We are certified Public Accountants a nd Financial Consultants offering a wide ran ge of services in the areas of accounti ng, taxation, personal financial .
We are certified Public Accountants a nd Financial Consultants offering a wide ran ge of services in the areas of accounti ng, taxation, personal financial planning and busine ss consulting. A significant portion of o ur activities involve the taxation and financi al advising of individuals, small businesses, a nd their related activities; trusts, estates, investme nt partnerships, etc. We have many yea rs
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Scam Calls and Emails Using I RS as Bait Persist
Scams using the I RS as a lure continue. They ta ke many different forms. The most comm on scams are phone calls and emai ls from thieves who pretend to be fr om the IRS. They use the I RS name, logo or a fake websi te to try to steal your mon ey. They may try to steal yo ur identity too.
Be wary if you g et an out-of-the-blue phone call or automat ed message from someone who claims to be fr om the IRS.
Sometimes they say y ou owe money and must pay rig ht away. Other times they say y ou are owed a refund and a sk for your bank account information ov er the phone. Don’t fall for it. Here are several tips that wi ll help you avoid becoming a sc am victim.
The real IRS will NOT:
Call y ou to demand immediate payment. The I RS will not call you if y ou owe taxes without first sending y ou a bill in the mail.
Demand t ax payment and not allow you to questi on or appeal the amount you owe.
Requi re that you pay your taxes a certa in way. For example, demand that y ou pay with a prepaid debit card.
A sk for your credit or debit ca rd numbers over the phone.
Threaten to bri ng in local police or other agenci es to arrest you without paying.
Threaten y ou with a lawsuit.
If you don’t o we taxes or have no reason to thi nk that you do:
Contact the Treasury Inspect or General for Tax Administration. Use TIGTA ’s “IRS Impersonation Scam Reporting” web pa ge to report the incident.
You should al so report it to the Federal Tra de Commission. Use the “FTC Complaint Assistan t” on FTC.gov. Please add "IRS Telepho ne Scam" to the comments of yo ur report.
If you think you may o we taxes:
Ask for a call back numb er and an employee badge number.
Call t he IRS at 800-829-1040. IRS employees c an help you.
In most cases, an I RS phishing scam is an unsolicited, bog us email that claims to come fr om the IRS. They often use fa ke refunds, phony tax bills, or threa ts of an audit. Some emails li nk to sham websites that look re al. The scammers’ goal is to lu re victims to give up their person al and financial information. If they g et what they’re after, they use it to ste al a victim’s money and their identity.
If you get a ‘phishing’ email, t he IRS offers this advice:
Don’t reply to t he message.
Don’t give out your personal or financi al information.
Forward the email to [email protected]. Th en delete it.
Don’t open any attachments or cli ck on any links. They may ha ve malicious code that will infect yo ur computer.
More information on how to repo rt phishing or phone scams is availab le on IRS.gov.
What You Need to Know abo ut Taxable and Nontaxable Income
All income is taxab le unless a law specifically says it isn ’t. Here are some basic rules y ou should know to help you fi le an accurate tax return:
Taxable inco me. Taxable income includes money y ou earn, like wages and tips. It al so includes bartering, an exchange of proper ty or services. The fair market val ue of property or services received is normal ly taxable.
Some types of income are n ot taxable except under certain conditions, including:
Li fe insurance. Proceeds paid to y ou upon the death of an insur ed person are usually not taxable. Howev er, if you redeem a life insuran ce for cash, any amount you g et that is more than the co st of the policy is taxable.
Qualified scholarsh ip. In most cases, income fr om a scholarship is not taxable. Th is includes amounts used for certain cos ts, such as tuition and required boo ks. On the other hand, amounts y ou use for room and board a re taxable.
Other income tax refunds. Sta te or local income tax refunds m ay be taxable. You should receive a Fo rm 1099-G from the agency that pa id you. They may have sent t he form by mail or electronically. Conta ct them to find out how to g et the form. Report any taxable refu nd you got even if you d id not receive Form 1099-G.
