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So far Administrator has created 175 blog entries.

Correcting An EIN (SS-4) Application

So here you are doing a newly formed company or partnership’s tax return for the first year. Maybe you are about to file it. Maybe you are just trying to put in an extension to buy you a little more time. In either case, you press submit, wait a few minutes and then your long awaited IRS acknowledgement comes back. But something’s not right. Rejected? How can this be? Well, one of these reject codes is more than likely the reason:

R0000-922 – Error: Filer’s EIN and Name Control in the Return Header must match data in the e-File database, unless “Name Change” or “Name or Address Change” check box is checked, if applicable.

R0000-900 – The return type indicated in the return header must match the return type established with the IRS for the EIN.

R0000-901 – Filer’s EIN and Name Control (see this related blog post) in the Return Header must match data in the e-File database.

So what do all of the above codes mean? Well, in layman’s terms it means that 1) the entity structure and the EIN on file don’t match what the IRS have one file and 2) that the Form SS-4 that was filled out may have been incorrect based on the preparers intentions.

Verifying what is on file with the IRS.
The first thing you may want to do is see what the IRS has on file for you. Ask the IRS to search for your EIN by calling the Business & Specialty Tax Line at (800) 829-4933. The hours of operation are 7:00 a.m. – 7:00 p.m. local time, Monday through Friday. An assistor will ask you for identifying information about the entity (e.g. name, EIN, address, etc.) and can tell you what entity they have you classified as. The can also provide you with instructions on how to correct it.

Just remember that the IRS will only speak to an “authorized person” with regards to the account. Examples of an authorized person include, but are not limited to, a sole proprietor, a partner in a partnership, a corporate officer, a trustee of a trust, or an executor of an estate.

Changing the Information associated with the EIN.
The IRS doesn’t currently have a form in place to change the previously filed information associated with the business or entity’s EIN. To change what the IRS has on file, one should submit a letter (on company letterhead if possible) to the appropriate IRS office with the following information:

The responsible party’s full legal name;
The responsible party’s Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN);
The business or entity’s full legal name;
The business or entity’s employer identification number (EIN);
The business or entity’s mailing address; and
The information associated with the EIN number that needs to be changed.

Where to mail your change request.
Where you send your request depends on where you live. At the time of this post, these were the applicable addresses:

Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia or Wisconsin

Send your letter to:
Internal Revenue Service
Stop 343G
Cincinnati, OH 45999

Alabama, Alaska, Arkansas, Arizona, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming, or any place outside of the United States

Send your letter to:
Internal Revenue Service
M/S 6273
Ogden, UT 84201

The IRS will send a letter confirming receipt of the updated information. If the entity has not received a confirmation letter within 60 days, it should mail a copy of the original letter (annotated “Second Request”) to the same campus that they sent the first one.

What one should NOT do is fill out another Form SS-4 for the same company. The IRS will not cancel the first EIN, but will simply issue another one, which can/will further complicate matters.

Need help getting your EIN corrected? Not sure you’re cut out for doing your corporate tax return on your own? Give us a call or send us an email via the information in the footer of this page and we’d be happy to assist you!

By Administrator|2015-03-15T22:37:10-06:00March 15, 2015|Categories: IRS Talk|Tags: correct EIN address, Correct EIN information with IRS, correct EIN name, Correcting An EIN (SS-4) Application, Correcting Business Information Where a Nominee Was Used, EIN Application, EIN error, How To Correct Information On A Filed EIN Application, IRS EIN reject codes, IRS reject code R0000-900, IRS reject code R0000-901, IRS reject code R0000-922, Lost or misplaced EIN, Return Header must match data in the e-File database|Comments Off

Name Changes and Income Taxes

Did you know that the IRS checks whether a Name/Taxpayer Identification Number (TIN) combination is correct by matching it against a file containing all social security numbers (SSN) issued by Social Security Administration (SSA)? Specifically, the IRS is looking to match the Name Control. What exactly is the Name Control?

A Name Control consists of up to four characters for individuals, corporations or trusts. It generally consists of the first four characters of the surname (for individuals), disregards blanks between letters and omits punctuation marks, titles and suffixes.

When you file your individual income tax return keep in mind that:

All the names on your return must match those on file with the Social Security Administrations records.
A name mismatch can delay the acceptance of your return by the IRS as well as your refund.

As such, if you experience a name change, make sure you:

Inform the SSA and Get a New Card. Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.

Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change. Form SS-5 is available via the link above or by calling 800-772-1213. Your new card will have the same number as your previous card, but will show your “new” name.

Notify the SSA of Dependent Name Changes. Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed. If you adopted a child who does not have a SSN, you may use an Adoption Taxpayer Identification Number (ATIN) on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W7-A.

