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Member of Russell Bedford International, a global network of independent professional service firms.
Tax debt can quickly snowball from interest, penalties, late fees, and the amount of the taxes due. And if you have unpaid taxes that you haven’t yet been making payments toward, it might make you fearful that the IRS will come knocking one day. However, a lot of the scaremongering surrounding the IRS is largely sensationalized in media and daily conversation. Rest assured, agents won’t come bursting through your door just because you have tax debt. In reality, they must follow due process in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA). This means that you will always receive written notice concerning your balance due as well as collection actions and any requests for payment plans or settling your account.
However, if you haven’t received further notification concerning what you owe, you may be able to ride out the little-known statute of limitations on tax debt collections, which is 10 years.
What the 10-Year Statute of Limitations Entails
Your tax debt can actually be canceled in 10 years if the IRS makes no efforts to collect on your account — and if you also don’t contact the IRS. However, it’s not as simple as just waiting a decade without ever paying the taxes you owe. There are conditions that must be satisfied. The first is that this 10-year time frame doesn’t begin when you filed that tax return with a balance due or when you realized you owed taxes you couldn’t pay.
The official statute of limitations date begins once you receive written notice from the IRS concerning what you owe. You may receive a notice of deficiency with an actual tax bill or a substitute tax return if you didn’t file by the due date. So, if you filed your tax return on June 15, 2023, and got a notice in the mail dated September 1, your statutory period would begin September 1, not June 15. This date is called the Collection Statute Expiration Date (CSED), and if you make it to September 1, 2033, without further collection actions, then you can actually get your entire tax bill from this period canceled. (Note: Future tax bills, such as next year’s taxes you also can’t afford to pay on the due date, do not count toward this.)
However, the IRS will not actively notify you of this. While the date of assessment is also generally when that notice is received, the IRS has argued over when the assessment date actually was. Some situations can also delay the CSED by halting the clock on the 10-year time frame, such as:
It takes six months after bankruptcy cases settle to get the clock restarted on the CSED, so this means the IRS has more time to take collection actions against you, and the IRS will tend to ramp up these efforts before the statute of limitations expires.
When you access your tax account transcript through your IRS Online Account, the transcript will indicate the earliest CSED associated with each tax debt. However, this is only a tentative estimate of the earliest possible date. The IRS can change this date based on the circumstances listed above, and you may also challenge the date through a formal process if you believe it is incorrect.
State Tax Debt
Unlike the IRS, state tax departments do not have reciprocity with the RRA or the Taxpayer Bill of Rights. Taxpayers who are subject to state income tax need to find out what options, if any, are offered by their state tax department, and they may actually take harsher collection actions. They can do this because many state departments do not have oversight committees. They also generally do not offer taxpayers the option to settle back taxes or make payment plans, and many do not have a statute of limitations on collections. The IRS tends to get a bad rap in movies and on TV, but it’s actually the state tax departments that are more likely to show up unannounced.
It’s very rare that anyone rides out the statute of limitations on unpaid taxes, and it’s usually due to extenuating circumstances like disability or a debilitating business closure. If enough time has passed that you think you might be able to go the whole 10 years without payments or responses to collection actions, you must keep fastidious records of all correspondence with the IRS. If the IRS sent you little or no mail in the time period after the time you think the CSED kicked off, you may qualify for the statute of limitations, but you should not intentionally try to ride it out without the guidance of a tax professional specializing in tax relief and resolution issues. Please contact Cray Kaiser today if you have any questions relating to unpaid taxes or your tax situation. We’re here to help.
Please note that this blog is based on tax laws effective in December 2023, and may not contain later amendments. Please contact Cray Kaiser for most recent information.
As the end of the year approaches and the holiday season brings on the spirit of giving, we will all see an uptick in the number of charitable solicitations arriving in our inboxes. And since some charities sell their contributor lists to other charities, frequent contributors may find themselves besieged by requests from unfamiliar organizations.
As a result, here are three tips to keep in mind as you make charitable contributions:
Be careful. Scammers are out there pretending to be legitimate charities. And they’re looking to take advantage of your generosity for their gain.
When making a donation to a charity with which you’re unfamiliar, you should take a few extra minutes to ensure that your gifts are going to a good cause. The IRS has a search feature, the Tax Exempt Organization Search, which allows people to find legitimate, qualified charities to which donations may be tax-deductible. Note that you can always deduct gifts to churches, synagogues, temples, mosques, and government agencies — even if the Tax Exempt Organization Search tool does not list them in its database.
