Vertical Advisors

Identity Theft with US Tax Returns

Vertical Advisors — Wed, 04 Apr 2012 19:01:51 +0000

It is amazing and shocking to see how our identity can be stolen. We have noticed over the past five years, that there has been an increase of income tax return problems because of identity theft. Generally we as a CPA firm first notice there is a problem when our firm electronically files a tax return and the government computers tell us the return has already been filed. We immediately inform our clients, and proceed in filing out a lot of paper work with the IRS and state governments. This can cause the taxpayers some real problems. First if there is a refund, the refund is held up typically for six months or longer. Yes, the IRS will pay you interest, but you don’t have your money. Next, if the taxpayers are trying to get a loan, the mortgage company will not be able to verify the tax return with the IRS as the return is in a state of flux.

Identity theft is all over the place. We have seen clients have their credit cards and bank account information stolen, and recently health insurance. Here is a short article that speaks about the tax return identity theft. http://reut.rs/Hep6RS. One can also search the Internet for many more articles. Identity theft can really cause headaches and require people to spend a lot of time and money to fix any problems. So, try to protect yourself. Yes, you can monitor your credit, minimize your disbursement of confidential information, but who has the time to do all of these steps?

There are many companies that claim they have the best identity theft protection, and we have tried a couple. However, in my personal experience, I have found that Legal Shields “Identity Theft Shield” to be one of the best. I personally use this. When my credit is run, I typically get an email within an hour of it being run. The company also provides me with monthly updates even if there is no activity. The program also offers identity restoration, which provides the customer with assistance to restore damage done due to the identity theft. The protection isn’t perfect, but it generally is a great protection. To sign up for the identity theft protection service go to http://bit.ly/HdsCP6 . The cost is a typically only about $15 a month. Clients that have the service feel more comfortable and protected.

Tax Tips for Recently Married or Divorced Taxpayers

Vertical Advisors — Sat, 11 Feb 2012 21:41:48 +0000

Most individual tax returns are electronically filed. If your name and social security number doesn’t match, the IRS computers will not accept the electronically filed tax return. Name mismatches cause problems with refunds also. The Social Security Administration (SSA) should be notified of a name change resulting form marriage or divorce by filing form SS-5 which is available at www.socialsecurity.gov.

Tax Deduction for Meals

Vertical Advisors — Wed, 11 Jan 2012 07:23:26 +0000

Typically business expenses for meals and entertainment are only 50% deductible for income tax purposes pursuant to IRC section 274(n). This is because the government feels that the taxpayer receives some enjoyment, so only 1/2 is deductible. But for financial statement purposes, 100% is expensed.

However, there is a special rule all business owners should be aware of. Meals furnished to employees can be 100% deductible pursuant to IRC 274(e) if they furnished to employees on the emloyers facility. We discuss this law with our clients all the time. These sorts of meals should be tracked separately on the taxpayers general ledger. So meals that our brought into the business or delivered and the food is for the employees would qualify as 100% deductible. Don’t forget this one when you are preparing your tax returns.

2011 Individual Tax Return filing due date

Vertical Advisors — Wed, 11 Jan 2012 07:14:41 +0000

The IRS announced that taxpayers will have until April 17, 2012 to file their 2011 individual tax returns. The IRS will also begin accepting 2011 electronically filed tax returns beginning on January 17, 2012. These updates were listed on IRS News Release IR-2012-1 which can be found on the IRS website at www.irs.gov.

Employee or Independent Contractor?

Vertical Advisors — Sat, 24 Sep 2011 21:14:56 +0000

Is the person working for you an employee or independent contractor? This question comes up often. Typically start-up businesses will want to treat as many workers as possible as independent contractors, so they don’t have to deal with payroll taxes, and other fringe benefits. However, is this approach correct? The IRS would rather has every worker treated as an employee as they would receive more payroll taxes which include social security and medicare. Also the employer is required to withhold federal and state income taxes and remit them to the government. Well this topic has been discussed often. For a starting point, review the IRS website at http://www.irs.gov/businesses/small/article/0,,id=99921,00.html. This will provide you with a brief understanding of the issue and links to other related areas.

When this question comes up with our clients, we ask questions about the worker to determine if they should be classified as an employee or a independent contractor. In helping our clients determine if they have an employee or independent contractor we look at the following items: (1) Are they going to be working exclusively for the client? (2) How many hours are they going to be working? (3) Will the business provide them with an office, business card, computer, telephone, cell phone and supplies? (4) Does the business provide instruction to the individual on when they will work? (5) How will the worker be paid? There are many other factors to consider. There are other issues to consider when treating an individual as an independent contractor. For example, does the business have proper insurance coverage for the workers irregardless of their treatment? Does the business feel there are risks in treating an individual as a independent contractor when they could sue the business and request over time wages.

Also note that recently the IRS and the Department of Labor have signed a memorandum of understanding to share information and collaborate on the issue of employees who have been misclassified as independent contractors. We feel this is the governments way of finding out about misclassifications and going after past payroll taxes which haven’t been paid. To support that our thoughts seem correct the IRS also recently came out with an opportunity for employers to voluntarily comply with misclassification of independent contractors and has created a process for the change and the past taxes to be correctly quickly. You can read about the voluntary compliance program at http://1.usa.gov/q72pYw. Make sure you retain proper tax counsel to assist you with this area.

So, we suggest you consider these items and speak with your attorney and / or your CPA to determine proper classification.

As always the application of tax law is based on the specific taxpayer issues, and attributes. Please discuss your situation with your tax advisor.