If you have not filed your taxes, are not on extension, or have simply missed the deadline, then the first thing you should do is to reach out to the tax company who is handling your taxes and to check to see if they did file an extension without sending you a copy. If there’s no extension, you still should file a return, even if it’s past the deadline, you will still want to go ahead and file one in order to reduce the potential financial penalty for being late. Different penalties will be applied for late filing and late payments, but it all depends on the how long it takes you to file or pay what you owe. If you wait to file more than two years past the deadline, the IRS is not required to pay you a single cent if you had a refund, so that should help you get motivated!

If you are on extension, do not procrastinate. The added time you were given was to help you prepare an accurate tax return. Use this time wisely to continue to gather the info you needed rather than waiting to the last possible minute.

And finally, if you turned in your taxes without a hitch, enjoy the coming summer months. If your tax filing process did not go so well, find out what caused the problems and iron them out for next year. Was there a death in the family? Did your employment status suddenly change? Was there a divorce that changed your marital status?

There can be many unexpected hiccups in life that can affect your tax return. That is why it is recommended to start early and talk to your tax preparer throughout the year to check in on events current, planned and unplanned. It’s better to tell your tax preparer well in advance of that impending marriage or baby on the way. Even a divorce—if you started divorce proceedings now, it’s likely you’ll have a “single” status by next year’s tax return.

So if you are looking for help with bookkeeping or tax consulting for next year, then give us a call. We can help design a plan that will ensure you stay on track and accountable for the calendar year of 2012. Call Simons Accountancy now to make an appointment—we’ll do a review of your taxes and get you on track for next year: (714) 637-4552

But no matter if it’s the 15^th or the 17^th, this deadline is the day that many dread, but most are relieved to find that they come out unscathed. The truth is, if you need to file a tax extension then there is no shame in doing so—in fact, statistics show that 30-40% of Americans file for a tax extension every year. Their reasons may differ, but if you notify the IRS within the allotted time then there should not be any problems.

However, filing for a tax extension does not mean you get a free ride when April 17^th comes around. In fact, to qualify for an extension you must have paid the majority of your tax liability for that applicable year. Not sure what that means? It means that if you have not paid more than 10% of your total tax liability, or $1,000, then you will be charged with fees and penalties in addition to the current interest rate.

On the other hand, if you have all your required payments in order, then you would need to inform the IRS of your tax extension request by filling out a Form 4868, known as the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This will provide the IRS with the data needed to process your request so that you only need to pay interest instead of charges and additional fees. Note that the added six months also gives you time to re-purpose your money from a traditional IRA to a Roth account. Self-employed business owners also get the added bonus of being able to fund retirement accounts right up to the extension’s due date.

So whatever the reason, be sure to file a tax extension if you know you are going to need the extra time. It can provide a safe cushion for your business during a down year, or give you the time you need to recover from an unexpected event, such as the sudden death of a loved one. No matter what the reason, Simons Accountancy is here to assist you with your every question, concern, as well as provide professional advice for any tax-related inquiry. Call now to have your taxes reviewed and get an extension filed for you: (714) 637-4552

In 2011, the IRS reworked what is known as the Alternative Minimum Tax. These rules were established so that anyone who has certain tax advantages must meet the required minimum tax. Thus, if your regular tax falls below the minimum calculation for your income you must pay an alternative tax to make up the difference.  Here are six facts to help better communicate the rules and changes about the AMT:

• You must understand that the purpose of tax laws is to provide benefits for specified incomes, and to allow deductions or the production of credits to accommodate specified expenses. Because of these preliminary rules, some taxpayer’s financial obligations were being drastically reduced by multiple claims.  So, in order to counter act this exploitation used amongst higher taxpayers, Congress created the Alternative Minimum Tax in 1969.

• Middle-income taxpayers are discovering at an increasing rate that they are subject to the AMT because it was not indexed to accommodate inflation.
• If your taxable income, plus applicable preference items and adjustments, are equal to more than the AMT exemption amount, then you may have to pay AMT.
• The law sets the AMT exemption amounts for each filing status.
• The AMT exemption amounts were raised by Congress in 2011 to the following levels:
  • $74,450 for a married couple filing a joint return and qualifying widows and widowers;
  • $48,450 for singles and heads of household;
  • $37,225 for a married person filing separately.

• In addition, the change was made in 2011 to increase the minimum AMT exemption amount to $6,800 for children whose unearned income was taxed at their parents’ tax rate.