Report Changes To the Health Insurance Marketplace. If you purchase health insurance coverage through the Health Insurance Marketplace, be sure to report changes to your Marketplace throughout the year. These include changes in circumstances, name changes, a new address or a change in your income or family size

By Administrator|2015-02-27T18:25:30-06:00February 27, 2015|Categories: IRS Talk|Tags: Adoption Taxpayer Identification Number, Application for a Social Security Card, ATIN, Form SS-5, Form W7-A, IRS name control, marriage name change and social security card, marriage name change and taxes, name change and the IRS, name changes and taxes, name changes and the SSA, report name changes before you file your taxes|Comments Off

2015 IRS Dirty Dozen

Screen Shot 2013-08-04 at 10.18.30 AM

As the tax season gets under way, the IRS does us all a public service by posting a list of the top tax scams currently making the rounds. Typically this is done by posting one scam per day over a two to three week period; usually right as the filing season opens up. The IRS recently finished releasing their list, which can be found here.

As we often see some of these scams impacting clients that visit our office, we figured we would post a quick summary. So without further adieu here is the…

Recap of the 2015 IRS “Dirty Dozen” scams:

Phone Scams: Aggressive and threatening phone calls by criminals impersonating IRS agents remains a threat to taxpayers. Callers often state that they are IRS agents and mention police arrest, deportation, license revocation and other things if the taxpayer doesn’t immediately pay their bill (i.e. as in on the phone right now as we speak). Remember, the IRS typically contacts taxpayers via letter (not phone) and don’t show up unannounced. If someone is asking for payment over the phone, tell them to give you a phone number, that you are calling your lawyer or simply hang up!
Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. If you believe that a fraudulent return has been filed by someone using your Social Security Number, we urge you to follow the steps we outlined in this identity theft blog post.
Return Preparer Fraud: Taxpayers need to be on the lookout for unscrupulous return preparers. Most tax professionals provide honest high-quality service. But there are some dishonest preparers who’s actions hurt you and the entire profession. Check out this post for the questions you want to ask any tax professional that you are thinking of using.
Inflated Refund Claims: Taxpayers should be wary of anyone who asks them to sign a blank return, promise a big refund before looking at their records, or charge fees based on a percentage of the refund.
Falsifying Income to Claim Credits: Taxpayers should avoid inventing income to erroneously claim tax credits (e.g. the Earned Income Credit or EIC).
Claims for Fuel Tax Credits: The fuel tax credit is generally limited to off-highway business use, including use in farming. Consequently, the credit is not available to most taxpayers.
Hiding Income with Fake Documents: The mere suggestion of falsifying documents to reduce tax bills or inflate tax refunds should be a huge red flag when using a paid tax return preparer.
Phishing: Fake emails or websites looking to steal personal information continue to be a problem. The IRS will not send you an email about a bill or refund out of the blue.
Fake Charities: Taxpayers should be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Follow the 10 steps in this post to ensure that you are giving to a “real” organization and not someone trying to steal your money.
Offshore Tax Avoidance: Anyone suggesting that you can avoid paying tax by hiding it in an “offshore” account is selling you lies. Just research FACTA and you’ll see what the IRS has to say about the topic.
Abusive Tax Shelters: The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true.
Frivolous Tax Arguments: Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. Just know that the penalty for filing a frivolous tax return is $5,000.

By Administrator|2015-02-12T21:47:10-06:00February 12, 2015|Categories: Tax Talk|Tags: 2015 IRS Dirty Dozen, Choosing a tax preparer, IRS Charity Scams, IRS IP PIN, IRS Phone Scams, IRS Tax Scams, Tax Identity Theft, Tax Return Preparer Fraud|Comments Off

First Generation Bus Bench Ad; Soon To Be Retired…

When you’re in business, effectively engaging your prospects and potential customers is half the battle of generating revenue. However, when you communicate via different advertising media (e.g. TV, radio, internet, outdoor, etc), you have to make sure that the design has been properly tailored. If the ad design doesn’t match the media, you risk the possibility of losing a lot of money. Case in point; our bus bench ads.

In 2014 we began using bus bench ads to extend our marketing reach around our retail office. While the bench didn’t “break even” from the standpoint of how much we spent on it versus the revenue generated, it did bring us some customers. With that said, we went back to the drawing board when it came time to redesign it for our contract renewal. Why? Well, we felt that the original version may have been a little too “busy” and cluttered. Thus, we tried to streamline it so that it delivered our message in line with the media (i.e. quick view, limited space and only a few seconds to capture your “on-the-go” audience).

Revised, Revamped and Ready To Reap Revenue!

