Posted on September 10, 2013May 31, 2016 by Jan Roberg

VA Disability Benefits Taxability

The IRS doesn’t tax your VA Disability, but if you owe the IRS money, they count your benefits as part of your ability to pay the IRS back.

I was having a bout of writer’s block and had a blog post due. Fortunately, I just received this email from Morgan, a disabled Navy vet, and it seemed like a worthy topic.

I was placed on “uncollectable status” by the IRS last year. Now, to keep my uncollectible status, they want me to provide them with the amount I receive from the VA each month along with my SSDI amount! Am I missing something here? I am totally
confused. I was told that VA disability benefits are tax exempt. So is my SSDI benefit. If that’s so, why is it considered income by IRS? Can you help me with this so I can understand?

This is a good question—if VA and SSDI payments aren’t taxable, why does the IRS ask about them when settling tax debt? Or in Morgan’s case, when determining collectability status?

The answer is—there’s a difference between “taxable” income and “money that you have that you can use to pay bills.” So even though things like VA payments and SSDI are not taxable, they are counted towards money available to pay bills.

So here’s what the IRS is doing. They’re taking all of your income—whether it’s taxable or not, and adding it together. Then they’re looking at all of your expenses and if there’s any money left over, that’s what they consider is available for you to pay your taxes with.

Here’s how the formula works: Income includes wages, interest, dividends, business income, rental income, distributions, pensions, social security, child support, alimony, and other income. VA payments and SSI would count as “other income”.

Expenses include: Food, clothing, and misc., housing and utilities, cost of owning and operating a car or using public transportation, health insurance, out of pocket health care, court ordered payments, child or dependent care, life insurance, taxes, and other debts.

Here’s the kicker. Expenses are limited to what the IRS calls “national standards.” The national standard for food, clothing, housekeeping supplies and personal care products is $583 for one person. Out of pocket healthcare is $60 if you’re under 65 and $144 if you’re over. If you own a car, the allowance is $517 for owning and operating it. If you use public transportation, you’re allowed $182 a month.

Housing and utility expenses vary greatly by area. Here in St. Louis County, the expenses allowed for one person is $1,426. If you live in St. Louis City, you’re only allowed $1,208.

You can look up all of the collection financial standards on the IRS website: http://www.irs.gov/Individuals/Collection-Financial-Standards

When dealing with the IRS on this issue, you are allowed to use the national standards for your family size without them questioning the amount you actually spend. The housing allowing will be the amount you actually spend or the local allowance, whichever is less.

So while the IRS is asking about VA payments and SSI to determine if you’re capable of paying a tax debt, SSI and VA payments will remain non-taxable income on your tax return.

Posted on September 6, 2013May 31, 2016 by Jan Roberg

Married and Gay: Should You Amend Your Tax Returns?

Photo by Guillaume Paumier at Flickr.com

First the Supreme Court overturned DOMA. Now the IRS has announced that no matter what state you live in, if you are married and gay, you should file as married filing jointly on your federal income tax return. Now the big question for everyone is: Should you amend your old tax returns?

The answer, in my best professional opinion, is MAYBE. If you read my blog posts very often, you saw that one coming didn’t you?

For some couples, filing jointly is going to help them out and get them a refund. If you’re a couple that’s entitled to a refund—AMEND! For some couples, filing jointly is going to have them paying more in taxes. To those couples I say—DON’T AMEND. You really do have a choice here because you filed your original return using the law of the land at the time of the filing. You are not required to amend your return because DOMA was overturned. You are allowed to amend your return. There’s a big difference.

An accountant friend of mine in Iowa has been working with some of his gay married clients and he’s finding that about 75% of his clients would lose money or stay close to the same amending their returns. Only about 25% of them would profit from it.

So how do you tell which category you fit into? Generally, a couple with a big difference is incomes—for example, one spouse stays home to care for the household while the other is the primary breadwinner—that couple is more likely to benefit from filing jointly. On the other hand, a couple where both spouses work and their incomes are close together could find themselves kicked into a higher tax bracket. They could really lose out filing together. Tax returns for families with children can go either way. I’m an accountant geek, so I say just run the numbers.