Here are so me items that are usually not taxable:
Gif ts and inheritances
Child support payments
Damage awar ds for physical injury or sickness
Cash rebat es from a dealer or manufacturer f or an item you buy
Reimbursements for qualifi ed adoption expenses
Missing Form W-2? IRS Can Help
Mo st people get their W-2 forms by t he end of January. Form W-2, Wa ge and Tax Statement, shows your inco me and the taxes withheld from yo ur pay for the year. You ne ed it to file an accurate t ax return.
If you haven’t received your fo rm by mid-February, here’s what you shou ld do:
Contact your Employer. Ask your employ er (or former employer) for a co py. Be sure they have your corre ct address.
Call the IRS. If you a re unable to get a copy fr om your employer, you may call t he IRS at 800-829-1040 after Feb. 23. T he IRS will send a letter to yo ur employer on your behalf. You’ll ne ed the following when you call:
Your na me, address, Social Security number and pho ne number;
Your employer’s name, address and pho ne number;
The dates you worked for t he employer; and
An estimate of your wag es and federal income tax withheld in 2015. Y ou can use your final pay st ub for these amounts.
File on Time. Yo ur tax return is normally due on or befo re April 18, 2016. Use Form 48 52, Substitute for Form W-2, Wage a nd Tax Statement, if you don't g et your W-2 in time to fi le. Estimate your wages and taxes withhe ld as best as you can. If y ou can’t get it done by t he due date, ask for an ext ra six months to file.
Correct if Necessa ry. You may need to correct yo ur tax return if you get yo ur missing W-2 after you file. If t he tax information on the W-2 is differe nt from what you originally reported, y ou may need to file an amend ed tax return
Falsely Padding Deductions on Returns is on t he IRS Annual “Dirty Dozen” List of T ax Scams to Avoid
The Internal Revenue Servi ce today warned taxpayers to avoid t he temptation of falsely inflating deductions or expens es on their returns to under p ay what they owe and possibly recei ve larger refunds.
The vast majority of taxpaye rs file honest and accurate tax retur ns on time every year. However, ea ch year some taxpayers fail to resi st the temptation of fudging their informati on. That’s why falsely claiming deductions, expens es or credits on tax returns is on t he “Dirty Dozen” tax scams list f or the 2016 filing season.
"Taxpayers should fi le accurate returns to receive the refun ds they are entitled to receive a nd shouldn't gamble with their taxes by paddi ng their deductions," said IRS Commissioner Jo hn Koskinen.
Taxpayers should think twice before overstati ng deductions such as charitable contributions, paddi ng their claimed business expenses or includi ng credits that they are not entitl ed to receive – like the Earn ed Income Tax Credit or Child T ax Credit.
Increasingly efficient automated systems generate mo st IRS audits. The IRS can normal ly audit returns filed within the la st three years. Additional years can be add ed if substantial errors are identified or fra ud is suspected.
Significant civil penalties may app ly for taxpayers who file incorrect t ax returns including:
20 percent of the disallow ed amount for filing an erroneous cla im for a refund or credit.
$5,000 if t he IRS determines a taxpayer has fil ed a “frivolous tax return.” A frivolo us tax return is one that do es not include enough information to figu re the correct tax or that contai ns information clearly showing that the t ax reported is substantially incorrect.
In addition to t he full amount of tax owed, a taxpay er could be assessed a penalty of 75 perce nt of the amount owed if t he underpayment on the return resulted fr om tax fraud.
Taxpayers even may be subje ct to criminal prosecution (brought to tri al) for actions such as:
Willful failu re to file a return, supply informati on, or pay any tax due
Fraud a nd false statements
Preparing and filing a fraudule nt return, or
Criminal prosecution could le ad to additional penalties and even pris on time.
Parents: Don’t Miss Out on The se Tax Savers
Children may help reduce t he amount of taxes owed for t he year. If you’re a parent, he re are several tax benefits you shou ld look for when you file yo ur federal tax return:
Dependents. In mo st cases, you can claim your chi ld as a dependent. You can dedu ct $4,000 for each dependent you a re entitled to claim. You must redu ce this amount if your income is abo ve certain limits.