Designing for outdoor media is a challenging communication task. It requires that one transmit their concept with both clarity and focus. With that being said, here are the top ten points to keep in mind when developing effective outdoor advertising:

The Five W’s. You want to convey the what, where, why, when and who in the most expedient manner possible. Some of you may say that the w’s aren’t in the order that you remember them in from school. Well, when it comes to advertising, the prospect wants to know what’s in it for me before they even care who is offering it. Thus, tell them what you’re offering, where they can get it, why they need it, when they can buy it and who you are in that order. They can always find out who you are, but that isn’t going to initially spark them to continue reading your ad.

Keep your message short. Refine your message to its most basic elements; you may only have 30 seconds of their time if you are lucky. You’re NOT trying to sell them on the spot so don’t waste your time or money attempting to do so. Remember, you just want the person to desire to learn more about the goods and services of the company so they will follow your call to action.

Use a “call to action.” The main reason businesses fail to make the sale is because they never ask for it! If you want the person to do something, explicitly tell them what steps they should take. Things such as call now, visit this website or visit us at 123 Anywhere Street are what we’re referring to. If your space is limited, at a bare minimum the ad copy should be designed so readers have the essential information and are stimulated to respond.

Use bold, vibrant colors. Colors that complement and contrast each other work best. Using more than two or three different colors isn’t advisable. Designs have better readability with opposite colors used next to each other for higher contrast. With colors that are too similar, design elements can blend together at a distance and get lost.

Eliminate unnecessary information. You’re probably not advertising services from Chicago to prospects in Florida. Thus, eliminate items such as area codes and city names if they aren’t absolutely needed.

KISS. Keep it simple sweetheart! Limit the complexity and number of concepts communicated. The more that prospect has to digest, the harder it will be for them to remember just what it is you do.

Use photos and graphics. There is a reason that Jared’s picture is on the benches. Pictures help to create intrigue, convey mental images as well as help an ad stand out. For example, if you see the bench with Jared’s face on it, you might just look at it simply to satisfy your curiosity as to who that guy is? Ads with images are viewed far greater than those with only text, so make sure to use those pictures!

Use large, clear fonts. You want to ensure that you copy is readable; especially for the most important concepts of the ad. In our first generation benches the company name was the most prominent. In the second generation we changed this so that our services were primary. Why? See the five w’s above.

Use intrigue. Make your prospects want to learn and know more about you and what you have to offer. Thus, be intriguing in both words and imagery.

Keep the layout simple. Remember, you’re trying to say a lot in a little amount of time. Make sure that the layout is clean with a clear-cut message and focus. Remember less is always better.

By Administrator|2014-12-31T18:23:05-06:00December 31, 2014|Categories: Business Talk|Tags: Anatomy of Bus Bench Ads, bus bench ads, bus bench advertising, bus bench marketing, Design Tips For Bus Bench Ads, Effective Ad Design, Jared Rogers Bus Bench, jared rogers cpa, Outdoor advertising design, Ten Tips of Effective Ad Design|Comments Off

Marijuana, The IRS and Taxes

It’s almost impossible not to notice the wave of marijuana legalization spreading across the country. Even Congress is getting into the act. Research hemp crops were recently included in the 2014 Farm Bill. Furthermore, Congress defunded DEA raids on state-legal marijuana facilities in the 2015 stop-gap funding bill.

Regardless of one’s personal feelings on this topic, it’s obvious that voters, legislators, and Congress are, for the most part, on board for the ride. In some states, this is driven by the expected tax revenue. The IRS, however, still has a few things to say when it comes to marijuana.

First of all, for those folks out there that are already medical marijuana patients or have considered getting their “card,” you should know that the costs of obtaining medical marijuana are NOT deductible as a medical expense on Schedule A of your personal income tax return. The reason for this is that marijuana is still classified as a Schedule I drug by the United States Controlled Substances Act.

If you have deducted your medical marijuana expenses in the past, and you ever get audited, do note that this deduction will be disallowed, and you’ll be subject to paying taxes, penalties, and interest as a result. In order to claim a deduction for this in the future, Congress will need to reclassify cannabis as, at the least, a Schedule II drug. If this is an important personal issue to you, your best course of action right now is to lobby your representative and senator, rather than testing this in tax court (it’s already been tested, and the IRS won).

On the business side of things, it gets even more complicated. Under Internal Revenue Code Section 280E, dealers of Schedule I controlled substances are not permitted to deduct the ordinary business expenses involved in selling their products. This means that recreational and medical marijuana dispensary owners cannot deduct the most common business expenses incurred in running a business, such as rent, utilities, wages, marketing, security, etc. To get an idea of how the tax court is thinking about this subject, feel free to take a look at the Olive v. Commissioner case and the ruling of Judge Diane L. Kroupa.

