Give tax records a mid-year tune-up

submitted by Martin H. Abo, CPA/ABV/CVA/CFF, Abo and Company, LLC

Here are some tips on tax recordkeeping.

  • Keep copies of your filed tax returns as part of your tax records. They can help you prepare future tax returns. You’ll also need them if you need to file an amended return.
  • You must keep records to support items reported on your tax return. You should keep basic records that prove your income and expenses that relate to your federal tax return for at least three years. This includes income information such as Forms W-2 and 1099. It also includes information that supports tax credits or deductions you claimed. This might include sales slips, credit card receipts and other proofs of payment, invoices, cancelled checks, bank statements and mileage logs.
  • If you own a home or investment property, you should keep records of your purchases and other records related to those items. You should typically keep these records, including home improvements, at least three years after you have sold or disposed of the property. Actually, because the statute of limitations runs for six years if they find there is a “material omission of income or excess deductions,” it is suggested retaining such records for seven years to be on the safe side.
  • If you own a business, you should keep records that show total receipts, proof of purchases of business expenses and assets. These may include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices. Also include credit card receipts, sales slips, canceled checks, account statements and petty cash slips. Electronic records can include databases, saved files, emails, instant messages, faxes and voice messages.
  • If you own a business with employees, you should generally keep all employment-related tax records for at least four years after the tax is due, or after the tax is paid, whichever is later.
  • The IRS doesn’t require any special method to keep records, but it’s a good idea to keep them organized and in one place. This will make it easier for you to prepare and file a complete and accurate return. You’ll also be better able to respond if there are questions about your tax return after you file.
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Opportunity Council celebrates 10 years of free tax prep: Volunteers needed

The Bucks County Opportunity Council Buck$Back Program marked 10 years providing free income tax preparation services on February 1st with the opening of three tax preparation sites throughout Bucks County. Volunteers are needed for the 2014 tax season to work directly with people who need help preparing their tax returns.

Since 2004, Buck$Back volunteers have helped prepare more than 7,000 income tax returns for low-to-moderate-income taxpayers, providing a value of $12.2 million in refunds, credits and fee savings. The volunteers assist hard-working, motivated families and individuals to obtain crucial refunds that can be used to reduce debt, start a savings account, go back to school, or pay for reliable transportation.


Linda Price, a long-time Buck$Back volunteer, enjoys making life a little easier for people struggling in hard times.
“Helping people who are trying so hard to help themselves is the biggest part of what we [volunteers] do,” said Linda. Don’t know that much about taxes? Don’t worry. Training is free and available in person or online. The program needs greeters, tax preparers, quality reviewers and phone schedulers. Retired or practicing tax professionals, college students and individuals with no prior tax-preparation experience who complete the training program are welcome. Become one of nearly 99,000 volunteers nationwide who helped people in their community file their tax returns. 
“You think, wow, it’s really great. I was really able to make that person’s day,” Linda said. “I encourage anyone who maybe doesn’t fit in a normal volunteer niche to consider something like this.”

Buck$Back is a Volunteer Income Tax Assistance (VITA) program administered by the Opportunity Council with funding support from the Bucks County Foundation in partnership with the Internal Revenue Service.
 Sites are located in Lower, Central and Upper Bucks through partnerships with Foxwood Apartments in Levittown, St. Andrews United Methodist Church in Warminster, and the Gathering Pointe Community Center in Perkasie.
 For specific information about volunteering for the program, visit www.bcoc.org and click Buck$Back, or call 215-345-8175 x209. 

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2013 Neshaminy School District Property Tax Assistance Program begins this month

The 2013 Neshaminy School District Property Tax Assistance Program begins this month. The purpose of the program is to provide property tax relief to senior citizens. The program is available to homeowners who will reach the age of 65 by December 31st, 2013. The program will provide tax rebates of up to $650 for senior citizens whose household income is less than $20,000. This includes reporting half of Social Security or Railroad Retirement Benefits, and 100% of any other income.

If you have received a rebate in the past, the district makes every effort to send a rebate application for you to complete each year. If you have not received a rebate in the past, rebate application forms will be available beginning this month. They will be available on the Neshaminy School District website, www.neshaminy.org, at your local tax collector’s office or by U.S. mail by calling 215-809-6522.

This program is entering its 36th year. Since 1977, rebates totaling over $2.3 million have been paid by the school district, with over 250 senior citizens participating last year.

NOTE REGARDING PENNSYLVANIA REBATE PROGRAM: If you qualify for Neshaminy’s rebate program, then you would also qualify for the Pennsylvania Property Tax program. The state program provides funds in addition to the Neshaminy rebate program and funds can be received from both. If you have not filed with the Commonwealth of Pennsylvania previously, you should call 1-888-222-9190 to order a form. This information is intended only to inform you; Neshaminy School District does not process the Pennsylvania rebates.