It makes a lot of sense to run the numbers because the new tax ruling is going to affect all of your future tax returns as well. If filing jointly is not to your advantage, it’s better to learn that now so you can adjust your withholding. Here’s a link to my Tax Tips for Newlyweds: http://robergtaxsolutions.com/?s=tax+tips+for+newlyweds. You may have been married for a couple of years, but never gotten to file a federal return as being married before so you might not have needed these tips before.

One more thing—if you’re in a state that doesn’t recognize gay marriage, you still might not be able to file a joint state return. Couples in gay marriage states have been dealing with the opposite problem for a few years now. They file joint state returns but then file a separate federal return. I suspect we’ll be seeing a lot of separate state returns for awhile. It’s going to take some time for lawmakers to make up their minds on that.

So, do you wait to see how your state legislature is going to handle the issue before amending? I say no. Go ahead and file your federal amendments. If the state changes, you can fix those later. I worry about people waiting too long and then missing out on their refund because they didn’t file the amended return on time. Unless the IRS grants some type of special extension, you only have until April 15^th of 2015 to amend your 2010 income tax return.

If you need help determining if you should file an amended return or not, please contact our office. We can help you figure out if it’s worth your while or not.

Posted on August 20, 2013January 14, 2017 by Jan Roberg

Top 5 Reasons Your Tiny Business May Not Be Doing As Well As It Could Be

If you don’t take care of your tiny business, it’s like flushing money down the toilet.

The government defines small businesses as companies making less than $7 million a year or having fewer than 500 employees. The companies I work with generally have three or fewer employees and only dream about seven million dollar revenues. I call these “tiny” businesses.

As tiny businesses, we’re generally ignored by the government. When you hear something in the news about Congress passing legislation to “help” small business owners—they don’t mean us. That’s okay with me. We tiny businesses can get into enough trouble all by ourselves. Here are my top 5 picks for tiny business problems.

1. Not working around Roadblocks. Every tiny business has roadblocks; you need a license, or special training or there’s a law change. No matter what type of business you have, there will be roadblocks. The successful tiny business finds a way to work through or around them.

True story: There was a small business owner who was basically ready with her business; the only thing left was to get her web-site up. She had asked me for some help. Mind you, the only thing stopping her business from getting off the ground (at least as she explained it to me) was her website. I gave her names of people who could make her website for a fee and I also gave her free website resources as budget was an issue for her.

Six months later we met again. She still didn’t have a website. The work was stalled because she couldn’t find the “right” art for it. She wanted a picture of a compass. She had hired a high school kid to draw it for her for free. He wasn’t done yet. Okay—go to Google images, type in compass and you get hundreds of pictures. Granted, she’d probably have to pay to use one of those pictures but her “free artist” hadn’t gotten the work done in six months.

And letting a high school kid that you’re not even paying be the reason your business hasn’t gotten off the ground? That’s ridiculous. Now in fairness, the compass idea was a cool idea and it tied to her business theme. But—it wasn’t necessary to her business. She could have already been up and running for 6 months while waiting for this art that she wanted so badly.

Sometimes, we’re our own worst enemies. If you’ve got a roadblock that’s holding your business back get a second opinion. There’s usually more than one way to skin a cat.

2. Not knowing who your customers are. If you own a business you’re selling something. The tough question is who’s going to buy it?

I once knew a woman who had started a business making bows. She had made hundreds of bows, invested in a bow making machine and lots of expensive ribbons. She hadn’t sold a single one. She really liked making bows so that was what she was doing with her time, but she hadn’t figured out who would buy them. At that point, that wasn’t really a business it was just a hobby. You have to have customers, someone willing to pay for what you’re selling to be a real business.

3. Partner problems. Recently I was asked, “Why do you hate partnerships?” It was a fair question, I was being pretty negative. The truth is, I don’t hate partnerships, I’ve just had to dissolve too many of them. Partnerships get started because two or more friends decide they want to go into business together. Good friends (or spouses) do not always make good business partners. If there is a disagreement—how do you settle it?

