Philip Garnett CPA

12/28/2021

So much reminds me of my lovely Karen

07/26/2021

5 Things That Can Unexpectedly Raise Your Taxes

Proper tax planning is a year-round proposition. You cannot afford to wait until April to start planning your taxes and assessing your tax liability.

Knowing which factors can raise your taxes is one of the best ways to keep more money in your pocket. These five factors can unexpectedly raise your taxes owed at the end of the year.

Note: If you owe back taxes, our firm can help negotiate with the IRS and potentially settle your tax debt. Call us today. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. 360-623-1375 phone or email [email protected].

#1 - Cashing in Your Retirement Plan
There are many reasons not to cash in your retirement plan early, but the tax penalty is one of the biggest ones. If you take the proceeds from your 401(k) plan in cash instead of rolling it over into an IRA, you will have to pay taxes on the money you withdraw. Even worse, you will be subject to a 10 percent penalty. By the time you are done, you could lose up to half your hard-earned retirement plan to taxes and penalties.

#2 - Working as a Freelancer
Working for yourself is great, but it can trigger a tax nightmare. Freelancers and other self-employed workers are subject to the self-employment tax, which represents the combined employer and employee share of the Medicare and Social Security tax. That tax hit can be substantial, especially if you plan to fail for it and set money aside.

#3 - Failing to Take Your RMD
You cannot keep retirement funds in your account indefinitely. You are required to start pulling money from your IRA and workplace retirement plans when you turn 70. If you fail to make that required minimum distribution (RMD), you could face a hefty tax penalty. The penalty for failing to take the RMD can be substantial.

#4 - Skipping Your IRA Contribution
If you are used to making an annual IRA contribution, skipping that contribution could cost you money. Before you skip your IRA contribution, take the time to run the numbers and see how the decision will affect your tax bill.

#5 - Paying Off the Mortgage
Paying off the house can be very freeing, but it can also raise your taxes. Mortgage interest is deductible if you itemize your deductions, and losing that deduction could leave you owing more to the IRS. That may not be a reason to keep a mortgage, but it can be an important consideration.

Owe Back Taxes?
If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed 360-623-1375 phone or email [email protected].

07/26/2021

How to Turn Your Side Hustle Into a Massive Tax Deduction

If you took on a side hustle last year to make ends meet and earn some extra cash, you may have found an unexpected surprise when you filed your taxes. If you did not prepare carefully, you probably ended up with a big tax bill for your troubles, possibly with penalties and interest added on.

Given the unpleasant surprises of the past, you may be resigned to a life of higher taxes, all courtesy of the very side hustle you thought would help you gain financial freedom. But before you put away your driving gloves and give up on ride sharing and grocery delivery, you might want to take a second look at your situation.

With the right planning and preparation, your side hustle could actually lower your tax bill, giving you an even bigger reason to keep driving, door dashing and doing whatever it takes to make ends meet. Here are some key ways to make your side hustle pay-off come tax time.

Note: If you fall behind on filing your taxes or owe back taxes to the IRS, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe back taxes. 360-623-1375 phone or email [email protected].

Start By Estimating What You Expect to Earn
It can be difficult to estimate how much you might earn from your side hustle, especially if the time you devote to it and the amount you make varies week to week. Even so, it is important to estimate your income, not only to plan for your deductions but to make advance tax payments as well.

If you expect to earn more than $1,000 from your side hustle, you should strongly consider making quarterly tax payments to the IRS. If you fail to pay ahead, you could end up with a tax penalty when you file, and possibly interest and other charges as well. If you end up overpaying what you owe, you will receive a refund when you file your taxes.

You can start estimating your earnings by looking at how much you made last year. To fine tune the figure even more, you can look at your monthly earnings to date and annualize that figure to determine how much you could earn for the entire year.

Consider a Health Savings Account
If you have a health savings account, either through your employer or purchased on your own, you may be eligible for a health savings account, and opening one could significantly reduce your taxable income, so you can keep more of your side hustle money.

In addition to the tax savings, a health savings account can help you pay for medical expenses, both expected ones and costs that would otherwise have drained your emergency fund. Since the money you put into an HSA if fully tax deductible, this simple step can lower your tax bill quite a bit.

Open a Self-Employed Retirement Plan
If you have a side hustle, even on a part time basis, you are considered self-employed, and that means you can open a retirement plan designed for self-employed individuals. The type of account you can open, and the amount you can contribute, will be dictated by the type of business structure and your earnings, but many of these retirement plans are quite generous in their contribution limits.

If your side hustle is truly a sideline and you have a full-time job with a traditional 401(k) plan, you may be eligible for a SEP-IRA, a unique form of account designed specifically for small business owners and the self-employed. If your side hustle has gone full time, you may want to look at a solo 401(k), a retirement plan that offers high contribution limits and an enormous potential for tax savings. You will need to apply for an employer identification number (EIN) to open this type of 401(k), but you can get that number free from the IRS.

Take Advantage of Your Deductions
Having a side hustle gives you a chance to tax advantage of certain deductions, and using those deductions could significantly reduce your taxable income and boost the size of your refund.