Child Tax Credit. Y ou may be able to claim t he Child Tax Credit for each of yo ur qualifying children under the age of 17. T he maximum credit is $1,000 per chi ld. If you get less than t he full amount of the credit, y ou may be eligible for the Addition al Child Tax Credit.
Child and Dependent Ca re Credit. You may be ab le to claim this credit if y ou paid for the care of o ne or more qualifying persons. Dependent childr en under age 13 are among tho se who qualify. You must have pa id for care so that you cou ld work or look for work.
Earned Inco me Tax Credit. You may quali fy for EITC if you worked b ut earned less than $53,267 last ye ar. You can get up to $6,2 42 in EITC. You may qualify wi th or without children.
Adoption Credit. Y ou may be able to claim a t ax credit for certain costs you pa id to adopt a child.
Education Tax Credi ts. An education credit can he lp you with the cost of high er education. Two credits are availab le. The American Opportunity Tax Credit a nd the Lifetime Learning Credit may redu ce the amount of tax you o we. If the credit reduces your t ax to less than zero, you m ay get a refund. Even if y ou don’t owe any taxes, you sti ll may qualify.
Student Loan Interest. Y ou may be able to deduct intere st you paid on a qualified stude nt loan. You can claim this benef it even if you do not itemi ze your deductions.
Self-employed Health Insurance Deduction. If y ou were self-employed and paid for heal th insurance, you may be able to dedu ct premiums you paid during the ye ar. This may include the cost to cov er your children under age 27, ev en if they are not your depende nt.
The Earned Income Tax Credit: Oft en Missed
The Earned Income Tax Credit h as helped workers with low and modera te incomes get a tax break f or 40 years. Yet, one out of eve ry five eligible workers fails to cla im it. Here are some things y ou should know about this valuable credit:
Revi ew Your Eligibility. If you worked a nd earned under $53,267, you may quali fy for EITC. If your income or fami ly situation has changed, you should revi ew the EITC eligibility rules. You mig ht qualify for EITC this year ev en if you didn’t in the pa st. If you qualify for EITC y ou must file a federal income t ax return and claim the credit to g et it. This is true even if y ou are not otherwise required to fi le a tax return. Don’t guess abo ut your EITC eligibility. Use the EI TC Assistant tool on IRS.gov. The to ol can help you find out if y ou qualify for the credit. It c an also estimate the amount of yo ur EITC.
Know the Rules. You need to understa nd the rules before you claim t he EITC, to be sure you quali fy. It’s important that you get th is right. Here are some factors y ou should consider:
If you are married a nd file a separate return you do n ot qualify for EITC.
You must have a Soci al Security number that is valid f or employment for yourself, your spouse, if marri ed, and any qualifying child listed on yo ur tax return.
You must have earned inco me. Earned income includes earnings from worki ng for someone else or working f or yourself.
You may be married or sing le, with or without children to quali fy. If you don’t have children, y ou must also meet age, residency a nd dependency rules. If you have a chi ld who lived with you for mo re than six months of 2015, t he child must meet age, residency, relationsh ip and the joint return rules to qualify.
If you are a member of t he U.S. Armed Forces serving in a comb at zone, special rules apply.
Lower Your T ax or Get a Refund. If y ou qualify for EITC, you could p ay less federal tax, no tax or ev en get a refund. EITC could be wor th up to $6,242. The average cred it was $2,447 last year.
Choosing the Correct Filing Status
It’s importa nt to use the right filing stat us when you file your tax retu rn. The status you choose can affe ct the amount of tax you o we for the year. It may ev en determine if you must file a t ax return. Keep in mind that yo ur marital status on Dec. 31 is yo ur status for the whole year. Sometim es more than one filing status m ay apply to you. If that happe ns, choose the one that allows y ou to pay the least amount of tax.
Here ’s a list of the five fili ng statuses:
Single. This status normally applies if y ou aren’t married. It applies if y ou are divorced or legally separated und er state law.
Married Filing Jointly. If you’ re married, you and your spouse c an file a joint tax return. If yo ur spouse died in 2015, you c an often file a joint return f or that year.