I recently sat down with a couple that had a pretty good business plan and they seemed to be a good choice for a partnership. But I was asking a lot of questions and I’m glad I did. It seemed that Adam and Eve each had two income streams that they were thinking about for the partnership—sales of widgets and sales of thingamajigs. Adam was going to cut back on his widget sales to pursue the thingamajig sales full time in the partnership. Eve couldn’t sell thingamajigs she was just going to help Adam with that and in the meantime she would still sell widgets. It all sounded like a good plan.

Except: Widget sales was technically another job. The money Eve earned selling widgets was outside the partnership—just as Adam’s widget sales were outside the partnership. Adam was counting on Eve’s widget income to help support him because he knew that the thingamajig income wouldn’t be enough to support him during the first year. Eve was hoping the thingamajig income would supplement her widget income; she wasn’t planning on turning over half of her widget income to Adam.

The bright side to this scenario is that they were thinking and talking before they made the partnership. They hit a roadblock, yes, but they’re smart and will work around it somehow. Too often I see partners who went into business together and later wind up fighting because they didn’t spell out their expectations up front.

4. You gotta work at your business—I can’t tell you how many times people have come to me because they bought a business or invested in a business that required no work—and they lost their money. If it sounds too good to be true, it probably is. And if you’re picking a business, do something you love to do—because you’re going to be at it a lot.

5. Not planning for your taxes—This wouldn’t really be a tax blog if I didn’t mention taxes now would it? The whole idea about owning a business is that you want to be profitable. If you’re making a profit, then there are going to be taxes. If your small business is making enough money to support you and your family then you know you’ve got self-employment taxes to pay.

Screwing up one year—that happens. Screwing up two years—you need to be more careful. But if you screw up and don’t make your estimated tax payments after you’ve been profitable and owed tax money for three years in a row—you’re asking for trouble. Our business cards say, “If you don’t have a strategy for your taxes, you’re probably paying too much.” Taxes take a huge chunk out of your earnings. Don’t let IRS penalties and interest make matters worse.

Posted on August 13, 2013May 31, 2016 by Jan Roberg

The Petty Cash Account

Photo by Laura Gilmore at Flickr.com - Some companies use a bank bag with a lock to keep their petty cash in.

Petty Cash Expenses Template – This is a free download to keep track of your petty cash. Please feel free to share it or alter it to suit your needs.

A while back I did a post about taking cash for your business out of the ATM machine. I said you should never do it. I’ve gotten a lot of push back from readers who need to use cash for their businesses on a regular basis. Here’s an example from Tracy who writes:

“What options do I have when I need to pay for cash transactions like Mass Transit & Taxi’s (I don’t drive) which total over 250/mo.(expendable as fringe benefits per IRS 15-B), or even office & software supplies?

Credit Cards don’t issue without corporate credit (which will take a year +), so can only use Prepaid Cash cards – which have to be paid by cash.

There are very few places where I can use my corporation check. So using checks as a paper record is out.

What do I do?”

Tracy has a good point. What do you do when you’ve got to use cash? You need to set up a petty cash account. In Tracy’s case, I’d say her petty cash account needs to be $250—but it’s really up to her as to how much cash she needs to keep around for her business. I have one client who regularly keeps $1000 cash available; it all depends upon your type of business and what works for best for you.

With a petty cash account, you have your base amount-we’ll use $250 for Tracy’s example. The first step is to write a check (or take out the cash) to Petty Cash. Establish a place to keep the petty cash money separate from your regular spending money. As Tracy spends down the money—on Taxis and subway fares and other business expenses, she keeps receipts for everything. Or at least a log of things like subway fares. Technically, what she should do is make a report like what I’m showing below:

7/24 Subway 1.20

7/25 Taxi 18.00

7/25 Office supplies 24.76

7/25 luncheo n 12.16

7/26 taxi 23.45

7/27 office supplies 88.22

7/29 Subway 4.20

Total 171.99

At the end of the week, or month, or whenever it makes sense to replenish the cash supply, Tracy would write another check for $171.99 to bring the petty cash account back up to $250.

