I know that I have been writing about little other than taxes for the last couple of months.  I hope you all can forgive me for that, however, as it is just a fact of life in my profession that the topic takes up most of my headspace this time of year.

This is something that became key for many of our business clients as they pushed to file their tax returns earlier this month, and will grow larger in the minds of many of our individual clients as the April 18^th deadline for their return rushes toward us.

(And there is also a rush filling up our calendar, so if you have not made your tax appointment yet, you should do so soon!)

Even as one prepares their information and gathers documents for a tax return, though, other thoughts can sneak in. Almost all of us (and yes, that sometimes even includes us professionals) think about simple actions we could have taken during the year to make the tax-time crush a little lighter. This can be something as simple as being better at filing receipts or as complex as wanting a more complete bookkeeping system.

Unfortunately, such thoughts tend to linger for only a short time before being forgotten until next year. After all, there are 11 ½ months or so when you do not feel the pressure. But is not a little bit of effort throughout the year worth easing one’s life during tax time? For no matter how much one may want to avoid it, these obligations come back year after year.

So when it comes to such issues, remember that taxes are not all that we do. We cannot help you remember to put your receipts and bank statements together in an easily retrievable place, but we can help in many other areas even if just involves another meeting later in the year so you at least know what to expect come next tax season.

No matter what, chances are there is something in your financial picture that comes up at tax time that you wish was different. Consider this then a plea to not forget about it and commit to making it better for yourself. If we can help you with it great, and if not, we may be able to point you in the right direction. So do not hesitate to allow us to help you on your journey …

Even if we may need to wait til May to really deal with it. It is still tax time after all.

And speaking of tax time, rarely a day passes this time of year when someone does not ask us when they will receive their tax return. I know I have mentioned this recently, but as it keeps coming up, and the IRS recently put out a notice about it, I wanted to pass on some of their words:

Taxpayers eager to know when their refund will be arriving should use the "Where's My Refund" tool rather than calling the IRS and waiting on hold or ordering a tax transcript. The IRS updates the status of refunds once a day, usually overnight, so checking more than once a day will not produce new information. “Where’s My Refund?” has the same information available to IRS telephone assistors so there is no need to call unless requested to do so by ”Where’s My Refund?”

Contrary to a myth rumored in social media, ordering a tax transcript will not help taxpayers find out when they will get their refund. The IRS notes that the information on a transcript does not necessarily reflect the amount or timing of a refund. While taxpayers can use a transcript to validate past income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation, they should use “Where’s My Refund?” to check the status of their refund.

“Where’s My Refund?” can be checked 24 hours after the IRS has received an e-filed return or four weeks after receipt of a mailed paper return. "Where’s My Refund?" has a tracker that displays progress through three stages: (1) Return Received, (2) Refund Approved and (3) Refund Sent.

Last week, reports came out that fewer people were filing their taxes than had at the same point of calendar year 2016. Bloomberg released an article that theorized taxpayer confusion was one of the reasons for this. Although the current political climate makes that more likely this year than others, it is not like taxes made sense to everyone in past years.

Talk of tax plans, health care, tax reform and repeal and replace, though, is making many wonder more about how everything is going to shake out and what our tax pictures will look like next year (and this includes myself and my team). Your responsibilities this year are set, though, so if you have been putting off filing, it is time to start moving on that, especially as our calendar tends to fill up fast time of year.

No matter how things fall in the future, though, it would involve a serious revamping to make the tax code something that is easy to understand. This is why one hears so much rhetoric about just how large and unwieldy our country’s tax code is.

So with all this talk of reform, just how big is that code?

Some of the biggest and most recent work on this subject appears to have been done by the Washington Examiner at the end of last tax season. It uses numbers from Dutch-based Wolters Kluwer to say the code has expanded from 400 pages in 1913 to over 74,000 in 2014, and that includes a jump from a number of just over 60,000 pages in 2004.

 The only problem is that this isn’t really the right number.

First of all, the tax code should be something that you can actually have and access, no? Well maybe not you, but someone (let’s say your trusted neighborhood tax professional), should have access to it and have it be something that is actually useable. 70,000 pages would not fit within it, as I cannot even quite imagine just what a 70,000 book (or series of books) would look like. Think about it, that would be 70 volumes of 1,000 pages each, which is simply ridiculous.