At Simons Accountancy, we make it a point to inform you when such changes occur in the nation’s tax laws. Our systems are always up to date with current calculations and information regarding tax laws and changes, and we always makes sure that they are reflected in your tax return.

For more information about the Alternative Minimum Tax, feel free to give us a call to determine whether or not you are eligible for—or affected by—AMT.

Dreading the quickly approaching date of April 15^th? Let Simons Accountancy take care of you and ease your fears! Call (714) 637-4552 for an appointment before you miss the date. Please note: We will not be scheduling any appointments after next week, so if you need a tax return or need and extension, call now so we can fit you in before our deadline!

At first, many people thought that this proposal would be good news for small businesses, yet small-business advocates say that Obama’s plan will benefit only a low number of small companies. As if that wasn’t bad enough, these advocates also point out that it will leave many business owners with higher tax bills.

It’s no wonder there hasn’t been overwhelming support for this proposal.

On the surface, Obama’s call to reduce the top corporate tax rate from 35 percent to 28 percent seems great, especially when you add that manufacturers would pay no more than 25 percent. Fantastic, right?

Wrong. Those tax reductions would only be for C corporations. Well-known C corporations are the big names, like General Motors, Co., Apple Inc. and Johnson & Johnson, and these C corps pay taxes on the money they earn.

Seventy-five percent of small business owners choose to become an LLC or S corporation, or they are sole proprietorships and/or partnerships; only 25 percent are set up as C corporations. What’s the difference? In the companies that are not C corps, the earnings from the business are passed to the owners, who report those earnings on their 1040 tax forms as income and pay the tax.

When you look even closer, you’ll find that most small businesses pay a substantially higher tax rate than these C corp reforms. Many small business owners fall into the group of households that have incomes above $250,000 annually, and they will face a federal tax rate of up to 39.6 percent next year. Ouch.

But before you start panicking, remember that this big tax law change is unlikely to make it through Congress in an election year, but it is good to have this on our radar. (And by “our”, I mean that Simons Accountancy is a small business, too!)

Is there anything beneficial in the proposal, or is it all bad news? Happily, the proposal does actually address some real concerns of the small business owner. It will increase the deduction for purchases of equipment, like computers, vehicles and machinery, from the $125,000 it is now up to $1 million. It is scheduled to drop to $25,000 next year, having dropped from 2011’s $500,000. Obama’s proposal would also double the deduction that an entrepreneur can claim for money spent on starting a company, from $5,000 to $10,000, and also allows more companies to use a simpler method of accounting: The “cash method”.

But although the National Small Business Association called the parts of the proposal listed above “positive”, they also called for broad reform of the tax code in the U.S., including individual income taxes.

What do you want to see in small-business tax reform? What would help your business out the most? Is there anything you’d like to keep the same? Please let us know in our comments section, below.

And, as always, if you have any questions about the tax issues for small businesses, please get in touch. We’re never too busy to help our clients, even during tax time! Call (714) 637-4552 or send us an email using our online form.

The first one is the most common way to determine how or when you should define your vehicle use as a claim for deduction or as exclusion from your income. Similar to an expense account, the accountable plan requires you to keep track of incurring costs and to obtain reimbursement when using your own vehicle for work purposes. As much as many of us want it to be, commuting to work does not meet the requirements needed to qualify as a tax deduction. Instead, expenditures such as parking fees, tolls, maintenance, repairs, fuel, car washes, registration and mileage can meet the criteria needed to file a claim. Just be sure to submit these expenses to your employer for confirmation or, if you are an entrepreneur, be sure to view your employees’ expenses for complete verification.

The second method pertains to employers providing a company-owned vehicle to their employees. In this scenario, it is up to the employee to manage and divide their driving time between business and personal use. Time spent on business matters should not be considered as income, but all personal time must be claimed as non-cash income.

For those who do not fall into either one of these categories, it may be better for you to claim the “unreimbursed expense” on your tax return.  This situation is best used when you are required to use your vehicle for work, but your employer does not have an accountable plan, nor do they reimburse you for any expenses.  For example, an outside salesperson that lives in their vehicle and drives from client to client all day long.

Unfortunately, complications can sometimes arise when trying to follow any of these procedures. In reality, the average taxpayer finds it difficult to find the line that divides each expenditure into business or personal categories. Not to mention that certain scenarios, such as having more than one job site or two totally different jobs, can cause a lot of confusion when trying to file taxes.