If you run a business out of your home, for instance, you may be eligible for the home office deduction, and that will entitle you to write off part of your mortgage, utilities and other costs. You can also take a standard home office deduction based on the square footage of your dedicated workspace and the size of your home.

In addition to those deductions, you may be able to write off things like office supplies, the cost of internet access and phone service and automotive expenses if you use your car as part of your side hustle or full time business. You should always check with a tax expert before claiming these deductions, as every individual situation is unique.

Side hustles are becoming more common, and that is good news for many wallets. But when tax time rolls around, those partially self-employed individuals will need to do some serious planning to keep their bills in check, including following the steps outlined above.

Life as a freelancer or gig worker can be wonderful, but it’s not uncommon to see self-employed taxpayers land in trouble with the IRS and owing back taxes.

If you do run into tax trouble, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. 360-623-1375 phone or email [email protected].

06/02/2021

06/02/2021

Made a Mistake On Your Tax Return?
Here’s What To Do.

Tax returns can be complicated and tricky to understand. Even for a professional, it can be surprisingly difficult to get every number and detail right.

Often, you only notice the mistakes when you take a casual look at your return days after you submit it online or drop it in the mailbox. Or worse, the IRS sends you a letter telling you something is off.

So is there anything that you can do after your return is in?

Actually, there's a lot that you can do. But if you don’t know where to start, it’s best to leave it to a professional. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. [email protected] . We help people who owe back taxes or have back tax debt. Call us today for a free consultation.

3 Major Types Of Mistakes
There are many red flags the IRS looks for on each tax return, but here are 3 common ones taxpayers make.

1: Not reporting all your income. No matter how much or little you make, report everything. In some way or another, unless you run a strictly cash business (another red flag), all of your income is reported to the IRS. W2, 1099 and other forms you receive are duplicated and sent in to the IRS. If your reported income doesn't match theirs, that's a red flag.

2: Overstating business expenses. Depending on the type of job you have, there can be many legitimate expenses that your employer doesn't reimburse you for. If you’re a business, you might be tempted to write off just a little extra. These might be genuine deductions. But don't try to deduct something that's not on the approved list and don't claim deductions way outside the norm. Check with your tax professional and stay up to date with tax laws so you’re not padding your tax return with write offs.

3. Math errors. Whether you file electronically or still file paper forms, your information gets entered into a computer. And one thing computers are very good at is doing math. If things don’t add up, or there was an honest mistake in inputting the information, it can raise a red flag. A math error won't necessarily get you an audit, but it will get attention you may not want. Make sure to double check your returns and have a qualified tax professional assist you and keep you out of tax trouble.

Filing an Amended Return - The 1040X

Individual income tax returns filed with the IRS can be amended up to three years after the due date of the original return by filing IRS Form 1040X.

On a 1040X form, the IRS only asks to be shown what was originally filed, what the corrected details are and the reason why you need to make changes. The form also includes a section where you get to change the personal exemptions that you've claimed on your tax return -- just in case you make a mistake listing your dependents.

A few tips on filing your 1040X form
● For each year that you need to make corrections for, you need to use a separate 1040X form and mail it in, in its own envelope.
● Each form should have the return year mentioned at the top.
● On the back of the form, you need to explain the changes you've made and your reasons for them.
● Any schedules, forms or anything else that are affected by your change need to be sent in with the form.
● If the corrections made to your federal form affect your state taxes, you need to send in a corrected return for that as well.

However, we strongly suggest consulting a tax resolution professional to help with your amended return. They can often file multiple years of unfiled tax returns, help you settle for a fraction of what you owe, and at the very least save you a headache.

You Have 3 Years

Many tax filers only notice a mistake on a tax return only when they look at it preparing their taxes the following year. Mistakes may come to their attention in one of several ways. They may share something with their tax preparer that they may have neglected to mention in a previous year. The tax preparer, then, may notice the need for amendments to a previous year's return, as well.

There is no set time period within which you must correct your return. You can do it any time you notice it. A general rule that the IRS follows, though, is to entertain corrections for 3 years after an original return is filed.

The 1040X is a paper-only form
Even if you always e-file your tax returns, you'll need to file the 1040X form as a physical, paper form. The IRS still isn't equipped to handle the 1040X form electronically. You also need to pay attention to where you mail it in - 1040X forms do not go to the same IRS service center address as regular returns.

If Correcting Your Mistake Results In More Taxes Owed, You Should Still Amend Your Return

If your tax return contains a mistake that shortchanges the IRS in a more serious way, chances are good that the IRS will discover it. For instance, if you made money off a freelancing job that you didn't file a 1099 form for, the IRS could find out and you could end up paying interest for a few years for the tax owed. If you catch it yourself, you'll save on interest, at least.

If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed

Tax Problem ResolutionCertified Tax Resolution SpecialistHow We Can Help View Our Services Schedule AppointmentTax Problem AssistanceHaving problems with the IRS? We’re experts at putting an end to the tax problems the IRS can put you through. We are fast, affordable, discreet, and happy to hel...