That’s the technically correct way to maintaining your petty cash account. Basically you have a base amount and there are receipts for whatever cash is no longer in the bag.

But what about real life? I say that because 80% of the people who use cash for their businesses aren’t going to be so disciplined. But I don’t want you getting into audit trouble for your cash withdrawals from the ATM.

Let’s use John as an example. If you look at John’s business bank statements for the past year, he’s got about 100 ATM transactions over the course of the year, usually taking out $40 at a time. If John were to be audited by the IRS, the IRS would count that $4000 business profit which is taxable to John, even though he spent that entire amount on business.

I can tell John to do the Petty Cash account the way I explained above, but being realistic it’s never going to happen. He’s going to keep going to the ATM and grabbing cash whenever he needs it. So how does John cover his behind? Keep receipts! If you don’t get receipts, write everything down.

For example: John has a property management company that takes care of several single family homes and some small apartment buildings around town. One of the homes is currently vacant but he needs to keep it looking good so it can rent. Although a tenant would be responsible for mowing his own lawn, John hires a neighbor kid to mow the grass a few times while to house is still vacant. It costs him $40 a pop. He’s paying a kid, not a business. No 1099MISCs, (he won’t get close to paying him $600). The kid might not even have a checking account so he can’t accept a check or credit card. The kid is not issuing receipts-he’s a kid.

John goes to the ATM, gets $40 to pay the kid and he writes down on the ATM slip a few notes about the expense. (Paid Walter $40 to mow 541 Mockingbird St. house.) John keeps that ATM slip with his business records to act as his business receipt. As long as John spends less than $75 on something—that will be acceptable. If John spends more than $75, he needs a receipt from the vendor. (Even if the vendor is a 16 year old kid.)

I still recommend not using the ATM for your business expenses whenever possible, but if you must, you can protect yourself from having the IRS count your cash transactions as income to yourself—and paying more taxes by keeping good records of the transactions.

Posted on August 2, 2013May 31, 2016 by Jan Roberg

Why Am I Being Audited By the IRS?

Photo by redjar at Flickr.com

The first question I’m always asked when someone receives an audit notice is, “Why me? What’s wrong with my tax return?”

If you received an audit notice, that’s a perfectly legitimate question, and you have the right to ask. It’s a very important question too. The answer you get from the IRS can help you to limit the scope of the audit—that‘s really important. If you know what the audit is about, you know where to focus your energies.

Often times, an IRS agent may respond with, “Oh, I don’t know why your return was pulled, it’s just a random audit.” However, sometimes they don’t seem so “random”. Actual random audits (and yes, they do occur) involve reviewing every single line item on the tax return. They’re used to help determine how future audits are handled. Most audits, are not random, and if you’re being audited you have the right to know why.

So what does trigger an audit? The most common type of audit is called a correspondence audit. Usually what happens there is that the IRS received a notice saying you received income from a source and it doesn’t match anything on your tax return. They call it “document matching.” (Hey, it’s the IRS; creative names are not their forte.)

Document matching audits are usually pretty simple. For example, the IRS gets a W2 from a job you had for 2 weeks in January but you completely forgot about it at tax time. You never got the W2 so you didn’t include it on your return. That’s a fairly typical correspondence audit. In a case like that you just sign the form and pay the tax. That’s a simple “oopsies.” You’re not a criminal, you just made a mistake.

Sometimes, document matching is kind of screwed up. For example: I just handled one where the document matching showed three interest statements for “First National Bank”; one for $21, one for $16, and the third for $54. The tax return showed interest for “First National Bank” as $91 ($21 + $16 + $54 = $91). We just handled that with a phone call. Document matching is done by computer. Normally, a human would have caught the numbers added together and the audit letter would never have gone out, but the computer isn’t that sophisticated.

One of the best ways to prevent document matching audits is to make sure that you report everything on the correct line. If you have a 1099 with an amount in box 7 and you don’t have a Schedule C with your tax return—that will generate a correspondence audit. Another common correspondence audit involves capital gains. If you’ve bought or sold stocks or had stock options through your job—there should be a Schedule D with your tax return.