The most important thing to remember is to keep detailed records of all expenditures. Why? Because, at the end of the day, the use of a vehicle for your business is a legitimate deductible expense and should be claimed as such. At Simons Accountancy, we don’t want you to miss out on any deductions on your tax return!

Are you worried about your tax return? Are you sure you’ve missed something important? Bring it in to Simons Accountancy Corporation. We will make sure your return is complete and sent in on time.

Call now for an appointment—there’s still time! (714) 637-4552

**We have copied and pasted this directly from the email from the Internal Revenue Service.

WASHINGTON – The Internal Revenue Service today warned senior citizens and other taxpayers to beware of an emerging scheme tempting them to file tax returns claiming fraudulent refunds.

The scheme carries a common theme of promising refunds to people who have little or no income and normally don’t have a tax filing requirement. Under the scheme, promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

In recent weeks, the IRS has identified and stopped an upsurge of these bogus refund claims coming in from across the United States. The IRS is actively investigating the sources of the scheme, and its promoters may be subject to criminal prosecution.

“This is a disgraceful effort by scam artists to take advantage of people by giving them false hopes of a nonexistent refund,” said IRS Commissioner Doug Shulman. “We want to warn innocent taxpayers about this new scheme before more people get trapped.”

Typically, con artists falsely claim that refunds are available even if the victim went to school decades ago. In many cases, scammers are targeting seniors, people with very low incomes and members of church congregations with bogus promises of free money.

The IRS has also seen a variation of this scheme that incorrectly claims the college credit is available to compensate people for paying taxes on groceries.

The IRS has already detected and stopped thousands of these fraudulent claims. Nevertheless, the scheme can still be quite costly for victims. Promoters may charge exorbitant upfront fees to file these claims and are often long gone when victims discover they’ve been scammed.

The IRS is reminding people to be careful because all taxpayers, including those who use paid tax preparers, are legally responsible for the accuracy of their returns, and must repay any refunds received in error.

To get the facts on tax benefits related to education, go to the Tax Benefits for Education Information Center on IRS.gov.

To avoid becoming ensnared in this scheme, the IRS says taxpayers should beware of any of the following:

• Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
• Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
• Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
• Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
• Offers of free money with no documentation required.
• Promises of refunds for “Low Income – No Documents Tax Returns.”
• Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.
• Unsolicited offers to prepare a return and split the refund.
• Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.

This refund scheme features many of the warning signs IRS cautions taxpayers to watch for when choosing a tax preparer. For advice on choosing a competent tax professional, see Tips for Choosing a Tax Return Preparer on IRS.gov.

For additional information on tax scams, see the 2012 Dirty Dozen list.

In which case you may be thinking—“You’re right! I need an actual person helping me with my tax return!” And you write down the number of that well-known tax preparation service that has been running ads on television for years. They must be good, right?

Not necessarily. Let’s explain a few things about these tax preparation firms that are commonly seen in television ads around tax time.

We use the analogy of a triangle. Imagine, if you will, walking into one of these tax preparation firms’ offices. You are now at the base of the triangle.  There will be rows upon rows of desks in that office, with employees talking to customers about their taxes.  You will be assigned to one of these tax preparers, but in the back of the room, essentially the top of the triangle, there is one person sitting on high.

You’ll be assigned to one of the tax preparers in the front, who will interview you, review your receipts, paperwork and other information they need for taxes, and then prepare your tax return for you. All of these tax preparers have to funnel the returns they have worked on up to the person at the top of the triangle. This person takes all of five minutes to look at your return for accuracy, signs it and sends it on, because they are looking at literally hundreds each day.

So far, so good, right? Well, let’s look a little closer. The person at the top of the triangle is usually an “enrolled agent”, rarely a certified public accountant. While enrolled agents (or EAs) have been tested by the IRS and can represent any taxpayer in any tax matter, they have not passed the rigorous certification test that certified public accountants have taken—a test that is said to be second only to passing the bar in difficulty. It’s not to say that they aren’t qualified to prepare taxes, but you are likely to get a higher level of service and knowledge from a CPA. CPAs are required to have a BA or BS degree before taking their CPA exam and, like an attorney, is required to pass testing in the state in which they are going to practice. They are held accountable at a state level.