Instead, read this quote from Andrew Grossman in a 2014 article on slate.com about this topic:

So, how long is it? In the 2013 edition, the last page is numbered 4,037. Now, that’s not exactly right either, for two reasons: The book starts at page 100, and then skips 500 pages in its numbering (don’t ask me why), and this volume (like all other volumes I’ve ever seen) contains both the present-day tax laws and prior versions of the tax law. That is because tax lawyers like me often find it useful to refer to prior versions of the law. But the compilation of those old laws isn’t really the “tax code”—it’s just a resource for lawyers. I’d estimate that the old law takes up about 800 pages. So let’s say the tax code is about 2,600 pages long. It’s like 2½ times the length of Stephen King’s It—except you replace “scary clown” with “accounting methods.”

Now that sounds much more reasonable, and Grossman even goes on to try to figure out where the 70,000 number comes from. He finds that it began with equating the “CCH Standard Federal Tax Reporter,” with the US tax code. And although that tome does contain the tax code, it also includes history, commentary, regulations, etc. on tax law in general.

This still does not mean that understanding the tax code is easy, but it’s not as wildly complicated as some would have us believe, and that is worth knowing. It is also worth knowing someone who understands the code no matter its size, so if you still have questions or needs for your 2016 return, don’t hesitate to contact us.

Over the last few weeks, I have touched on both the politics of our new presidential administration and IRS audits. And I suppose it won’t surprise anyone to know there is a spot of convergence between those two worlds. After all, the future of the IRS does not appear as if it will remain status quo under the new administration, but it also appears impossible to determine where its future lies.

A recent New York Times article discussed the different outlooks on the agency presented by President Donald Trump and Treasury Secretary Steven Mnuchin. Trump, who the article slyly points out has had issues with the IRS in the past, has advocated plans that could drastically cut agency funding. Mnuchin, on the other hand, believes that the IRS needs an increased budget to regain some of the power it held in the past.

With ever decreasing funding, the IRS has been carrying out fewer audits, which inevitably leads to less collection of taxes owed. In a way then, it seems counterintuitive to make the IRS suffer more cuts, for it seems there should be a sweet spot where the increased funding pays for itself?

That seems to be the tact Mnuchin would prefer, but whether him getting his way seems unlikely. Just where the final allocation of funds lands, however, is impossible to determine. So just remember the recent things I have written about audits, and how one does not need to fear one if turning in a valid tax return. Then at least if an audit does happen to you, there can be confidence that it will not result in drastic negative findings for you – even if the wait times in dealing with the agency’s customer service is maddening, for again, less funding means less manpower.

This story further illustrates how we cannot be sure about how tax law will change over the next year. Indicators say that many taxpayers can expect a decreased tax burden, but it promises to be months before we have any sort of final answers in this area.

(And with a likely protracted battle over The Affordable Care Act, those issues could linger right up to next tax season.)

One thing that can help in times of uncertainty, though, is taking control of the things over which you have power. One of those can still be your 2016 tax return. There is already only about six weeks left in the tax season, so if you’ve been procrastinating filing your return (or even starting to get your paperwork together), then do it now while you still have enough time. The more time you have to get everything in order, the more chances we have to turn things more in your favor.

From this end, let me also give a warning that this is the time of year when our calendar can fill up fast, so the sooner you set up an appointment with us to handle your taxes, the better chance you have of being able to do so at a convenient time for you.

Finally, I want to let this also serve as a time for us to remain committed to bringing you valuable service that you can count on. In these time of uncertainty, we want to be one of the things you know you can count on. Let our service prove it to you this tax season, and for those beyond.

I know that is has only been a couple of weeks since I last mentioned audits, but it remains a hot-button topic this time of year – as it should be, really. It was reported last week that the number of audits the IRS is carrying out continues to decrease, but remember they are far from nonexistent.

That report seems to be what triggered this recent article on Forbes.com, which goes into ways to try to avoid being audited. Much of what is in that article is similar to my recent writing on the subject, but there were some new additions that I think are worth highlighting.

The first comes under the heading of “Call Home,” referring primarily to the number of college students away from home who may be filing their own tax returns, possibly for the first time. If they are doing such a thing, what will they mark it comes to whether they are a dependent on someone else’s tax return? And most importantly, will it match what their parents claim? This is something that a phone call will figure out in a few minutes. That time commitment is quite worth it to make sure that everyone’s return says the same thing.