More and more, organizations and communities are also using crowdfunding campaigns to fundraise and connect with potential donors. While the vast majority of these campaigns are legitimate, be aware that not all crowdfunding donations are tax deductible. If a qualifying charity or religious organization is behind the campaign and receiving the funds, your donation will likely be treated as a regular tax-deductible contribution. But if an individual, business, or anything else that’s not a charity is receiving the funds, then the IRS would treat the donation as a non-deductible gift rather than a deductible contribution. Common examples of non-deductible gifts would be for campaigns to raise funds for a community members’ medical expenses, or to help local businesses recover from natural disasters. These campaigns may be worthy of support, but they are not tax deductible unless backed by a qualified charity.
Here are some other ways to ensure your contributions go to legitimate charities:
Contributions to charitable organizations are deductible if you itemize your deductions on Schedule A. Generally, the deduction is the lesser of your total contributions for the year or 50% of your adjusted gross income. However, the 50% is increased to 60% for cash contributions in years 2018 through 2025. Lower percentages may apply for non-cash contributions and contributions to certain types of organizations. Itemized deductions reduce your gross income when determining your taxable income.
However, with the increase in the standard deduction as a result of the 2017 tax reform, many taxpayers are no longer itemizing their tax deductions (because the standard deduction provides a greater tax benefit). For those in this situation, there are two possible workarounds:
Bunching Deductions: As a rule, most taxpayers just wait until tax time to add everything up and then use the higher of the standard deduction or their itemized deductions. If you want to be more proactive, you can time the payments of tax-deductible items to maximize your itemized deductions in one year and take the standard deduction in the next. Click here to learn more about bunching.
Qualified Charitable Distributions: Individuals age 70½ or older – who must withdraw annual required minimum distributions (RMDs) from their IRAs – are allowed to annually transfer up to $100,000 from their IRAs to qualified charities. Here is how this provision works, if utilized:
1) The IRA distribution is excluded from income;
2) The distribution counts toward the taxpayer’s RMD for the year; and
3) The distribution does NOT count as a charitable contribution deduction.
At first glance, this may not appear to provide a tax benefit. However, by excluding the distribution, a taxpayer lowers his or her adjusted gross income (AGI), which helps with other tax breaks (or punishments) that are pegged at AGI levels, such as medical expenses when itemizing deductions, passive losses, and taxable Social Security income. In addition, non-itemizers essentially receive the benefit of a charitable contribution to offset the IRA distribution.
Charitable contributions are not deductible if you cannot substantiate them. Forms of substantiation include a bank record (such as a cancelled check) or a written communication from the charity (such as a receipt or a letter) showing the charity’s name, the date of the contribution, and the amount of the contribution. In addition, if the contribution is worth $250 or more, the donor must also get an acknowledgment from the charity for each deductible donation.
Non-cash contributions are also deductible. Generally, contributions of this type must be in good condition, and they can include food, art, jewelry, clothing, furniture, furnishings, electronics, appliances, and linens. Items of minimal value (such as underwear and socks) are generally not deductible. The deductible amount is the fair market value of the items at the time of the donation; as with cash donations, if the value is $250 or more, you must have an acknowledgment from the charity for each deductible donation.
Note that the door hangers left by many charities after picking up a donation do not meet the acknowledgement criteria; in one court case, taxpayers were denied their charitable deduction because their acknowledgement consisted only of door hangers. When a non-cash contribution is worth $500 or more, the IRS requires Form 8283 to be included with the return, and when the donation is worth $5,000 or more, a certified appraisal is generally required.
Special rules also apply to donations of used vehicles when the claimed deduction exceeds $500. The deductible amount is based upon the charity’s use of the vehicle, and Form 8283 is required. A charity accepting used vehicles as donations must provide Form 1098-C (or an equivalent) to properly document the donation.
No matter what time of year you find yourself making charitable contributions, we encourage you to do it responsibly. Unfortunately, there are complexities when it comes to the spirit of giving and there are individuals out there who are looking to take advantage of well-intentioned people. If you have any questions related to charitable giving, please contact Cray Kaiser today. We’d be happy to help!
Please note that this blog is based on tax laws effective in December 2023, and may not contain later amendments. Please contact Cray Kaiser for most recent information.
