| Taxpayers should only prepare their tax return when they have all their required tax documents. The return cannot be file with the IRS before the official start date of the tax season. Taxpayers who receive early payments for their return get a high interest loan through their tax preparer. By tax laws, taxpayers with children whose refund amount is in large part come from earned income credit or other refundable credits usually receive refund from the IRS around the end of February. This is intended to reduce tax fraud. Further, as the laws require, Forms W-2 and Forms 1099 are due by February 1, 2021. After that date, taxpayers could inquire from the institutions that they transacted business with during the 2020 tax year to find out when they will receive their tax documents. In case where taxpayers have not received their Form W-2 or Form 1099-R in time to file, they can use the Form 4852 to estimate their wages or payments and to withheld taxes as accurately as possible. The IRS may delay processing the return while the information is being verified. Checklist To Consider For Your Tax Filing Appointment Personal information Last year income tax return if you are a new client Name, Address, Social Security Number and Date of Birth for yourself, spouse and dependents PIN Number from the IRS of any individual in the return who was previously a victim of identity theft Dependent Provider, Name, Address, Tax ID and S.S.N. Banking information if Direct Deposit Requested Copy of Social Security Card of individuals in the tax return Copy of driver license of taxpayers Birth certificates for children or other documents that show taxpayers are eligible to claim the dependent Income Data Required Wages and/or Unemployment (W2s, K1s, others) Interest and/or Dividend Income State/Local income tax refunded Social Assistance Income Pension/Annuity/Stock or Bond Sales Contract/Partnership/Trust/Estate Income Gambling/Lottery Winnings and Losses/Prizes/Bonus Rental Income Self Employment/Tips Foreign Income Amount of stimulus payment received in 2020 Expense Data Required Dependent Care Costs Education/Tuition Costs/Materials Purchased Medical/Dental Mortgage/Home Equity Loan Interest/Mortgage Insurance Gambling/Lottery Expenses Real Estate Taxes Estimated Tax Payments to Federal and State Government and Dates Paid Home Property Taxes Charitable Contributions Cash/Non-Cash Purchase qualifying for Residential Energy Credit IRA Contributions/Retirement Contributions Home Purchase/Moving Expenses A tax preparer is hired to prepare the tax return of the clients. The said preparer could not legally promise a taxpayer a lot of money or big refund. The preparer could not promise a specific amount of earned income tax credit (EITC) because each taxpayer financial situation is different. Alimony, unemployment compensation, child support payments cannot be used to increase the EITC because these payments are not earned income. The preparer should apply the tax laws to each client’s situation. The client should request an explanation as to how the preparer gets to the refund amount before signing the tax return. The client must inquire about any questionable amount. The fee that taxpayers pay to prepare the tax return should be based on the amount of work, time, complexity, education and experience of the preparer, and the number of schedules and forms that the return requires. It is against the rule of IRS circular 230 section 10.27 for tax preparers to charge a contingent fee based on the amount of a taxpayer refund amount. There are modifications to the tax forms to account for all the changes in tax laws that were enacted during the past year. Be Aware! Getting a big refund does not necessarily mean that your tax return is legally done. You are personally liable for everything on your tax return. If you are married, you are jointly and severally liable for anything on your joint return. If you have more than one statement of income (W2, K1, 1099, etc.), make sure that all items of income are accounted for. Make sure there is not a Schedule C attached to your return if you do not receive payments from other sources as self employed. Many taxpayers are being audited because a Schedule C was attached to their Form 1040 to either increase their taxable income or to lower their taxable income. Take some time to review line 1 (wages), line 8 (Other Income), line 10b (Charitable Contribution), line 12 (Standard Deduction or Itemized Deductions), line 15 (Taxable Income), line 30 (Recovery Rebate Credit), lines 34-36 (Refund). Ask questions! This exercise could save many taxpayers a lot of money and could protect them from audit! Make sure the tax return preparer information and signature are at the lower bottom of the second page of Form 1040 because in the case of an audit you could not attempt to hold the preparer liable if he or she did not sign the return. Don’t inflate your expenses on your tax return as a business owner. Reporting consecutive big losses or expenses are red flags. Inflated expenses could trigger an audit by the IRS. They could certainly disqualify you for a mortgage, a line of credit, or in cases you have to show proof of income for certain transactions. Make sure that you file the proper tax forms for yourself or your business. Making the maximum contribution in a qualified retirement plan reduces your taxable income. Self employed and small businesses are qualified for higher contribution .Taxpayers could contribute to their IRA account until the filing deadline for their tax return. A self employed or business owner who did not pay quarterly estimated taxes might owe a penalty. Do you know that you could reduce your tax liability by proper tax planning strategies? We offer FREE initial consultation!!! |
| ALERTS!!! Estimated Tax Payment Dates Fourth Quarter – Due January 15, 2021 OPPORTUNITY FOR ACCOUNTANTS AND TAX PREPARERS! Your clients and potential clients would be relieved when you let them know that a team of professionals are qualified and ready to represent them before the Internal Revenue Service in matters like: tax audit, wage garnishment, tax lien, Offer in Compromise, seizure of their property, and other tax problems. Pierre Tax Group offers partnership agreement to provide tax representation services to clients. Contact us for further details at: 954-362-5199 pierre@pierretax.com |
Recent Comments