06/02/2021

Lucky Day at the Casino? Don't Forget About the IRS

Whether you gamble all the time or only once in a blue moon, you are filled with hope and excitement every time you walk through those casino doors.
If you have been gambling for even a little while, you already know that Lady Luck can be a fickle partner. Sometimes the gods of the casino smile upon you, and other times they turn their back. So when you finally hit the jackpot, you are overjoyed and brimming with excitement…

At least until you consider the tax consequences of your good fortune.

Every time you walk through the doors of the casino, Uncle Sam is peering over your shoulder, and the IRS will be waiting with its hand out when good fortune finally smiles on you.

So as you celebrate your big win, do not forget about your taxes; if you do, the IRS is sure to come calling. If you have any tax issues, or find yourself owing a large amount in back taxes, reach out to our tax resolution firm and we’ll help you navigate any obstacles. [email protected]

Ask About a W2-G
One of the first things you need to know about winning big at the casino is that the IRS will receive notice of how much you won. If you try to fudge the numbers or not report the win at all, chances are you will soon be on the wrong end of a tax bill.

It is important to report all of your gambling winnings, even smaller jackpots that may not warrant a W2-G, the form on which those monies are recorded. And if you do win a substantial jackpot, ask the casino workers about how and when the tax forms will be issued.

Understand Withholding
When you have a lucky day at the casino, it is easy to blow your winnings, especially if you have never been so lucky before. But before you spend your last dollar, you might want to keep some in reserve for when tax time rolls around. If you fail to keep that money available, you could be in for an unpleasant surprise, and a big tax bill, when you file.

Casinos know that their customers may have trouble paying taxes on their winnings, and that is why many of them will automatically withhold a portion of the jackpot. If you do win a substantial jackpot, make sure you understand whether, and how, this withholding will take place.

If you are concerned about having the money to pay the taxes due, you may be able to ask the casino to do the withholding for you. Not all casinos will be willing to do this, but it never hurts to ask.

Track Your Losses
The fact that you have to pay taxes on your gambling winnings may seem unfair and arbitrary, but the IRS is not entirely heartless. You may be able to write off some of the money you lost in pursuit of your latest jackpot, but only if you can back up those numbers with hard data.

Tracking your losses is never a fun thing to do, especially if you are a regular casino visitor. Even so, it is important to keep track, and many casinos will do the work for you.

If you carry a casino loyalty card, you may be able to log on or request a report showing how much you spent, and how much you won, while your card was in use. This is not a perfect solution, but it can be a good first step if you plan to write off your losses in hopes of reducing your final tax bill.

Having a lucky day at the casino feels good no matter who you are, as does leaving the casino with a stack of cash and a big jackpot to your name.

But the next time Lady Luck smiles on you, make sure you leave a little for Uncle Sam.

If you find yourself behind on your taxes and owe more than $10,000, contact our firm. We’ll schedule a no-obligation confidential consultation to explain your options to potentially settle your tax debt for less than what you owe. 360-623-1375

12/30/2020

As we wrap up the year the last thing most people are thinking about is their taxes. But planning ahead can have a serious impact on your tax bill next year, especially if you know you’ll owe taxes.

12/29/2020

When you owe the IRS back taxes, it’s best to have the right tax relief firm representing you so you can get the best result possible. Don’t try to face the most brutal collection agency on the planet alone. You’ll be sorry you did.

If you owe back taxes you might think you need a tax attorney, but that’s not necessarily always the case. Just like hiring a traditional accountant to try to resolve your tax debt might not be the best choice, hiring a tax attorney, who doesn’t specialize in tax resolution might be the same thi...

12/23/2020

When you owe creditors money that you can’t afford to repay, sometimes you may be able to get the debt forgiven or otherwise canceled. When this happens, you no longer owe your creditors the money that you used to owe them. Learn more in this informative article 👇

When you owe creditors money that you can’t afford to repay, sometimes you may be able to get the debt forgiven or otherwise canceled. When this happens, you no longer owe your creditors the money that you used to owe them. 

12/21/2020

There has been a lot of confusion over how cryptocurrencies were to be taxed, and the IRS itself has issued a number of different rulings in that regard. With so much conflicting information, it is no wonder so many cryptocurrency investors chose to avoid the whole thing. If you invested in cryptocurrency, here are some tips on how to report your earnings.

For early adopters of Bitcoin, Ethereum and other popular cryptocurrencies, the profit potential has been simply stunning. While there have been some heart stopping moments and frightening ups and downs, the clear long-term trajectory has been upward.

12/18/2020

Falling behind on your debts is never a fun place to be. It’s less fun when a levy is placed on your assets. In this article, we take a look at what an IRS levy is, why it happens, and what you can do about it.

09/21/2020

Looking for tips on selecting a tax professional? We're here to help! Our guide goes over the top questions you should ask to make sure your tax professional is qualified for the job. Check it out here 👇

Considering hiring a tax professional? Here are some questions to ask to make sure they are qualified. How many years has the professional been in business? You want to make sure that the professional you select has the skills, knowledge and experience to get you the results that you want. How many....