As for the tax preparers at the base of the triangle, they have had about 80 hours worth of instruction before taking a test that they need to only pass with a score of 80% or higher. (Most CPAs study for six full months for their examination.) They get taught the basics, like how to read a W2 form, filing status, tax credits and deductions and exemptions, and then they are given the test. Their results determine whether or not they are given a job. No other formal training is required, not even anything above a high-school degree.

Like with many things in life, you get what you pay for. Is a small refund worth an audit down the line? Are you happy paying for a service where your taxes are being prepared by marginally qualified individuals? Or would you rather spend a little more money and get your taxes completed by a true professional?

But don’t just assume that all CPAs are perfect! Treat hiring a CPA like hiring an employee. Schedule an interview. Check references. Trust your gut feeling—do you feel comfortable with this person?

At Simons Accountancy, every tax return gets personally checked by Ed Simons himself, and he sure takes more than 5 minutes reviewing each return. He takes the time to look over the details and all of the supporting documents before signing off on the return.

Remember, that if you are audited, it’s not the tax preparer’s responsibility to recompense the IRS if the return is wrong; that burden is squarely on the individual’s shoulders. Yes, these companies will have some guarantee on certain types of mistakes and will attempt to fix them, but the individual is responsible to pay any discrepancies on money owed.

Do you have questions about the Simons Accountancy process? Are you ready to schedule an interview with Ed Simons? April 15^th is fast approaching, so contact us now for the earliest appointment to review your taxes—call (714) 637-4552 or use our online form.

For example: I told a client to go to someone else this year, because they said that they had sought a second opinion and believed that I was wrong. I had gone to a seminar prior to this incident, along with one of my staff bookkeepers, and we heard this client’s exact example, almost verbatim, spelled out. And the answer? We were right, according to the expert teaching the course.

At the end of the day, there are people out there who just don’t understand the consequences of short sales and foreclosures when it comes to your tax return. Was the property a rental? Your personal residence? Was the debt recourse or non-recourse? A personal residence that you borrowed money against or refinanced? There are so many variables that can affect how the property is reported in your taxes—and each time one of those variables changes, it changes the outcome.

Each and every time we help a client with their tax return and they are reporting a short sale or foreclosure, it’s a different return. There is no template to these types of tax returns: Every single one has different variables that need to be explored, followed up on and reported properly. And, depending on the facts and circumstances, you might find that you receive a tax refund because of a deductible loss.

You definitely need professional guidance when you are reporting a short sale or foreclosure in your tax return, no question about it. Frankly, you would be crazy to do it yourself, and you will most likely be asking for an audit.

And it’s not clear if the IRS will audit you because the return is blatantly wrong, or if all of the attention surrounding bad lending and the housing markets will capture the auditors’ attention—we don’t know how this will pan out over the next few years. They’ve just started sending out auditing notices for 2009, which is really when the foreclosure crisis hit, and it won’t be until the end of this year when we’ll find out how the IRS decides to deal with these foreclosure/short sale tax returns. Keep an eye out on our blog for further information on this subject, one that will not be going away for a while.

But, as always, wouldn’t you rather have your tax return correct rather than take a gamble? Protect yourself from further financial distress by making sure you report that foreclosure or short sale correctly. That process is a stressful one, to say the least, and the last thing you need is to have that stress resurrect itself down the line, just as you’re getting back on your feet.

But if you are bound and determined to do your tax return yourself, then do us one favor: Call a licensed CPA and arrange a one-hour complimentary consultation. We provide these for potential clients, and in this situation, that one hour could help you understand what you’re getting yourself into.

If you still have questions about your tax return, foreclosure or not, please give Simons Accountancy a call at 714-637-4552, or fill out our online contact form here http://simonscorp.com/contact-us/. Take the tax-time stress out of your life and make sure your taxes are done right—we can help.

Let’s get the last two out of the way: A statutory employee is a certain type of independent contractor that have special situations that require them to be treated as employees for certain employment tax purposes, like types of delivery drivers, salesmen, those assembling items at home or a life insurance agent. The three categories of statutory nonemployee are fairly simple: licensed real estate agents, direct sellers and certain companion sitters. Click on the links if you’d like to read the full description on the IRS website.

