Audit Proof Your Tax Return

 

No one likes the stress involved when your tax return is under the audit spotlight. Here are some ideas to avoid some of the more common audit triggers.

1. Report everything that has an informational tax return. If you are like most Americans, you will receive numerous 1099s and W-2s in the mail. The IRS receives them too. If your tax return does not meet or exceed this reported income you can count on receiving a notice from the IRS. Some hints:
   • Make a list of the forms received last year
   • Update the list with any new vendors or employers
   • Check off each of them when you receive them
2. Match the reports…even when they are wrong. When reviewing your tax return make it easy for the IRS programs to match what is being reported to them. If an amount on a 1099 or W-2 is incorrect, try to get it changed before you file your tax return. If not possible, report the incorrect amount (so it matches the IRS records) and then correct it with an explanation.
3. Get your key information right. Social Security numbers must be valid. Names must match Social Security numbers. Mis-matches here are sure to be noticed.
4. Get your dependents right. You and an ex-spouse must consistently report your dependents. Both of you cannot claim a child as a dependent. If an ex-spouse claims paying you alimony, it must match alimony income on your tax return.
5. Get your documents in order. While the chance of being audited is historically low, it is expected to rise with all the recent hires at the IRS. Your best defense is to be prepared. So act now to organize your tax records. That way if you are audited, you will be ready to defend your deductions.

Alliance Financial & Income Tax: Your Trusted Partner in Blue Springs, Missouri

 

Introduction

When it comes to managing your finances and navigating the complexities of income tax, having a reliable partner by your side is crucial. Alliance Financial & Income Tax, located in Blue Springs, Missouri, has been serving families and small businesses in the Kansas City area since 2002. As a veteran-owned and operated business, they understand the unique challenges faced by individuals and entrepreneurs alike.

Services Offered

1. Income Tax Preparation Services

Alliance Financial & Income Tax specializes in income tax preparation. Whether you’re an individual, a small business owner, or an independent professional, their experienced Enrolled Agents can assist you in maximizing deductions and credits while ensuring compliance with tax regulations. Don’t leave money on the table—let the experts at Alliance Financial & Income Tax help you navigate the tax season.

2. Financial Planning

Dreaming of a comfortable retirement? Alliance Financial & Income Tax can help you create a personalized financial plan tailored to your goals. From retirement savings to investment strategies, their team will guide you toward financial security.

3. Financial Guidance

Making informed financial decisions requires expert guidance. Alliance Financial & Income Tax develops strategies that align with your unique financial needs. Whether you’re planning for major life events or seeking to grow your wealth, their advice is tailored to you.

4. Tax Reduction Strategies

Minimizing your tax liability is essential. Alliance Financial & Income Tax helps you see the bigger picture and considers the tax implications of your financial choices. By legally reducing your tax burden, you can keep more of your hard-earned money.

Who They Serve

Alliance Financial & Income Tax caters to a diverse clientele:

1. Retirees & Pre-Retirees: Mitigate risk and enhance wealth accumulation strategies for a secure retirement.
2. Small Business Owners: Proactive financial planning for entrepreneurs without the safety net of traditional employment.
3. Working Professionals: Maximize benefits and employer-sponsored plans to transition smoothly into retirement.
4. Women: Address unique financial challenges and create a path toward financial security.

The Three-Step Process

1. Discover: Schedule a meeting with Alliance Financial & Income Tax to discuss your ideal retirement and financial goals.
2. Evaluate & Plan: Their team will assess your current financial situation and create a customized plan.
3. Implement: Alliance Financial & Income Tax will guide you through the steps needed to achieve your financial objectives.

Conclusion

Alliance Financial & Income Tax is more than just a tax preparation service; it’s a trusted partner committed to your financial success. Whether you’re in Blue Springs, Missouri, or the surrounding area, reach out to them at AFITonline.com to schedule a consultation. Let their expertise help you make the most of your hard-earned money.

Homeowner Alert! Review Your Tax Forms

 Homeowner Alert! Review Your Tax Forms

New tax rules are creating confusion

Tip Category: Deductions

Because of many home-related tax changes over the years, it can easily confuse taxpayers on what, when and how much can be used to qualify for a home mortgage related deduction. So when your mortgage company reports tax-related information to you and the IRS using Form 1098, it no longer means all the interest and points reported on these statements are tax deductible. Here is what you need to remember:

• Mortgage interest deductions loan amount limits. For mortgages starting on or after Dec. 15, 2017, you can deduct interest on up to $750,000 of the loan (it is $1 million for mortgages initiated before Dec. 15, 2017). If your original mortgage is above the threshold, a calculation will have to be done to determine the deductible amount of interest. You can’t simply deduct the full amount of interest being reported on your Form 1098.
• Proceeds not used to buy a home add complexity. Proceeds from home equity debt that are not used to build, buy, or substantially improve a qualified home are not tax deductible. This includes mortgage or home equity proceeds used to pay for college expenses, debit consolidation, or other purposes. Mortgage companies issuing these loans will still send you a Form 1098, but it’s up to you to prove how you use the funds during the current year and any prior year.
• Mortgage points requires review of settlement statements. Points are paid as a way to obtain a lower interest rate. Generally, points are deductible in the year they are paid, but they have more restrictions than mortgage interest. Points paid to refinance an existing mortgage, for example, may need to be deducted over the life of the loan. If you bought or refinanced a home this past year, a review of your mortgage settlement statement may be required to ensure proper tax treatment of the cost of your points.
• Mortgage insurance premiums are not deductible. If you pay mortgage insurance, your mortgage insurance premiums are not deductible. This on again, off again deduction is now in the off position.