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2013 Neshaminy School District Property Tax Assistance Program begins this month

The 2013 Neshaminy School District Property Tax Assistance Program begins this month. The purpose of the program is to provide property tax relief to senior citizens. The program is available to homeowners who will reach the age of 65 by December 31st, 2013. The program will provide tax rebates of up to $650 for senior citizens whose household income is less than $20,000. This includes reporting half of Social Security or Railroad Retirement Benefits, and 100% of any other income.

If you have received a rebate in the past, the district makes every effort to send a rebate application for you to complete each year. If you have not received a rebate in the past, rebate application forms will be available beginning this month. They will be available on the Neshaminy School District website, www.neshaminy.org, at your local tax collector’s office or by U.S. mail by calling 215-809-6522.

This program is entering its 36th year. Since 1977, rebates totaling over $2.3 million have been paid by the school district, with over 250 senior citizens participating last year.

NOTE REGARDING PENNSYLVANIA REBATE PROGRAM: If you qualify for Neshaminy’s rebate program, then you would also qualify for the Pennsylvania Property Tax program. The state program provides funds in addition to the Neshaminy rebate program and funds can be received from both. If you have not filed with the Commonwealth of Pennsylvania previously, you should call 1-888-222-9190 to order a form. This information is intended only to inform you; Neshaminy School District does not process the Pennsylvania rebates.

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Good tax planning begins now

submitted by Martin H. Abo, CPA/ABV/CVA/CFF, Abo and Company, LLC

As we approach year-end, it’s again time to focus on last-minute moves you can make to save taxes – both on your 2013 return and in future years. To get you started, we’ve included a few money-saving ideas here that you may want to put in action before the end of the year.

For 2013, the standard deduction is $12,200 for married taxpayers filing joint returns. For single taxpayers, the amount is $6,100. Currently, it looks like these amounts will be about the same for 2014.

If your total itemized deductions each year is normally close to these amounts, you may be able to leverage the benefit of your deductions by bunching deductions in every other year. This allows you to time your itemized deductions so they are high in one year and low in the next.

For instance, if you’re temporarily short on cash, charge Tax (AMT – Alternative Minimum Tax), as these taxes are not deductible for AMT purposes.

Higher-income individuals will likely see their taxes go up this year. This makes it more important than ever to do the calculations to see where you stand before the end of the year.

If it looks like you are going to owe income taxes for 2013, consider bumping up the federal income taxes withheld from your paychecks now through the end of the year. When you file your return, you will still have to pay any taxes due less the amount paid in.

However, as long as your total tax payments (estimated payments plus withholdings) equal at least 90% of your 2013 liability or, if smaller, 100% of your 2012 liability (110% if your 2012 adjusted gross income exceeded $150,000; $75,000 for married individuals who filed separate returns), penalties will be minimized, if not eliminated.

Finally, watch out for the AMT in all of your planning. What may be a great move for regular tax purposes may create or increase an AMT problem.

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Where’s my tax refund?

submitted by Martin H. Abo, CPA/ABV/CVA/CFF, Abo and Company, LLC

Oy, another IRS notice?

But wait. What if you get a letter from the IRS informing you that they are holding the tax refund you were expecting?

Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other federal or state debts that you owe.

Here are six facts that we (and even the IRS) believe that you should know about tax refund ‘offsets.’

  1. A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
  2. The Treasury Department’s Financial Management Service (FMS) is the agency that issues tax refunds and conducts the Treasury Offset Program.
  3. If you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt.
  4. You will receive a notice from FMS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
  5. If you believe you do not owe the debt or you want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
  6. If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund federal Form 8379, Injured Spouse Allocation, needs to be filed.
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Doing 2012 tax returns, and now talking about 2013?

submitted by Martin H. Abo, CPA/ABV/CVA/CFF, Abo and Company, LLC

In general, estimated taxes must be paid on income which is not subject to withholding, including taxable income from self-employment, interest, dividends, alimony, gambling winnings, unemployment compensation, social security, rent, and gains from the sale of assets.

You also may have to pay estimates if the amount of tax being withheld from your salary, Social Security, pension or other income is not enough. Estimated tax is used to pay income tax and self-employment tax, as well as other taxes and amounts reported on your personal tax return.

If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty.

You may be charged a penalty even if you are due a refund when you file your return. Here are tips even the IRS agrees are worth considering about estimated taxes and how to pay them:

  1. As a general rule, you must pay estimated taxes if 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2013 taxes or 100% of the tax on your 2012 return.
  2. For Sole Proprietors, LLC Members, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
  3. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Consider changes in your situation and recent tax law changes.
  4. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15th, June 15th (17th in 2013), September 15th (16th in 2013) and January 15th.
  5. The 0.9% new Additional Medicare Tax applies to Medicare wages and self-employment income over threshold amounts. You may need to include this amount when figuring your estimated tax.
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Warning against taking distributions from inherited IRAs

submitted by Martin H. Abo, CPA/ABV/CVA/CFF

We have been seeing some interesting financial scenarios presenting themselves as we hunker down into tax season. Here’s one such item that came upon us that we thought we’d share with other clients and friends.

