R. Darren Sanford, CPA, CGMA

09/29/2020

How People Can Reconstruct Records Lost In a Natural Disaster

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records
•Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.
•Order transcripts by calling 800-908-9946 and following the prompts.

Financial statements
People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records
•To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
•Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
•For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
•When no other records are available, people should check the county assessor's office for old records that might address the value of the property.
•Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley's Blue Book, the National Automobile Dealers Association and Edmunds.

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Tax Tip 2020-127, September 28, 2020

08/29/2020

Earning side income: Is it a hobby or a business? IRS likes to know.

Tax Tip 2020-108, August 25, 2020

08/22/2020

Important things all extension filers should remember -

October 15 is almost here. That’s the last day to file for most people who requested an extension for their 2019 tax return. These taxpayers can file any time before Thursday, Oct. 15 if they have all their required tax documents. They can also pay part or all of their taxes anytime on IRS.gov..

Here are some key reminders for extension filers
E-File. Nearly everyone can e-file their tax return. E-filing is easy, safe and the most accurate way for people to file their taxes.

File to get a refund. Anyone due a refund should file as soon as possible and use direct deposit to get their tax refund electronically deposited for free into their financial account. There is no penalty for filing a late return for people who are due a refund.

Pay tax balance as soon as possible. The deadline to pay 2019 income taxes was July 15, 2020. Taxpayers can check their account balance or view payment options online. Those who owe and can’t pay their balance in full should pay as much as they can to reduce interest and penalties for late payment. Pay taxes online for free from a checking or savings account with IRS Direct Pay.

File by the deadline to avoid penalties and interest. Taxpayers should file by Thursday, October.15, 2020 to avoid a failure-to-file penalty.

What taxpayers should do about a missed deadline. Anyone who did not request an extension by this year’s July 15 deadline should file and pay as soon as possible. This will stop additional interest and penalties from adding up.

More time for the military. Members of the military and others serving in a combat zone get more time to file. These taxpayers typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.

Using a tax preparer who has the capability of e-filing your return is the best way to file your return.

08/18/2020

IRS: Unemployment compensation is taxable; Have tax withheld now and avoid a tax-time surprise

WASHINGTON – With millions of Americans now receiving taxable unemployment compensation, many of them for the first time, the Internal Revenue Service today reminded people receiving unemployment compensation that they can have tax withheld from their benefits now to help avoid owing taxes on this income when they file their federal income tax return next year.

By law, unemployment compensation is taxable and must be reported on a 2020 federal income tax return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

Withholding is voluntary. Federal law allows any recipient to choose to have a flat 10% withheld from their benefits to cover part or all of their tax liability. To do that, fill out Form W-4V, Voluntary Withholding Request (PDF), and give it to the agency paying the benefits. Don’t send it to the IRS. If the payor has its own withholding request form, use it instead.

If a recipient doesn’t choose withholding, or if withholding is not enough, they can make quarterly estimated tax payments instead. The payment for the first two quarters of 2020 was due on July 15. Third and fourth quarter payments are due on Sept. 15, 2020, and Jan. 15, 2021, respectively. For more information, including some helpful worksheets, see Form 1040-ES and Publication 505, available on IRS.gov.

Here are some types of payments taxpayers should check their withholding on:
• Unemployment compensation includes: Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability benefits paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974, and
• Unemployment assistance under the Airline Deregulation Act of 1978 Program

Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure they are having enough tax taken out of their pay. Available only on IRS.gov, this online tool can help any worker or pension recipient avoid or lessen their year-end tax bill or estimate the refund they want.

In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments (PDF) from the agency paying the benefits. The form will show the amount of unemployment compensation they received during 2020 in Box 1, and any federal income tax withheld in Box 4. Taxpayers report this information, along with their W-2 income, on their 2020 federal tax return. For more information on unemployment, see Unemployment Benefits in Publication 525.

08/15/2020

Use Non-Filers Online Tool to Register for Economic Impact Payment

https://youtu.be/s0eKEWlcNp8

The IRS has a free online tool to help individuals who don’t have a filing requirement submit information to register for an Economic Impact Payment. Visit h...

08/12/2020

Using the Tax Withholding Estimator will help taxpayers avoid surprises next year.

Using the IRS Tax Withholding Estimator can help taxpayers have the right amount of tax withheld and avoid surprises when filing next year.

Income taxes are pay-as-you-go. By law, taxpayers are required to pay most of their tax as income is received. There are two ways to do this:

• Through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.
• Making quarterly estimated tax payments for income not subject to withholding.

Income tax withholding is generally based on the taxpayer’s expected filing status and standard deduction. Adjusting withholding on their paychecks or the amount of their estimated tax payments can help prevent penalties. This is especially important for people in the sharing economy those with more than one job and those who experienced major life changes in the last year.

The IRS also reminds people affected by COVID-19 to review their withholding status, particularly those receiving unemployment during this period.