And as for categorizing independent contractors and employee—well, it’s not an exact science. There is no single factor that is decisive in determining a worker’s status, as the individual circumstances of each case will determine how the IRS’ axe will fall. The basic rule is this: Independent contractors generally control the manner and means by which their contracted work (i.e. services, products or results) is achieved. For instance, an employee may have a deadline for a project, but their employer deems that they have to work on it from 8 a.m. to 5 p.m. during normal office hours and at the employer’s office. An independent contractor, for instance, may have the same deadline for a project, yet they can do it working 36 straight hours at home in their pajamas, or for one hour a day for two weeks, as long as they provide the results they were hired to do.

There are 20 factors that the IRS will consider when determining employee vs. independent contractor relationship.  The first five are as follows:

1. Level of Instruction: If the company dictates to the worker when, where and how the work must be done, that level of control leans towards an “employee” status.
2. Amount of Training: If you need to direct the worker in the methods of how the work should be done, i.e. sending them to company-provided training, this suggests an employee status.
3. Degree of Business Integration: If the worker’s services are integrated into day-to-day business operations or they significantly affect business success, that worker is likely to be considered an employee.
4. Extent of Personal Services: Independent contractors are usually free to assign the work in the project’s scope to whomever they choose, whereas a company will insist on a particular person performing the work (for instance, covered under an employee’s job description), which indicates an employee relationship.
5. Control of Assistants: Have you hired, supervised and paid that worker’s assistant? Then most likely this worker has an employee status, as an independent contractor maintains control over hiring, supervising and paying helpers.

Again, these are only the first five of 20 possible factors that can assess if your workers are employees or independent contractors. If you would like to read the remaining 15 factors, please leave a comment below and we would be happy to email them to you.

Also, don’t forget to ask us whether or not you should file an SS-8 form with the IRS to allow them to determine the worker’s classification. There are pros and cons to submitting the “Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding” form, so please don’t submit one until you’ve talked to us first.

Don’t let a misclassification of a worker cause you to be fined unnecessarily! We cut through the complex language of the IRS and translate it into words you can understand. Call now for your free consultation before it’s too late—1099s are due to your independent contractors by February 29^th! Click here to fill out our online form, or call us directly on (714) 637-4552.

Here’s one that we think you should all know about: California Senate Bill 459. Do you have any independent contractors working for your company? How many? Did you send them all a 1099 form? And, most importantly, do they all legally qualify as independent contractors?

If you are surprised by any of the questions above, it’s a good thing you’re reading this.

In Senate Bill 459, penalties for misclassified independent contractors will increase. That means that if you know that you have classified someone working for you as an independent contractor when you know full well that they should be treated as an employee, the penalty that can be assessed against you has just increased.

How much? Violation of SB 459 can bring a civil penalty of between $5,000 and $15,000. Not just for violating it, but for each violation. SB 459 has authorized the Labor and Workforce Development Agency to enforce its statutes, and to assess the specific civil penalties to be levied against employers (or persons) violating the law. In addition, the bill requires the LWDA to take other “specified disciplinary actions” against these individuals.

What kind of disciplinary actions? There’s one that they have outlined that reminds us of the way people have been “named and shamed” in public, either in the newspaper or being forced to wear a sandwich board in front of a busy store. This disciplinary action requires the employers who have been found guilty of this misclassification to create a notice “to display prominently” on their website for one year. The notice, to employees and the general public, must announce that they have committed a serious violation of law by this misclassification, and it must be signed by a corporate officer.

Is there more bad news? Yes. If an employer has been found engaging in the past or present in “a pattern or practice of violations”, that penalty we mentioned earlier moves up to a range of $10,000 to $25,000—again, that’s per violation. And, of course, the law does not define what they mean by “a pattern or practice”, but we assume it means that an employer’s records make it clear that they’ve misclassified on numerous occasions, and it was clear it wasn’t an accident.

So the moral of the story is that it is always better and safer to add a person as a full employee, rather than an independent contractor, if you have any questions at all about their eligibility.

Next week we will talk about how to determine the business relationship between an employer and an individual, and how to classify them as an independent contractor, an employee, a statutory employee or statutory nonemployee.

Sound complicated? Then let us explain it for you. At Simons Accountancy, we are happy to sit down with you for a free, one-on-one consultation to understand your tax questions and problems, and see if we can help. Our award-winning firm has the experience and know-how to deal with almost every tax problem. We cut through the complex language of the IRS and translate it into words you can understand. Call now for your free consultation before it’s too late—1099s are due to your employees by February 29^th! Click here to fill out our online form, or call us directly on (714) 637-4552.