Category Archives: Tax Preparation

What should you do if you notice that your tax return prepared incorrectly? Should you amend return for ANY reason? What if there are math errors? What if wrong deductions were used? It is important to be accurate when filing a tax return. Use these steps to ensure accurate return.

Ten Facts from the IRS about Amending Your Tax Return

If you discover an error after you file your tax return, you can correct it by amending your return.  Here are ten facts from the Internal Revenue Service about amending your federal tax return:

1. When to amend a return You should file an amended return if your filing status, your dependents, your total income or your deductions or credits were reported incorrectly.
2. When NOT to amend a return In some cases, you do not need to amend your tax return.  The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return.  In these instances, do not amend your return.
3. Form to use Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend a previously filed Form 1040, 1040A or 1040EZ.  Make sure you check the box for the year of the return you are amending on the Form 1040X. Amended tax returns cannot be filed electronically.
4. Multiple amended returns If you are amending more than one year’s tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.
5. Form 1040X The Form 1040X has three columns. Column A shows original figures from the original return (if however, the return was previously amended or adjusted by IRS, use the adjusted figures). Column C shows the corrected figures. The difference between Column A and C is shown in Column B.  There is an area on the back of the form to explain the specific changes and the reason for the change.
6. Other forms or schedules If the changes involve other schedules or forms, attach them to the Form 1040X.
7. Additional refund If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X.  You may cash that check while waiting for any additional refund.
8. Additional tax If you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.
9. When to file Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
10. Processing time Normal processing time for amended returns is 8 to 12 weeks.

Another tax year approaches and IRS has adjusted the exemptions due to inflation. If you have one w-2 and that;s it you may want to see this adjustment. It could adjust your filing.

 

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

• For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
• The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
• For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased  from the tax year 2011 amounts; please see the table below.

Medical Savings Accounts (MSAs)	Self-only coverage	Family coverage
Minimum annual deductible	$2,100	$4,200
Maximum annual deductible	$3,150	$6,300
Maximum annual out-of-pocket expenses	$4,200	$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

• The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
• Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

As the tax filing deadline for businesses inches closer and closer, there are a number of changes to the business tax code that business owners need to be aware of when preparing their returns (if you are determined to prepare your own returns, that is!).

One of the big changes is the introduction of Form 8937, which is called the “Report of Organizational Actions Affecting Basis of Securities”. This form is an informational return that requires issuers of securities to disclose actions they take that may affect holders of their securities.

For example, if your company issues securities, and at some point during the year your company takes an action (i.e. corporate tax merger, “F” reorganization, etc.) that would affect the basis of your holders’ securities, then you are required to report that action in a Form 8937. There is, however, some debate as to what types of actions qualify, so you should consult a tax professional for specific case analysis.

The idea behind this change is to give brokers and stockholders all the information they need to manage their portfolios, and also to make sure all affected parties have up-to-date information.

However, there are two very important aspects of this new reporting rule that you need to be aware of:

1. S-Corporations

If you are an S-Corporation, you can meet the reporting requirements by simply filing a timely K-1 schedule, thus making the 8937 form irrelevant for you.

2. Posting Online

Even if you are not an S-Corporation, you can get around having to file a 8937 by simply posting the necessary information on your primary website and making it available to the public for a period of ten years.

If you want to read more about this new form, you can access the IRS’s instructions for the form here: http://www.irs.gov/pub/irs-pdf/i8937.pdf.

However, if reading documents put out by the IRS is not your cup of tea (which makes you normal), feel free to call us at Beaton Accounting and we will be happy to explain the new form and its requirements to you.

Of course, if you are not inclined to file your own returns (as most business owners are these days), we have the experience and expertise to handle this for you for an affordable rate.

At Beaton Accounting, if there’s one thing we want you to keep in mind most of all when filing your taxes this year, it’s to be extremely cautious with your personal information at all times.

With all of the personal information exchanging hands this time of year, it makes sense that criminals would target tax filers and tax preparers as prime victims of identity theft. These thieves steal your information in order to claim your tax return or tax refund for themselves, and they may even continue using your information to find jobs, make additional claims and more.

Here are few things you should know about identity thieves to avoid being the next victim:

–          The IRS does not initiate contact with taxpayers via email to request personal or financial information. If you get an email saying you’re being audited or getting a refund, it’s probably a scam.

–          Your identity may be stolen during tax season in a number of ways:

• Looking through your personal items (wallets, purses) when they are left unattended
• Looking through your trash for bills, invoices, etc.
• Posing as someone who needs your information
• Accessing information you provide to unsecure websites

–          Your social security number is one of the most important numbers you own. If stolen, the thief may use it to get a job, in which case the employer would file your thief’s income as your income. If the IRS tells you that you haven’t reported all of your income, you’ve probably become a victim.

To learn more about identity theft, secure websites and complete information on legitimate IRS activity, our tax professionals advise you to visit the official IRS website: www.irs.gov

If you opt to enlist a tax preparer this tax season to file your tax return for you, be sure to check out their policies on identity theft. In case something happens, you want to make sure that they will take responsibility for any foul play or loss of identity.

At Beaton Accounting, we ensure that all of our tax returns are completed safely and securely by a professional tax preparer. If you’d like to speak with a Beaton Accounting tax representative, call us today for a FREE consultation:

631-921-6894

Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment, or email us at [email protected]

If you are a business located in one of the Credit Reduction states (New York, New Jersey, Connecticut and Rhode Island are included) and also paid unemployment taxes this year, listen up. This applies to you!

As you may have already figured out, the federal government’s recent decision to extend payment of unemployment benefits will affect the tax credit you earn for paying unemployment taxes. More specifically, it will shrink that tax credit — meaning you actually have to pay more.

This is because New York, New Jersey, Connecticut and Rhode Island are among the 20 states who have not repaid the money they borrowed from the federal government to these extended benefits.

So, when it’s finally time, here’s what you need to know.

Your “credit reduction” (a.k.a. the reason you have to PAY MORE) is calculated on Schedule A of the 2011 Form 940, the Employer’s Annual Federal Unemployment (FUTA) Tax Return.

For those filing through QuickBooks®, here’s something you’ll be relieved to hear. QuickBooks® DOES take this credit reduction into account and provides you with correct amount due, but it DOES NOT record an increase to your payroll liability account automatically.

Thankfully, we’ve found an article that shows you how you can this yourself, step-by-step. Click here to read it!

If you would like advanced QuickBooks® training in order to quickly file your own business taxes this year, Beaton Accounting can help. Our QuickBooks® ProAdvisors® are software gurus, and they can help you become one too.

If you’d like to take an even easier route, Beaton Accounting can file all of your business and corporate tax returns on your behalf! All of our tax preparers are experienced tax professionals to ensure the accuracy of your return.

Call us today for a FREE consultation if interested!

631-921-6894

Have a question or certain topic you’d like to see addressed in our next blog post? Just leave a comment, or email us at [email protected].