If you’re dealing with something new in your taxes, even if you’re very good at preparing your own, I recommend at least having a second look done before you file.

In-person audits are more often based on statistical data. The IRS uses something called a “DIF” score. To put it in simple terms, a DIF score basically highlights when things on your tax return are out of the “normal” range. Basically, a computer algorithm kicks out something like: “Joe Schmoe’s charitable contributions are out of line with his income. So Joe will be audited for his charity donations.

So how do you know what’s normal? That’s the magic question isn’t it? The IRS does not release its DIF score formulas. Even if they did—if you have a legitimate deduction, you shouldn’t let DIF scores (or the threat of DIF scores) keep you from claiming what’s legitimately yours.

I once worked on an audit for a fellow whose return was being looked at for the mileage he claimed. In truth, his actual mileage was much higher than what he reported, but his co-workers had convinced him that he shouldn’t claim all his mileage because he’d get audited. Claiming the lower mileage didn’t protect him from an audit—and—it cost him money for all those years that he didn’t claim what was rightfully his.

Your best defense against an audit is always going to be doing your taxes right in the first place and having the documentation to back up your claims.

If you’re a W2 wage earner, the most likely audit area will be your charitable contributions and employee business expenses, because most everything else can be determined through document matching.

Small business owners (Schedule C) are much more likely to be audited—mostly because there’s so much more to audit. In every Schedule C audit I’ve ever worked on, the IRS has requested the mileage log. Every audit—mileage log. Every single one.

In addition to the mileage log, they’ll often want to examine the expenses or the revenues, sometimes both. If you own your own business, I can’t stress enough the importance of keeping good records.

If you’re being audited, the IRS agent should be able to tell you why. If you honestly don’t know why you’ve been selected, and you’re not getting clear answers from the IRS, hire someone to represent you. A professional can usually find the audit trigger (or triggers) within a matter of minutes.

Posted on July 23, 2013May 31, 2016 by Jan Roberg

What Can an Enrolled Agent Do for Me that I Can’t Do Myself?

Photo by T M Tonmoy Islam @Flickr.com

The other day at a networking meeting I was asked the question, “What Can an Enrolled Agent Do for Me?” I really had to think about that. You see, I had two different answers: The first one was, “nothing” and the second one was, “everything.” Both answers are right. Let me explain.

An Enrolled Agent is someone who is licensed by the Department of the Treasury to represent taxpayers like yourself in front of the IRS. Let’s say you are getting audited, you can hire an Enrolled Agent to help you through it. If you have an Enrolled Agent, you don’t have to talk to the IRS at all; the EA can do all the talking for you. That’s probably one of the biggest advantages.

You can represent yourself, but most taxpayers really should not try to represent themselves during an IRS audit. You’ve probably heard the saying, “The defendant who tries to represent himself in court has a fool for an attorney.” It’s pretty much the same in an audit. Honest, intelligent people can get themselves tripped up by the IRS.

For example: one taxpayer was trying to represent herself when the IRS denied her refund claim on an amended return. She had made numerous phone calls and written letters to the IRS explaining her claim, but was getting nowhere. When she called me in, I discovered that she had been responding to what she “thought” was the problem, not what the IRS was asking for. It’s actually a fairly common mistake—talking to the IRS can be confusing.

Another issue is debt resolution. You might have seen those tacky TV commercials where the little old lady says, “I settled my taxes for pennies on the dollar.” That’s known as an Offer in Compromise (OIC). And while that company is out of business now (they used some questionable practices) an Offer in Compromise is something that an Enrolled Agent can do for you. But there’s a really important thing about preparing an Offer In Compromise in the first place: it’s knowing if you really need one in the first place. For example: I once received a call from a woman who wanted me to prepare an OIC for her because the IRS said she owed them $15,000. Well, I could have just done the OIC paperwork, but I reviewed her tax returns first and found that the IRS actually owed her $8,000 instead. An $8,000 refund is a whole lot better than paying anything to the IRS isn‘t it?