With the rise in interest rates over the past several years, more taxpayers will be itemizing their deductions due to mortgage interest. So for each Form 1098 you receive, make a note on the form to explain what the loan is for to ensure a proper deduction.

Factors that Will Affect the Size of Your Tax Refund

Many people eagerly anticipate tax season. It's a chance to get back some of the hard-earned money you've paid in taxes throughout the year. However, the size of your tax refund can vary significantly from year to year, and it's essential to understand the factors that influence it.

In this blog post, we'll explore some critical factors that can affect the size of your tax refund.

1. Income Level
   One of the most significant factors that will impact the size of your tax refund is your income level. Generally, earning more money will have a higher tax liability, which can result in a smaller refund or even a tax bill. Conversely, if your income is lower, you may be eligible for various tax credits and deductions to increase your refund.
2. Filing Status
   Your filing status is crucial in determining your tax liability and refund amount. There are several filing statuses, including Single, Married Filing Jointly, Head of Household, and more. Your chosen level can affect your tax brackets, standard deductions, and eligibility for certain tax credits. For example, married couples who file jointly often receive more favorable tax treatment than those who file separately.
3. Tax Deductions
   Tax deductions reduce your taxable income, which can result in a larger tax refund. Common deductions include mortgage interest, medical expenses, charitable contributions, and state and local taxes paid. The more deductions you qualify for, the lower your taxable income will be, potentially leading to a larger refund.
4. Tax Credits
   Tax credits directly reduce your tax liability; some are refundable, meaning they can increase your refund even if you have no tax liability. Examples of popular tax credits include the Earned Income Tax Credit (EITC), the Child Tax Credit, and the American Opportunity Credit for education expenses. Eligibility for these credits often depends on factors like income, family size, and education expenses.
5. Withholding Amount
   Your tax refund is the difference between the taxes you owe and the amount you've already paid through withholding or estimated tax payments. If you have too much money withheld from your paycheck throughout the year, you will receive a larger refund. Conversely, if you have too little withheld, you may owe additional taxes or receive a smaller refund.
6. Life Changes
   Life events such as getting married, having children, buying a home, or changing jobs can significantly impact your tax situation. These changes can affect your income, deductions, and credits, leading to variations in your refund from year to year.
7. Changes in Tax Laws
   Tax laws are subject to change, and new legislation can alter the tax landscape. These changes can either increase or decrease your tax liability and refund size. Staying informed about tax law changes and working with a tax professional can help you navigate these shifts effectively.

Various factors influence the size of your tax refund, and understanding these variables is essential for effective tax planning. While controlling every element is impossible, you can make informed decisions to optimize your refund potential.

To ensure you receive the maximum refund you're entitled to, consider consulting a tax professional who can help you navigate the tax code's complexities and identify tax savings opportunities. Ultimately, staying informed and proactive can significantly affect the size of your tax refund each year.

Navigating Back Taxes: A Guide to Resolving Them with Expert Help

 

Understanding Back Taxes

Back taxes—those lingering financial ghosts from previous years—can haunt your financial peace of mind. Whether you missed filing a return, underreported income, or miscalculated deductions, dealing with back taxes requires a strategic approach. Fear not! Let’s break it down step by step.

1. Acknowledge the Situation

First, take a deep breath. Facing back taxes head-on is essential. Acknowledge that you owe taxes from prior years and commit to resolving them.

2. Seek Professional Guidance

Enlisting the help of a tax professional is crucial. These experts specialize in navigating the complex tax landscape. Here’s how they can assist:

• Assessment: A tax professional will review your situation, assess the outstanding taxes, and determine the best course of action.
• Options: They’ll explain your options, such as payment plans, offers in compromise, or penalty abatement.
• Advocacy: Your tax pro becomes your advocate, communicating with the IRS on your behalf.

3. Gather Necessary Documents

Before meeting with your tax professional, gather essential documents:

• Prior-Year Returns: Collect any unfiled tax returns.
• Income Records: W-2s, 1099s, and other income-related documents.
• Expense Documentation: Receipts for deductions or credits.

4. Choose a Tax Professional

Select a tax expert based on your needs:

• Certified Public Accountant (CPA): CPAs are licensed professionals with expertise in tax law.
• Enrolled Agent (EA): EAs specialize in tax matters and can represent you before the IRS.
• Tax Attorney: If legal complexities arise, a tax attorney provides legal advice.

5. Collaborate with Your Tax Pro

During your consultation, discuss:

• Filing Past Returns: Your tax professional will guide you through filing back tax returns using the correct forms for each year.
• Payment Options: Explore payment plans or offers in compromise.
• Penalty Abatement: Your tax pro can request penalty relief if you have a valid reason.

6. Take Action

Once you’ve agreed on a strategy, take action:

• File Promptly: Submit your past-due returns promptly.
• Payment Plan: Set up a payment plan if needed.
• Negotiate: If eligible, negotiate an offer in compromise.

7. Stay Compliant Moving Forward

Learn from the past. Stay current with your taxes to avoid future back tax situations.

---

Remember, you’re not alone in this journey. Seek professional guidance, address back taxes, and regain your financial footing. Share your experiences or questions in the comments below—I’d love to hear from you! 📝💡