Married Filing Separately. A marri ed couple can choose to file t wo separate tax returns. This may benef it you if it results in le ss tax owed than if you fi le a joint tax return. You m ay want to prepare your taxes bo th ways before you choose. You c an also use it if you wa nt to be responsible only for yo ur own tax.
Head of Household. In mo st cases, this status applies if y ou are not married, but there a re some special rules. For example, y ou must have paid more than ha lf the cost of keeping up a ho me for yourself and a qualifying pers on. Don’t choose this status by mista ke. Be sure to check all t he rules.
Qualifying Widow(er) with Dependent Child. Th is status may apply to you if yo ur spouse died during 2013 or 2014 a nd you have a dependent child. Oth er conditions also apply.
Six Tips on Whether to Fi le a 2015 Tax Return
Most people fi le a tax return because they ha ve to, but even if you don ’t, there are times when you shou ld. You may be eligible for a t ax refund and not know it. He re are six tips to help y ou find out if you should fi le a tax return:
1.General Filing Rules. Wheth er you need to file a t ax return depends on a few facto rs. In most cases, the amount of yo ur income, your filing status and yo ur age determine if you must fi le a tax return. For example, if you’ re single and under age 65 y ou must file if your income w as at least $10,300. Other rules m ay apply if you’re self-employed or if you’ re a dependent of another person. The re are also other cases when y ou must file.
2.Premium Tax Credit. If y ou enrolled in health insurance through t he Health Insurance Marketplace in 2015, y ou may be eligible for the premi um tax credit. You will need to fi le a return to claim the cred it. If you chose to have advan ce payments of the premium tax cred it sent directly to your insurer duri ng 2015 you must file a feder al tax return. You will reconcile a ny advance payments with the allowable premi um tax credit. You should receive Fo rm 1095-A, Health Insurance Marketplace Statement, by ear ly February. The form will have informati on that will help you file yo ur tax return.
3.Tax Withheld or Paid. D id your employer withhold federal income t ax from your pay? Did you ma ke estimated tax payments? Did you overp ay last year and have it appli ed to this year’s tax? If y ou answered “yes” to any of the se questions, you could be due a refu nd. But you have to file a t ax return to get it.
4.Earned Income T ax Credit. Did you work a nd earn less than $53,267 last ye ar? You could receive EITC as a t ax refund, if you qualify, with or witho ut a qualifying child. You may be eligib le for up to $6,242.
5.Additional Child T ax Credit. Do you have at lea st one child that qualifies for t he Child Tax Credit? If you don ’t get the full credit amount, y ou may qualify for the Additional Chi ld Tax Credit.
6.American Opportunity Tax Credit. T he AOTC is available for four yea rs of post secondary education and c an be up to $2,500 per eligib le student. You, your spouse or yo ur dependent must have been a stude nt enrolled at least half time f or at least one academic period. Ev en if you don’t owe any tax es, you still may qualify. You mu st complete Form 8863, Education Credits, a nd file it with your return to cla im the credit.
Which Tax Form is Best f or You?
This tax filing season, get thin gs off to a good start. Fili ng electronically is the easiest way to fi le a complete and accurate return. T he tax software asks questions at ea ch step and minimizes errors.
Here are so me tips to help you choose t he right forms:
You can generally use Fo rm 1040EZ if:
Your taxable income is bel ow $100,000;
Your filing status is single or marri ed filing jointly;
You don’t claim dependents; and
Yo ur interest income is $1,500 or less.
No te: You can’t use Form 1040EZ to cla im the Premium Tax Credit. Nor c an you use this form if y ou received advance payments of the premi um tax credit in 2015.
Fo rm 1040A may be best for y ou if:
Your taxable income is below $100,000;
Y ou have capital gain distributions;
You claim certa in tax credits; and
You claim adjustments to inco me for IRA contributions and student lo an interest.
You must use the Form 1040 if:
Yo ur taxable income is $100,000 or more;
Y ou claim itemized deductions;
You report self-employment inco me; or
You report income from sale of a property.
Rememb er, if you e-file you don't ne ed any paper forms to mail to t he IRS.
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VG CPA PC, is a professional Certified Public Accountant firms incorporated in Virginia. Our firm provides personalized assistant for all your tax needs.
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