Enrolled Agents are required to prove their competence in all areas of taxation, representation and ethics before they can practice before the IRS by passing a three-part federal exam. All enrolled agents specialize in taxation. This is very different from attorneys or CPAs who are licensed by their respective states and may not specialize in taxation at all.

An Enrolled Agent can prepare a tax return, represent you in an audit, and help you settle your IRS debt. Some Enrolled Agents can even represent you in Tax Court, but only those EAs that have passed a special Tax Court exam can do that.

The Enrolled Agent designation was created back in 1884 when Congress passed the Horse Act. At the time there were lots of dubious claims for Civil War reparations—there were more claims for horses then there were horses lost in the Civil War. Most of the dubious claims were from agents representing the people with claims as most of the agents were scam artists and con men. Congress decided that the agents needed to be regulated. They created a standard which required suitability checks, criminal record checks, moral character, and testing. When the income tax was passed in 1913, the role of Enrolled Agent was expanded to include claims for relief of citizens whose taxes had become inequitable. As tax regulations became more cumbersome and complex, the role for EAs kept expanding.

As an Enrolled Agent, I can do a lot to help you with your taxes; but, I’m no longer able to get Congress to give you a horse.

For more EA information you can check out the McTax Hangout video: https://plus.google.com/u/0/106432421922678528479/posts/iKYcxFGzZjn?cfem=1

Posted on May 24, 2013May 31, 2016 by Jan Roberg

Can You Lose Your Job if You Complain About the IRS?

Photo by Adam Fagen at Flickr.com

It appears that complaining about the IRS cost news anchorman Larry Connors his job this week. It’s kind of sad; Mr. Connors has been a local media celebrity for 37 years. First, for the full disclosure; Larry Connors is not a client of mine. If he were, I wouldn’t be allowed to discuss his case due to confidentiality laws. Since I don’t represent Mr. Connors (I‘ve never even met him), clearly there are things I don’t know about his case. That said, as an enrolled agent, I do IRS representation and I have experience with how the IRS handles these issues.

The whole thing boils down to a post Larry Connors made on his Facebook page. The page has been removed, but here’s the quote that he posted on May 13th:

“I don’t accept ‘conspiracy theories,’ but I do know that almost immediately after the interview, the IRS started hammering me. … Can I prove it? At this time, no. But it is a fact that since that April 2012 interview … the IRS has been pressuring me.”

The interview he’s talking about is one where Mr. Connors interviewed President Obama and asked him a rather pointed question about Mr. Obama’s vacations in light of the current economic crisis. Here is a link to that interview if you would like to see it. It’s only a minute 18 seconds long: http://www.youtube.com/watch?v=8CookYzmUZk

The other important piece of information is that Larry Connors’ tax issues actually date back to 2008 and that he was paying his back taxes on a monthly installment agreement since the summer of 2011. Mr. Connors did not mention this fact in his Facebook post.

So those are the facts as presented by the press. Here’s what I think—

My best guess is that Mr. Connors made one of his monthly installment payments late. I’ve seen this happen to my own clients; you only have to be late on one payment by only one day and the IRS has the right to cancel your installment agreement – and they will. And they can be really nasty about it. Really nasty. My clients often say they feel like they’re being persecuted.

So, here you have Mr. Connors doing an interview with the president that he’s been told went too far. Shortly after the interview he receives IRS nasty-grams and eventually has a lien slapped on his home. (Note that he’s been paying his installment agreement the whole time here, it’s possible that at the time he is unaware that there was a late payment.) Then he sees the news story about certain groups being targeted by the IRS for political reasons. Is it unreasonable for him to think that he might have been a political target? I don’t think so.

The day the main IRS story broke, one of my not for profit clients called and said, “Did you see the news? That’s what happened to us!” Her group was required to jump through hoops and wait for months to obtain their status while other non-profit groups leap-frogged right past them without a hitch. (I know, I was the one doing the paperwork.) I confess, before I learned more about the actual groups involved, I sort of thought my client might have been one of the targeted agencies although I now know they weren’t in that group.

