax break allowed taxpayers with modified adjusted gross income of $80,000 or less ($160,000 for joint filers) to claim up to $4,000 of their own qualified tuition and related expenses, or the tuition of a spouse or dependent.

One of the most far-reaching extenders to expire, however, is the state and local general sales-tax deduction. Taxpayers who itemize have previously been permitted to subtract either their state income tax or their state sales tax in calculating their federal taxable income, but the sales-tax deduction was never made permanent.

Its expiration, along with the 54 other tax breaks this year, means those who live in states with no state income tax, like Texas and Florida, have neither write-off available.

More than 8 million taxpayers claimed the deduction for state and local general sales taxes in 2012.

Retirees should also be warned that one of the most popular ways to donate to charity—donating directly from their individual retirement accounts, thereby reducing their tax burden—will be lost if the extender bill is not approved.

Taxpayers who are 70½ or older will no longer be permitted to exclude up to $100,000 per year from gross income by donating directly from their IRAs, or count that qualified charitable distribution as their required minimum distributions.

Lastly, tax relief for homeowners who are underwater on their loan, meaning their house is worth less than they owe on their mortgage, has also disappeared.

Those still struggling in the wake of the housing crisis will no longer be able to write off up to $2 million of any portion of their mortgage debt that gets forgiven by their bank. That amount will instead be treated as taxable income.

Taxpayers this year should be prepared to disclose on their federal tax form whether they obtained qualified health insurance coverage and accurately report any foreign income they received. They should also brace themselves for the possible loss of 55 tax breaks that may hit close to home.

How to Improve Your Chances of Getting a Business Loan

Regardless of whether inter­est rates are high or low, the ability to borrow is an important factor in running a successful busi­ness. Whether you need to borrow money now or in the future, it’s good business practice to know what information a banker or other lender will need in order to grant your loan request.

This information falls into two broad categories. The first is general information about you, your business product or service, and your plans for the business. While some banks will gather this information from a loan application, it’s wise to prepare a clear, written presentation of the general facts about you and your business.

General information

You’ll probably be asked to supply some of this information on the loan application form, but you can often provide additional facts that will have a favorable impact on a lender. That’s why it’s good strat-

egy to prepare a written presenta­tion that gives a lender a clear de­scription of you and the business you are in.

Here’s a checklist for the general information you should include in your written presentation:

  • Your management background, abilities, and accomplishments as well as those of your key man­agement personnel.
  • A general description of the na­ture of the industry or business you are in.
  • The sales potential of your prod­uct or service. This should include your short-term and long-term marketing plans and how you intend to handle any problems or opportunities which your busi­ness faces.
  • An explanation of exactly how the money you are borrowing will be spent, whether the amount is sufficient for your im­mediate or long-term purposes, and how the borrowed funds will contribute to your firm’s well being.

In short, your general informa­tion presentation should tell the lender who you are, what your business has done and what you expect to do, how you intend to reach your goals, and, of course, how the money you are borrowing will help you achieve those goals. If you make a logical presentation of this general information, you’ll set the table for a clear understanding of your financial information.

Financial information

It’s critical that you present all fi­nancial information in a formal, professional manner. A sloppy financial presentation is almost certain to result in the rejection of your loan request. The follow­ing financial documents should be prepared by your accountant:

  • A personal financial statement for you and other principals of the business or other guar­antors of the loan. Be sure that your personal financial statement includes the amount of money that you yourself have at risk in the business.
  • A balance sheet which shows your company’s assets and liabilities for your most recent accounting pe­riod. It’s important that the bal­ance sheet includes the amount of the company’s present indebt­edness and the terms of repay­ment of any outstanding loans. Copies of recent company tax re­turns should be attached to the balance sheet as supporting material.
  • An income statement which shows the company’s profit performance over a specific period of time.
  • A cash flow projection which in­cludes the prospective loan funds and other sources of money and shows how the money will be used.
  • A sales forecast which projects and preferably allocates sales by type of customer over a given period of time.
  • A current ratio position which shows the relationship between the company’s current assets and current liabilities.

 

The role of your accountant

It’s important to involve your accountant in both the preparation of all financial documents and in your meetings with the lender. Your accountant can supply whatever degree of assurance about the financial information that your lender may require. The degree of assurance will vary, depending on matters such as the lender’s previous experience with you, the size of the loan you’ve applied for, and how well the bank knows your business.

For example, audited financial state­ments may be required if you are requesting a large loan and the lender has not had any previous experience with your company. In other situations, a review of the financial information by your accountant may be sufficient, par­ticularly if the lender has had previ­ous dealings with your company.

It’s generally recognized that banks credit standards vary among banks, some banks have tighter credit standards than others. But if you’re properly prepared and make a solid presentation, your chances of getting that vital business loan will be greatly improved.

Congratulations Gary Skop!

CONGRATULATIONS TO GARY SKOP!!!!

Gary was recently elected by his peers as Vice President of the Michigan Society of Enrolled Agents.  He will serve a 2 year term among Americas Tax Experts.  What an achievement!  Gary has been in business for over 40 years, and has been an Enrolled Agent for over 24 years.  He loves what he does, and is looking forward to serving the other EA’s in Michigan.

What is an Enrolled Agent??

An enrolled agent is a tax professional who has been authorized by the United States Department of the Treasury to represent taxpayers in audits, collections and appeals by the Internal RevenueService (IRS).EA’s are considered tax specialists. They have a vast knowledge of anything pertaining to income tax, inheritance tax, gift tax, estate, payroll, retirement, and non-profit taxation.
According to the National Association of Enrolled Agents, “enrolled” means that an individual is licensed to practice, and “agent” means authorized to serve as the proxy for a taxpayer.

Becoming an Enrolled Agent

To become an enrolled agent, a candidate must either successfully pass a comprehensive 2-day exam covering all tax codes or have worked at the IRS for five years, regularly interpreting tax regulations. A background check must also be performed. Then, there are continuing education requirements similar to those of CPAs. Unlike CPAs who study and practice in all areas of accounting, EAs specialize in taxes and IRS problems

Ethical Standards

All enrolled agents are mandated to comply by the provisions highlighted in the U.S. Department of Treasury Circular 230, which governs the actions of enrolled agents when interacting with the IRS.