The next thing heading I wanted to mention is “Don’t make up stuff.” Granted, this is as obvious as it sounds, but I enjoy the story shared to highlight the issue – a client at audit who claimed expenses (without receipts) with all round numbers, but not just to the nearest dollar, to the nearest hundred or thousand. It serves as a warning that if numbers look made up, the IRS will know it. If putting something on your return makes you uneasy, you probably shouldn’t’ do it.

There is, however, another topic in the article with which I wanted to raise some issue, and that is “Be as normal as possible.” Now sure, if your only goal is to not be audited, yes, you should be as normal as possible, for outlying numbers are ones that can raise red flags when the IRS is reviewing returns. But even if being as normal as possible may keep you from an audit, I don’t think you should withhold anything legitimate on a return, even if it lies outside the norm.

So think of the college student and his parents whose audit issues could be avoided with a couple of questions. Think of the business owner who didn’t keep good records and ran with guesses and estimates because they thought they were entitled to something. And then think of someone facing an audit because they knew they were due to more of a tax break than most in their situation.

Who would you rather be?

I think we will all pick the last of the three, and that is because they are the one who filed their return with not only confidence, but with the necessary knowledge. It’s a good thing you already know a tax professional that you can trust, isn’t it?

I know that during election season I wrote often about politics. I never thought it was my place to take sides, but there were issues being raised that I thought deserved attention for they could affect one’s financial, business, and/or tax situations.

I have been quieter on that front since, for in those couple of months between election and inauguration there were no new measures being passed, and we all largely sat by in wait-and-see mode. Now that President Donald Trump has taken office, though, we are starting to see the ramifications of his actions.

As most have hopefully realized by now, there is a connection between your tax return and the Affordable Care Act/Obamacare (and since I have seen recent data that says many don’t realize it, please know that those are two names for the same thing). Since Trump’s first executive order displayed his intentions to undo any aspects of the ACA that he could as quickly as possible, it is not surprising that us in the tax world are closely watching this.

Unfortunately, we are largely in another wait-and-see area now, though. We have just moved into a further shade of gray (of which I hear there are at least 50, some of them darker) because the executive order doesn’t lay out definite action steps. Instead it states that agencies and authorities, “shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.”

So how is the IRS handling this and how does it affect your current tax filing?

Well, you should currently not make any changes and not wait to file your taxes. Hopefully, that’s clear enough to move us back toward black and white areas.

There are a couple of other definites we can say, too. First, the IRS was rejecting returns earlier in the season that did not include information related to health coverage. Now, however, lacking that information is no longer resulting in an automatic rejection.

This does not mean that there will not be penalties for those who did not carry health insurance without qualifying for an exemption. And that penalty can be big, $695 per adult and up to $2,085 per family, or 2.5% of the family income, whichever is greater. For as the IRS has warned, new legislation will be required to change those aspects of the ACA.

The debate over the Affordable Care Act is going to continue for the foreseeable future and changes to it seem likely, though I would not hazard a guess just how far they will proceed. No matter how quick they come, though, we are already deep into the 2016 tax season, with returns already being accepted and refunds given, so any legislation that had an effect on those current responsibilities would be stunning.

What this all will mean next year, then … well tune in next year to know that. In the meantime, proceed as you would have before the election and inauguration and know that we will be here along the way to help you with any questions you may have about this confusing situation.

I suppose it is not surprising that this is the time of year when people most think about the potential of a tax audit.  After all, many like to ignore all thoughts of taxes through much of the year, only letting them rise to the forefront when they are forced to file a return.

It also gets avoided, because it is the most frightening aspect of paying taxes. Again, no one gets too overjoyed when they see the amount of money they send to the government on an annual basis, but it is even worse when mysterious agents decide to take extra steps in an attempt to gather even more money from you. This can be especially worrisome, and unexpected, when it comes years after the return in question. I don’t want to be the bearer of bad news, but as the carrier of a little dose of reality, you may want to take note of this recent Forbes article that speaks of how audits can be started on returns that are up to six years old.