Now Larry Connors is out of a job because his employer claims he has a bias against the IRS. Dear KMOV, I have a news flash for you: Everybody has a bias against the IRS! But that said, Mr. Connors is a respected 37-year veteran journalist. His Facebook post was an opinion, not a news story. If he had found proof that the IRS really was pressuring him because of the interview—what would have been the lead news story at six o’clock! Clearly he knows the difference between news and opinion.

Here’s my opinion: A 37-year veteran costs a whole lot more in payroll than someone younger with less experience. And a 66 year old anchorman doesn’t look as pretty in HD as some of the sweet young reporters do. I think KMOV is using the Mr. Connors’ IRS Facebook post as an excuse to break his employment contract and reduce their operating costs. I think that’s the real story, but I don’t expect you to hear that on the KMOV news.

Since his dismissal, Mr. Connors and his attorneys have filed a lawsuit. Good luck, Larry!

Posted on March 26, 2013May 31, 2016 by Jan Roberg

Filing an Extension for Your Personal Taxes

Photo by david.ian.roberts on Flickr.com

Are you late filing your taxes this year? You’re not alone. It seems that many people are behind.

It’s important to know that an extension gives you an extension of time to file your tax return; it’s not an extension of time to pay your taxes. I think a lot of people want to file extensions because they owe and they think it will give them more time to pay. It doesn’t.

The penalty for paying late is ½ of 1% per month. So, let’s say that you owe $10,000 on your taxes. You file an extension, but don’t pay anything towards what you owe. When you actually file and pay in October, instead of owing $1000, you’re going to owe an extra $300. (.005 times $10,000 times 6 months = 300)

No matter what, if you’re not ready to file your taxes before April 15th, do file an extension. Although the late payment penalty is ½ of 1% per month, the penalty for not filing (or filing an extension) is 5% per month. That’s ten times as much as the late payment penalty. You don’t want to have to pay that.

If you need to file an extension—that is, ask for more time to file your taxes, here are three ways to do it:

1. File electronically, using tax software. If you don’t have tax software already, you can use the 1040.com software on this website. Here’s a link: Do Your Own Taxes

2. You can mail in a paper copy of the extension form. It’s called a 4868. Here’s a link: IRS Extension Form

3. You can make a payment towards your taxes with a credit or a debit card. And that will give you an automatic extension for your taxes. If you just want to make a payment, it’s pretty easy. You’ll start at the IRS website, and chose your payment provider from there. Here’s the link: IRS Direct Pay

So if you can’t get those taxes done before filing time, do get that extension filed. If you owe the IRS, it could save you some money!

Posted on December 28, 2012May 31, 2016 by Jan Roberg

Angels at the IRS

Photo by Svenstorm at Flickr.com

My job is to fight the IRS. All year long, that’s my job. It’s like a little accounting war. I’m the soldier for the little guy.

But, although the IRS as an institution is pretty cold and impersonal, many of their foot soldiers are real people. They have friends and families who love them. And they are kind and generous and they actually care about the human beings that call them and try to straighten out their tax problems.

To you IRS agents, today is my day of truce. I’ll be back battling you again all too soon. But for today, I’d like to acknowledge the good guys.

To Mr. H—who helped straighten out the account of a senior lady with Alzheimer’s and understood that her tax issue really wasn’t her fault. You went above and beyond to help figure out her situation. Your information also helped the doctor understand the problem better as well. You’ll never know how you helped her that way.

To Mrs. G—who deals with the really hard luck cases and tries not to cry every night because she sees so much suffering. I’m sorry for sending you more hard luck stories, but I’m glad you’re out there for those people. It helps when there’s someone who actually cares on the other end of the line.

To Miss S—who exhausted every possible avenue until she found a way to help a taxpayer who really needed it. It took a long time to work something out, but you didn’t give up. I underestimated you, but you surprised me. Thanks.

To the woman whose name I don’t remember but whose laugh I’ll never forget—thank you for recognizing that the IRS really did make a mistake when they sent my client a bill for $2 million dollars! If more agents were like you, there’d be less need for people like me. The first agent my client had called was not nearly as smart, nor friendly, as you.