As you fill your shopping cart this holiday season you might be wincing at the price tag of some of the presents for your family and friends. But did you know that certain holiday gifts can yield tax benefits? While your online shopping won’t help minimize your taxes, larger gifts can go a long way in bringing you benefits in 2020. Here are a few examples:
If you’re an employer you may purchase gifts this time of year for your team members. If the gift is infrequently offered and has a fair market value so low that it would be impractical to account for it, the gift’s value would be treated as a de minimis fringe benefit. Therefore, it would be tax-free to the employee and tax-deductible by the employer.
Note that a gift of cash, regardless of the amount, is considered additional wages and is subject to employment taxes (FICA) and withholding taxes. Gift certificates, debit cards, and other items that are convertible to cash are also considered additional wages, regardless of the amount. Furthermore, if the employee receiving a cash gift is a W2 employee, the employer cannot issue a 1099-MISC. The cash amount must be treated as W2 income.
Did you know that according to gift tax laws, any individual can pay a student’s tuition directly to a qualified school or university, and it will be exempt from gift tax and gift tax reporting? What student wouldn’t love to have part of his or her tuition paid? It would make a great gift.
As an aside, college tuition generally qualifies for a tax credit. Another quirk in the tax laws says that the education credit goes to the individual who claims the child as a dependent, resulting in another gift from the noncustodial individual who pays the tuition.
Here’s an example: Whitney is attending college and is the dependent of her mother and father. Whitney’s grandfather makes a tuition payment directly to her college and therefore has no gift tax issues. And since Whitney is a dependent of her parents, her parents can claim any available tuition credit. Thus, by paying the tuition, her grandfather made a gift of tuition to his granddaughter and a gift of the tuition credit to her parents.
If you purchase an electric car as a holiday gift for your spouse or even yourself, you will find that most electric cars come with a tax credit. To qualify to claim the credit on your 2019 tax return, the car will have to be “placed in service” by December 31, 2019. So merely ordering the vehicle, even if payment for it is made at the time when the order is placed, won’t be enough. You will need to receive the car and start using it before New Year’s Day.
But before you take the leap, be sure to research the credit available for the electric car you are looking at purchasing. Some credits affiliated with popular electric vehicles may have already expired or have been reduced.
You should also know that the credit is non-refundable for vehicles used strictly for personal use, meaning it can only offset your actual tax liability; any excess credit over your tax liability will be lost. Electric cars used in a business have less stringent tax liability limitations.
Of course, contributions to qualified charitable organizations can be deducted, provided you itemize your deductions. If you are over age 70.5 and have not taken your required minimum distribution (RMD) from your IRA account for 2019, you might consider making direct transfers to the charities of your liking, thereby satisfying your RMD requirement while avoiding taxation of the distribution. Contact your IRA custodian or trustee to arrange the transfer, which would need to be completed by December 31, 2019 to count for 2019.
Some words of caution about charitable contributions during the holiday season: When you are shopping at a mall and drop cash into the holiday kettle, you won’t get a receipt for your contribution, and a cash charitable contribution cannot be claimed as an itemized deduction without documentation. The same goes for buying and then giving new, unused toys to holiday toys-for-kids drives, which have become very popular. In this case, save the purchase receipt for the toys and request verification of the contribution from the sponsoring organization. If the drop point is unmanned and it is not possible to obtain a contribution verification from the organization, the IRS will allow a deduction of up to $249, provided you document the purchase of what you’ve donated.
‘Tis the season for holiday shopping (and tax benefits)! If you have questions about how these suggestions might impact your tax situation, please give us a call at 630-953-4900.
Please note that this blog is based on tax laws effective in November 2019, and may not contain later amendments. Please contact Cray Kaiser for most recent information.
Over the last few decades, Master Limited Partnerships (MLPs) have gone mainstream. But what are MLPs? They are companies structured as partnerships and traded on the stock exchanges. You can buy units of the partnership as easily as you can buy common stock.
In order to be a classified as an MLP, the partnership needs to meet two qualifications:
1) The partnership must operate in an industry such as energy or natural resources
2) The partnership must distribute at least 90% of its income to its unitholders
By distributing more than 90% of its income the partnership avoids double taxation, which occurs when tax is paid by corporations first and capital gains tax is paid by individuals on dividends received. With MLPs, the partnership does not pay corporate tax and distributions to the unitholder will be higher because the tax is only paid once at the unitholder level.
At year-end you will receive Form K-1 from the MLP, which allocates income based on your ownership percentage. Since these MLPs operate in a capital-intensive sector, most of the income that is allocated will in many cases be losses, due to the high rate of depreciation. And since you are considered a limited owner of the MLP, these losses will be deferred until you sell your units. On the other hand, the distributions are considered a return of capital and not taxed until you sell your units.