The rarity of audits is difficult to determine, for there are so many factors involved, and just what can trigger one is also impossible to nail down. Regardless of the answers, though, the best way to ease the tension of the possibility of coming under one is to work with a professional tax advisor that you trust (wink, wink, nudge, nudge). That way, even if you face this situation, you know that your return was correctly handled, and the only thing the audit should result in is inconvenience.

Tied in with that are common-sense things that can be done with a tax return that decrease the overall chances of an audit, there is another article from Forbes that tackles the idea from that point of view. Essentially, it largely comes down to the idea that you should fully be taking advantage of all that you are entitled to, but if you feel like you’re pushing the limits of what is reasonable (or even legal), then it is much more likely someone else looking at that return will agree with that feeling.

I would like to highlight one piece, though, about watching out for Forms 1099.  These come in many different varieties, some of which may even surprise you when they arrive in your mailbox. But know that if you received one, the government knows about it too, so you can’t hide it.

 I know that a lot of these more vague ideas about what could trigger an audit are not enough for some, and you want to know just what could make one happen, so here is one final article that goes a little more into it, and even has some concrete numbers on the chances of an audit.

For those who don’t want to read the whole article, or for those who just prefer to receive news through my golden words, here is a brief summary. First, your chances of an audit are higher if you’re self-employed. This makes sense as the government has less of a chance to track your income throughout the year. There are also more deductions open to someone in that situation, making more things the IRS may want to check up on.

Second, the IRS knows how many deductions someone in your financial situation claims on average, so if you’re an out liar claiming much more, they may question it. Again, this does not mean that you should not claim anything that is a legitimate deduction (let’s say you’re more charitable than most, you deserve the perks that come with those good deeds), but you will want to be able to back up all that you are claiming.

Finally, those on the extreme ranges of the income spectrum also run higher chances of an audit. These are further things that look out of the ordinary, after all, so the government may want to know why things look strange.

What you most want is for your return to be legitimate and result in you paying as few taxes as you are allowed, so contact us if you have not already so that we can ensure that is done for your latest return.  

It could be that I’m still a bit out of sorts after Super Bowl Weekend’s milieu of an historic game, Lady Gaga performance and sexy Mr. Clean, but my thoughts seem to be all over the place this week. So possibly because of that, welcome to a quick hits article, where I’ll highlight a few things that have come up in the tax world over the last week or so.

Amended Returns

This topic is something I find many people know about, but few ever take advantage of. Let me take this chance then to make you aware that many tax preparers are always willing to take a look at your past returns and see if we can turn it to your advantage (hint, hint). What better way could there be to prove our worth, right?

To that point, I found it odd that this article from the Journal of Accountancy begins by saying that many amended returns come about because of human error. Although I cannot deny this, I do not like how the wording seems to imply there may be some future mechanized way to make sure that everything turns out alright. After all, not a tax season passes when I don’t see people who have not been taking advantage of all the options legally open to them because a software program did not know the right questions to ask.

If you think you may be in that position, and a human touch could benefit you, well, you know where to turn.

Accountants are Cool

Well not cool like Born in the USA-era Springsteen cool, but pretty sweet nevertheless.  Or at least that is the conclusion that I am taking from another recent article.

It is a short piece, but mentions a few things business owners may want to think about (finding new revenue opportunities, future-proofing the business, and gaining an extra lookout) that are services their accountant could provide that they are not taking advantage of.

Not utilizing that potential is very much in line with those who don’t file amended returns in that they are both caused by inaction. It is not that one never thinks about the benefits and potential of these acts, it just never gets pushed forward enough in the mind (or you tell yourself it’s not the right time) to reach completion.

Then consider this a push, if there are some financial services you wished you had and are not receiving, you know where to turn.

Refund Repartee

One thing that people do always want to talk to a tax preparer about, though, is when they will get their refund. I certainly can’t fault people for this, I mean we can finish a tax prep meeting with me saying you’re going to be a receiving (a possibly unexpected) couple thousand dollars. If someone were to say that to me, I’d also be quite curious about the timeframe.

Essentially, though, the answer is that it arrives when it arrives. There are some rules that will cover when the money arrives, but it’s pretty set and standard and there isn’t anything you can do to speed it up.

Still, I suppose I shouldn’t have been surprised that an entire article was put together on the top tax refund myths.  So yes, unfortunately this is an area where we can’t help things move along faster for you, but if you need help anywhere else, please feel free to contact us!