To Mr. D—you said that the IRS had, “Empowered you to help people.” I nicknamed you Captain IRS; you were like a super hero. (You even had the super hero voice!) Not only did you go out of your way to help a woman who was truly indigent, you also pressured me to do the case pro bono as well. I kept up my end of the bargain.

To all the phone people who answered questions correctly—please know how much that is appreciated. There’s nothing worse than getting incorrect information from the IRS.

To all the people who said, “I don’t know,” when they didn’t know an answer. It’s also much appreciated. “I don’t know,” is always better than wrong information. Thanks.

We’ve got a new year ahead of us and I’ll be back in battle mode again soon. Most of my clients think that I’m fighting against the IRS when I try to help them with their tax problems. And sometimes I am. But more often than not, there’s an IRS agent out there battling for them as well. Most people don’t know about the good guys, but they’re out there. Just thought you should know about them.

Posted on December 25, 2012December 6, 2018 by Jan Roberg

Santa and the IRS

Parody about Santa Claus being audited by the IRS

Who knew Santa kept receipts?

Roberg Tax Solutions will be closed from December 24th – January 3rd. Generally, confidentiality rules prevent me from sharing client information, but our very special client has authorized the release of his personal information so that our clients may understand why we will be closed that week. We were recently contacted by Mr. S. Claus concerning this letter that he recently received from the IRS. What follows is our correspondence on behalf of our client with the IRS.

IRS: Mr. Claus, It has come to our attention that you have never filed a US Income Tax return, despite that fact that you have been receiving US business income. We have gone back as far as 1913 and estimated your income and taxes and have determined that you owe the IRS $16,345,619,841.61 including penalties and interest.

Roberg Tax: Dear IRS, Don’t you think it’s a little absurd for you to be charging tax back to 1913? What about the 10 year statute of limitations on collections?

IRS: The 10 year statute does not apply if a tax return was never filed. Therefore, we demand full payment for all years in question.

Roberg Tax: But Santa doesn’t receive US income, he delivers gifts for free.

IRS: Mr. Claus has been receiving his income in the form of barter. He has been receiving cookies, milk, and reindeer carrots for years as payment for his deliveries. We understand, Ms. Roberg, that your parents used to leave Santa beer but we have been gracious enough not to impose federal alcohol excise taxes on Mr. Claus at this time.

Roberg Tax: Well thank you for your generosity on that point, how could you possibly know my Dad used to leave Santa beer?

IRS: We have our ways. We know lots of things.

Roberg Tax: I don’t think I want to know! Anyway, you’re arguing that Santa runs a business in the US and gets paid with milk and cookies. Therefore, since his operation is a business, then he gets to deduct his business expenses which certainly exceed any revenue he could possibly receive from the milk and cookies he receives, therefore he owes no tax.

IRS: Not so fast! Only a legal business may write off expenses. Santa does not live in the United States and he flies into the country illegally—thereby voiding any expense deduction that he would otherwise have been allowed to claim.

Roberg Tax: So you’re calling Santa’s delivering of toys a criminal activity? But if he has proper permission to enter the country, then his business is legal and he may deduct his business expenses which would make his tax bill zero. Is that correct?

IRS: Well, it will work on the business income, but we’ll probably be asking for his federal fuel excise tax on the reindeer.

Roberg Tax: I don’t believe that reindeer feed falls under fuel tax guidelines.

IRS: We’re reaching. We’ve got to close the tax gap and the fat guy could be our ticket out of trouble.

Roberg Tax: Don’t call my client fat, he prefers the term, “Jolly.” And you can’t use Santa to solve the federal deficit. That’s Congress’ job.

Anyway, we’ll be closed for the week. I’m going to be spending my time with a very nasty IRS agent, who really should be dropping this case if he doesn’t want to stay on Santa’s naughty list. We’ll all be back in time for tax season. Don’t you worry about Santa, we’ve got him covered.

Merry Christmas.