As you can imagine, investing in MLPs introduces more complexity in the preparation of your taxes. In addition to Form K-1, you will be required to individually report each K-1 on your tax return. And the sale of any units in the MLP will require you to determine ordinary and capital portions of any gains, as both have different tax rates.
It is generally recommended that MLPs are held in taxable accounts because any distributions over $1,000 in a retirement account could result in Unrelated Business Taxable Income (UBTI) tax. This is a special tax accessed by the IRS and would cause additional fees charged by your brokerage. Both of these would reduce the appeal of the MLP structure.
If you are interested in MLPs but don’t want to conduct in-depth research or deal with the complexity of tax preparation, you can find Exchange Traded Funds (ETFs) that will circumvent K-1 reporting and diversify company risk. However, keep in mind that the ETFs will be treated as a common stock, which would result in double taxation.
Master Limited Partnerships are complicated in nature and have various tax implications and strategies. If you need guidance on your MLP or EFT, please call Cray Kaiser for assistance.
Please note that this blog is based on tax laws effective in October 2021, and may not contain later amendments. Please contact Cray Kaiser for most recent information.
There are a multitude of ways that technology has turned our world upside down. One of the most recent examples is cryptocurrency. And it’s inevitable that as cryptocurrency gains more traction, it will gain more attention from the IRS. The Service already knows that many cryptocurrency owners are not reporting or paying taxes on their cryptocurrency transactions. In fact, the IRS recently issued warning letters to over 10,000 taxpayers it suspects might have an under-reporting problem. So, if you own cryptocurrency, please keep reading for important information.
Cryptocurrency is a form of digital money that is not controlled by any central authority. The first cryptocurrency created was Bitcoin, back in 2009. Since then, over 4,000 other cryptocurrencies have been created. Cryptocurrency can be digitally traded between users and can be purchased for, or exchanged into, US dollars, euros, and other real or virtual currencies.
One of the big issues surrounding cryptocurrency is how it is treated for tax purposes. The IRS says that it is property, which means that every time it is traded, sold or used as money in a transaction, it is treated much the same way as a stock transaction would be. In other words, the gain or loss over the amount of its original purchase cost must be determined and reported on the owner’s income tax return. That treatment applies every time it is sold or used as money in a transaction.
On the bright side, cryptocurrency is generally treated as a capital asset for most holders, so any gain is a capital gain. If the gain is held for more than a year and a day, any gain will be taxed at the more favorable long-term capital gains rates. If the cryptocurrency is being held as an investment and the sale results in a loss, then the loss may be deductible. Capital losses first offset capital gains during the year, and if a loss remains, taxpayers are allowed a $3,000 per year loss deduction against other income, with a carryover to the succeeding year(s) if the net loss exceeds $3,000.
When cryptocurrency is used as payment to an employee, the usual payroll withholding and reporting still apply, and if used to make payments to an independent contractor, 1099 form reporting is still required. If the individual receiving payment in cryptocurrency is subject to backup withholding, the payer is required to withhold the required amount. In all reporting and withholding instances, the amounts must be in US dollars.
If you have received one of the 10,000 letters sent out by the IRS, do not ignore it! The IRS compiled this list of taxpayers that it feels has not been reporting their cryptocurrency transactions from various ongoing IRS compliance efforts. Here are the three types of letters that were sent out and what you should do if you received it:
The IRS has announced that it will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits and criminal investigations.
Taxpayers who do not properly report the income tax consequences of virtual currency transactions are liable for the tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.
If you have received one of these IRS letters – or even if you haven’t had correspondence from the IRS but have unreported cryptocurrency transactions from past years – and need assistance, please contact Cray Kaiser. We’re here to help!
Please note that this blog is based on tax laws effective in October 2019, and may not contain later amendments. Please contact Cray Kaiser for most recent information.
We recently shared what you should do if you receive notification of a tax audit (and why you should never take on the IRS alone!). But have you ever wondered what the odds are of your return being audited? This is somewhat of a mystery to taxpayers and unfortunately there is no concrete answer. Audits are generally selected at random, but there are a few things that may flag your return for an audit. Here are some considerations to keep in mind:
Before you panic when you check the mail and find a letter from the IRS, know that not all notices are audit notices. Taxpayers often receive notices about information on tax returns that does not agree with government tax records. These are known as computer-generated CP2000 notices. They generally cover the data mismatches of income and deductions on your tax returns when compared to the data the IRS receives via W-2s, 1099s, and 1098s. Most importantly, CP2000 notices are NOT audits.