As you probably know, these days it’s increasingly common for individuals to inherit IRAs. By inheriting an IRA, we mean when you become entitled to some or all of the balance in a deceased account owner’s traditional IRA or Roth IRA by virtue of being designated as an account beneficiary.

In this scenario, you may think your share of the inherited IRA balance can be distributed to you and then rolled over tax-free into your own IRA before the familiar 60-day deadline for rollovers has passed. While this seems like a very reasonable assumption, we just learned IT’S WRONG – unless you are the deceased IRA owner’s surviving spouse. In other words, only a surviving spouse is allowed to roll over a distribution from an inherited IRA into his or her own IRA. Nobody else can.

Fortunately, there are apparently ways to finesse the “no-rollover-allowed rule” so that you can take control of your share of an inherited IRA without adverse tax consequences. However, to make this work, we just learned that you must follow some important rules, one of which is that you cannot receive a distribution check payable to you personally from the inherited IRA.

If you do so and are not the deceased IRA owner’s surviving spouse, you can’t put the money back into an IRA and continue earning tax-deferred income (or possibly tax-free income in the case of an inherited Roth IRA).

Furthermore, if you know the distribution is from an inherited traditional IRA and you are not the deceased IRA owner’s surviving spouse, you must include it in your taxable income. Depending on the circumstances, a distribution from a Roth IRA may result in taxable income to you as well.

To avoid adverse tax outcomes, we suggest you contact a pension/IRA/retirement specialist before taking any distributions from an inherited traditional or Roth IRA. That way, they can work with you to achieve the most favorable tax consequences for your inherited IRA money.

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Consumer Troubleshooter

submitted by Bucks County Consumer Protection Agency

Q. These last few years have been very difficult for me financially.  To make matters worse I now find myself in trouble with the IRS over my back taxes and unfiled returns. I cannot allow any more time to pass; I am being penalized and the amount is becoming outrageously high.

I have read and, also have heard on the radio, advertisements by companies offering tax relief and that these companies could help me to get the penalties I have incurred reduced. I was hopeful until my friend told me to be careful with these types of companies, because what they advertise may be a scam.

What can you tell me?  D.D., Telford

A. These tax relief companies do claim that they can reduce or eliminate your tax debt and back-tax collection by applying for IRS hardship programs on your behalf. They will ask that you pay up front for their service, which could be thousands of dollars.

The fact is that most taxpayers don’t even qualify for the programs these fraudsters promise. The truth is that many of these companies do not settle your tax debt and, in most cases, do not file the paperwork required by the IRS requesting your participation in the IRS hardship programs, even if you do qualify. Doing business with one of these companies could actually leave you even further in debt.

There have been complaints reported that, after signing up with one of these companies, the companies took even more of a consumer’s money by making unauthorized charges to their credit cards or withdrawals from consumer’s bank accounts.

Our first word of advice; don’t panic but, instead, consider your options.

When you are having difficulty paying your bills it is often a better idea to try and work out a payment plan with the company/creditor yourself. You don’t necessarily need to pay someone else to negotiate this for you. It is the same when you owe money to the IRS.

The IRS’s help for taxpayers includes an “Installment Agreement” program that is generally available to people who cannot afford to pay their debt in full, thus offering people the option of making smaller, monthly payments. There are a few other programs that might be better suited for your situation.

You can call the IRS at 1-877-777-4778 to speak to an independent Taxpayer Advocate Service representative or visit irs.gov/advocate. There are similar programs for state tax relief. State by state information can be found at nasact.org.

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Consumer Troubleshooter

submitted by Bucks County Consumer Protection Agency

Q. It is that time of year and I am getting ready to have my taxes done.  My husband, who usually did our taxes online, is recently deceased and I do not know how to use a computer.  I will need to have someone else prepare them for me.

I have heard though that some of these tax preparation companies offer to advance you more of a refund than you will actually get back.  This is done with the understanding that you will have to repay the additional money with interest set at a high rate.  I have a very limited budget and would not be able to pay back the extra money they are offering me.

Can you give me any advice?  T.T., Fairless Hills

A. The “instant refund” is what you are referring to and that was called a “refund anticipation” loan.

As of this year that type of loan is no longer legally available.  No one should be offering you this type of loan.

There were really high interests rates attached to this type of loan and did not really benefit the consumers.

The good news is that, because of what your annual income is, you are eligible to have your taxes prepared with a program called “Buck$ Back.”  This is a special program operated by a partnership of the U.S. Internal Revenue Service and the Bucks County Opportunity Council for Bucks County residents with earnings less than $50,000 annually.

In its ninth year of operation it is funded by several sources, including the Bucks County Commissioners.

If interested, visit www.bcoc.org and click Buck$Back, or call the Opportunity Council at 215-345-8175, ext. 221 for more details.

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