The Tax Withholding Estimator on IRS.gov is designed to help taxpayers determine how to have the right amount of tax withheld. It offers workers, retirees and self-employed individuals a user-friendly, step-by-step method to help determine if they need to adjust their withholding by submitting a new Form W-4 to their employer or making additional or estimated tax payments.

When to check withholding
Taxpayers should check their withholding annually and when life changes occur, such as marriage, birth or adoption of a child or changes in employment. Anyone who changed their withholding earlier this year, received a large refund or tax bill after they filed their 2019 return, should also check their withholding.

Quarterly estimated tax payments
People with a large amount of their income not subject to withholding may need to make quarterly estimated tax payments. Taxpayers who have received unemployment compensation at any time this year should check their withholding by using the IRS Tax Withholding Estimator to learn if they should have taxes withheld or if they need to make estimated tax payments.

Based on the Tax Withholding Estimator results, taxpayers can choose to have federal income tax withheld from their unemployment checks or change the amount being withheld. To have taxes withheld from unemployment, they must complete Form W-4V, Voluntary Withholding Request.

Some financial transactions, especially when made late in the year, can have an unexpected effect on taxes. These include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.

Taxpayers have two free electronic options for scheduling their estimated federal tax payments. With IRS Direct Pay, people can schedule payments up to 30 days in advance. Using the Electronic Federal Tax Payment System, they can schedule payments up to 365 days in advance.

https://go.usa.gov/xfvUX

COVID Tax Tip 2020-101, August 12, 2020

08/11/2020

Good recordkeeping is an essential element of tax planning.

Now is a good time for people to begin thinking about next year’s tax return. While it may seem early to be preparing for 2021, reviewing your recordkeeping now will pay off when it comes time to file again.

Here are some suggestions to help taxpayers keep good records.

Taxpayers should develop a system that keeps all their important information together. They can use a software program for electronic recordkeeping. They could also store paper documents in labeled folders.

Throughout the year, they should add tax records to their files as they receive them. This includes Notice 1444, Your Economic Impact Payment, and unemployment compensation documentation. Having records handy makes preparing a tax return next year easier.

• Taxpayers should notify the IRS if their address changes. Taxpayers should let the IRS know if they change their address. They should also notify the Social Security Administration of a legal name change to avoid a delay in processing their tax return.

• Review their tax return to make sure they didn’t overlook any credits or deductions. Double check credits and deductions. Records that taxpayers should keep include receipts, canceled checks and other documents that support income, including any unemployment compensation.

• Taxpayers should also keep records relating to property they dispose of or sell. They must keep these records to figure their basis for figuring gains or losses.

• Taxpayers should keep records for three years from the date they filed the return. Taxpayers who have employees must keep all employment tax records for at least four years after the tax is due or paid, whichever is later.
IRS.gov has several tools taxpayers can use to stay updated on important tax information that may help with tax planning. People can also download the IRS2Go app, watch IRS YouTube videos and follow the agency on social media.

07/31/2020

Tennessee Sales Tax Tip:

During the 2020 legislative session, the Tennessee General Assembly expanded the sales tax holiday for 2020 only. This year, there will be two sales tax holidays.

The first tax-free holiday weekend focuses on clothing and other back-to-school items. It begins at 12:01 a.m. on Friday, July 31, and ends Sunday, August 2, at 11:59 p.m. During this time, consumers may purchase qualifying clothing, school supplies, computers and other electronic devices without paying sales tax.

The second sales tax holiday weekend focuses on restaurant sales. It begins at 12:01 a.m. on August 7 and ends Sunday, August 9, at 11:59 p.m. During this time, the retail sale of food and drink by restaurants and limited service restaurants, as defined in Tenn. Code Ann. § 57-4-102, is exempt from sales tax. Liquor by the drink tax will still apply.

07/27/2020

Attention teachers: Those school expenses might be tax deductible.

School may look a little different this year, but eligible teachers and other educators can still deduct certain unreimbursed expenses on their tax return next year.

Who is considered an eligible educator:
The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Things to know about this deduction:
Educators can deduct up to $250 of trade or business expenses that were not reimbursed. As teachers prepare for the school year, they should remember to keep receipts after making any purchase to support claiming this deduction.

The deduction is $500 if both taxpayers are eligible educators and file their return using the status married filing jointly. These taxpayers cannot deduct more than $250 each.

Qualified expenses are amounts the taxpayer paid themselves during the tax year.

Examples of expenses the educator can deduct include:
• Professional development course fees
• Books
• Supplies
• Computer equipment, including related software and services
• Other equipment and materials used in the classroom

07/21/2020

*IMPORTANT: Due to tax relief related to the COVID-19 outbreak, the information in this video may not include the latest updates. Visit https://www.irs.gov/c...

05/21/2020

I'm attending "Tax Security 2.0 –A Tax Pro’s Security Checklist."

04/29/2020

SSA and RRB Benefit Recipients with Dependents

The window has closed to use this tool for SSA and RRB recipients who have a child and don’t normally file a tax return. SSA and RRB recipients who do not receive $500 payments can claim these on a 2020 tax return (to be filed in 2021).