There are other types of notices requesting additional information to allow for a deduction or simply to verify reported data. These are also NOT audits. If you ever receive a notice from the IRS and you’re not sure what it means, contact your tax advisor right away.
Overall, there has actually been a decrease in audit rates over the last few years. In 2018 there was a 7% drop in audit exam rates compared to 2017 for all tax returns.
The 2018 individual audit rate was just 0.59%, which means one out of every 170 returns filed was audited. 81% of those audits were correspondence exams and 19% were conducted in person at IRS offices or at the taxpayer’s business. In other words, only about one out of every 900 returns required in-person audit meetings.There were also less business return audits in 2018. The C corporation exam rate was 0.9% and exam rates for both partnerships and S corporations was only 0.2%.
As the IRS audit staff is reduced, fewer audits are being performed. However, with the increased application of computer-assisted audits and reviews, we believe audits will continue for taxpayers that are at high risk.There are many red flags that can increase your chance for an audit. Some are identified by IRS computer formulas while others are issue-focused compliance campaigns by IRS’s Large Business and International Divisions. Here are the most common audit triggers:
If you are concerned about your tax audit risk, we can review your situation and advise if we identify any potential red flags. Call Cray Kaiser if you would like a risk assessment or if you receive any tax notices that you are uncertain about.
We have great news for manufacturers in Illinois! There has been a longstanding sales tax exemption for machinery and equipment that is used primarily in the manufacturing of tangible personal property. However, until recently, the exemption did not apply to consumables, hand tools, safety apparel, or other supplies. Recent tax legislation has now expanded the manufacturing sales tax exemption in Illinois. For purchases made on or after July 1, 2019, any production-related, tangible personal property used or consumed in the manufacturing process qualifies for the sales tax exemption.
Here are a few examples of supplies that are included in this new tax law:
To receive the exemption, you must prepare Form ST-587, Exemption Certificate (for Manufacturing, Production Agriculture, and Coal and Aggregate Mining), and provide the certificate to the retailer selling the related tangible personal property.
For more information on the exemption, click here. If you have any questions about whether your company’s purchases qualify for this sales tax exemption, please don’t hesitate to contact Cray Kaiser today.
As we officially enter the second half of the year, we’d like to remind you to perform a check-up on your payroll tax withholdings. You probably know that many taxpayers were surprised with either reduced refunds or higher taxes due when they filed their 2018 taxes. Why did this happen? Because their 2018 income tax withholding was not sufficient throughout the year.
While the tax reform that came out of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, the IRS has not yet revised Form W-4 to reflect major revisions that affect withholdings. The IRS plans to issue a revised Form W-4 for the 2020 tax year. As such, employers continue to use the pre-TCJA form which results in lower amounts withheld than the withholdings based on the new law.
The good news is that the IRS website has a tax withholding calculator where you can input your salary and withholdings to date, along with other criteria, to compute your estimated 2019 withholding. Using this tool and updating the W-4 you have on file with your employer can help you avoid any large tax surprises on your 2019 tax return. Alternatively, we can perform a detailed computation based on your 2018 return along with 2019 activity to help you come up with an accurate withholding amount for your specific tax situation. As always, Cray Kaiser is here should you have any questions or concerns about your payroll withholdings. Please don’t hesitate to contact us at 630-953-4900.
It’s another normal day at the office, until you receive a letter from the IRS. You’re being audited. What do you do now? The first thing you should do is call your tax advisor! While you might be up to navigating an audit on your own, there are many reasons why utilizing a professional’s help will make or break the outcome of your audit. Here’s why:
Seasoned IRS agents have seen your situation many times and know the rules better than you. On top of that, they are under no obligation to teach you the rules. Just like a defendant needs the help of a lawyer in court, you need someone in your corner that knows your rights and understands the correct tax code to apply in correspondence with the IRS.
When selected for an audit, the IRS will typically make a written request for specific documents they want to see. The list may include receipts, bills, legal documents, loan agreements and other records. If you are missing something from the list, that’s when things get tricky. It may be possible to reconstruct some of your records, but generally the IRS wants your records to be contemporaneous. Your tax advisor can help you gather the information necessary to meet IRS standards, and avoid additional taxes (plus a possible 20% negligence penalty).
While most audits are limited in scope, the IRS agent has the authority to increase that scope based on what they find in their original analysis. That means that if they find a document or hear something you say that sounds suspicious, they can extend the audit to additional areas. Being prepared with the proper support from your advisor and concise, smart answers to their questions is the best approach to limiting further audit risk.
When you receive the original audit request, it will include a response deadline (typically 30 days). If you miss the deadline, the IRS will change your tax return using their interpretation of findings, not yours. This typically means assessing new taxes, interest and penalties. If you want your point of view to be heard, get help right away to prepare a plan and manage the IRS deadlines. While you might think you have time to take this on, you don’t want to risk paying the price of a missed due date.
Tax audits are never fun, but they don’t have to be pull-your-hair-out stressful. Together, you and your tax advisor can map out a plan and take it step-by-step to ensure the best possible outcome. You’ll rest easy knowing your audit situation is being handled by someone with the proper expertise that also has your best interests in mind.
While an audit is the last thing you want on your plate, we can help relieve the pressure. Call Cray Kaiser today if receive an audit letter and need support.
There are so many wonderful things about spring. Flowers are starting to bloom, the grass is green, and (hopefully) Chicago is done with snow! But as accountants, we sometimes look at spring with unease. We’ve worked hard all fall and winter to help our clients prepare for April 15th, but how will our collective efforts pan out? While the work of tax season is fresh in our minds, we wanted to share our insights into the lessons learned during the 2018 tax season (Cray Kaiser’s 47th tax season).
Last January, the IRS adjusted the federal tax withholding tables to reflect the reduced tax rates that would apply during the 2018 tax season. As a result, many employees enjoyed higher paychecks, at the sake of reduced federal tax withholding. The problem was that the tables were too generous in reducing federal tax withholding. The tables didn’t take into account other changes in the law, including the loss of tax deductions by higher income individuals. As a result, many taxpayers faced significant, unexpected tax bills.
If you fell into the camp of being disappointed with the tax results, let us know. We can plan beyond the basic tax table to advise not only the appropriate federal tax withholding rate, but also other tax minimization ideas.
The 20% deduction for Qualified Business Income (QBI) was one of the most discussed topics this year. It was not until the summer of 2018 that we received more clarity on “specified service” businesses. There are still uncertainties in the law, which we hope will be ironed out via additional guidance. That said, many of our clients took advantage of the new deduction and the advance planning surrounding maximizing the QBI was effective.
On the flip side, we saw a significant delay in tax reporting from partnerships and S corporations that hold businesses that may generate QBI. Hedge funds in particular will face extremely challenging reporting requirements for the QBI. We expect that some K1’s will arrive even later in the summer of 2019.
Effective for the 2018 tax season, the standard deduction was increased ($12,000 single and $24,000 married filing jointly). Given the $10,000 limit on the income and real estate deduction, as well as the elimination of miscellaneous itemized deductions, many taxpayers’ standard deduction was higher than allowable itemized deductions. Taxpayers that found themselves in this situation would likely anticipate that the standard deduction will probably be more beneficial in the near term. Those taxpayers should consider steps to better plan controllable tax deductions in order to maximize the benefit of the deduction.
At the time of this writing, a mere week after April 15th, our clients have already started receiving tax notices from both the IRS, and more so from the Illinois Department of Revenue. Our advice: Don’t panic! Most of these notices are showing disallowed deductions or credits, but that doesn’t mean the notice is correct. The revenue agencies are simply asking for more information. If you receive any such notice, forward it to your tax advisor. They will be able to provide the information necessary to rectify an apparent underpayment with the information supporting the tax position.
Sadly, there continues to be an uptick in fraud and scams, and tax returns are no exception. As an added protection, the IRS has in recent years provided an Identity Protection (IP) PIN to affected taxpayers. The PIN is a six-digit number assigned to eligible taxpayers that helps prevent the misuse of their Social Security Number on fraudulent federal income tax returns. Taxpayers with a PIN must use the PIN on their tax returns in order for the IRS to accept the tax filing.
Recently, the program opened up to taxpayers here in Illinois. We believe that requesting an IP PIN is yet another tool to help you protect your identity. Please contact us if you’d like to learn more.
While it’s easy to bask in the glow of another tax season behind us, we believe it’s important to continually learn. When a rainy spring day arrives and you want to look ahead to 2019 taxes, give us a call at 630-953-4900. We are happy to walk through the nuances of your tax return in order to plan effectively for next year.