Marijuana businesses are still allowed to take a Cost of Goods Sold (COGS) deduction from gross revenue. COGS includes the hard cost of acquiring marijuana for resale, for example.

Businesses that provide other services beyond just selling marijuana are allowed to deduct reasonable business expenses for those other services and products. For example, many medical marijuana stores also offer various naturopathic services, yoga classes, massage, etc. Expenses related to those services are deductible (reference: 128 TC 173 (2007)).

Whether you’re a medical marijuana patient or contemplating opening a marijuana related business, it’s important to seek proper legal, tax, and accounting counsel to make sure you stay on the right side of the law.

By Administrator|2020-09-16T10:21:49-06:00December 25, 2014|Categories: Tax Talk|Tags: are medical marijuana expenses tax deductible, IRC Section 280E, Judge Diane L. Kroupa, Marijuana and The IRS and Taxes, Medical Marijuana Dispensary Taxes, medical marijuana tax deductible, Olive v. Commissioner, Schedule I Drugs, Schedule II Drugs, The Vapor Room Tax Case, United States Controlled Substances Act, US Controlled Substances Act|Comments Off

He’s Back. Uncle Sam Wants You!!!!

Sometimes things happen. Life get’s in the way. Your health takes an unexpected turn for the worse. You have the best intentions of getting out of the financial hole you are in, but the hole just seems to keep getting deeper. No matter what the reason is, sometimes the tax returns just don’t get filed on time. And sometimes they don’t get filed for a few years. But don’t worry, now you have an option to get back on track. Introducing fileoldtaxreturns.com!

Fileoldtaxretruns.com is our recently developed sister site to helps those who specifically have unfiled tax returns from previous years. Why create a separate website; especially if the services are provided the same fine professionals who run Wilson Rogers & Company? Keep reading.

Software availability. If you have old tax returns to be filed and are the DIY type, you’ll quickly stumble onto something. Software providers typically STOP offering tax software for a particular year once the IRS has shut down the e-file platform. Thus, if you want to prepare your return electronically, there are a limited number of online sites you can use or you have to manually fill out the forms once you download them from the IRS website. But what if you don’t want to prepare the return?

Real people available year round. It’s no secret that most retail tax offices close up shop once the tax season is over. If you have a deadline to provide a tax return to someone (e.g. loan officer for that new home you’re trying to purchase), you might find it hard to locate anyone who can prepare it for you, when YOU need it. Thus, fileoldtaxreturns.com was created as a option so that taxpayers could get these old returns prepared all year round. Depending on the situation, you may be able to get them done in as little as 24 hours!

Real people available year round!

Repository of tax law. Tax laws are constantly changing. Even if you don’t want to have someone prepare your return for you, what laws and tax rates were in effect back when your tax return was due? Not to worry, fileoldtaxreturns.com has a tax help blog that has all of the historical information that you would need to ensure that your return was done right. While only containing historical tax rate tables at the moment, it will soon be expanded to include tax law summaries for each year as well as specific information on various credits, deductions and other items.

Help with IRS debt. It’s not uncommon for those who have unfiled returns to also have amounts owed to the IRS. Sure, you’ve seen all those companies with the late night infomercials telling you how you can settle your debt for pennies on the dollar if you owe more than $10,000 to the IRS. But can you trust them? How do you know if they are reputable? Well, fileoldtaxreturns.com has a dedicated Got IRS Debt page that will not only inform you of your options when it comes to settling your tax debt, but inform you of your rights!

So there you have it. If you have (or know someone who has) unfiled tax returns, why not pay a visit to the site? If you need to speak to someone, you can call the site’s dedicated support number at 844-TAXES88 or 844-829-3788. Plus, when you visit the site, you can sign up and save 30% off current year tax preparation rates.

Until next time…

By Administrator|2014-11-30T08:44:22-06:00November 30, 2014|Categories: Tax Talk|Tags: 844-829-3788, 844taxes88, bus bench ads, bus bench advertising, file old tax returns, file old tax returns turbotax, fileoldtaxreturns.com, IRS Debt, old irs tax tables, old tax tables|Comments Off

10 Options For Solving Your IRS Debt

When it comes to settling your tax debt, there are 10 options “commonly” employed by resolution professionals (such as ourselves) or the individual taxpayer (see full explanations below):

»          Full pay the tax owed
»          File unfiled returns to replace Substitute for Returns (SFR’s)
»          Dispute the tax on technical grounds
»          Currently Not Collectable
»          Installment Agreements
»          Offers In Compromise
»          Penalty Abatement
»          Discharging taxes in bankruptcy
»          Innocent Spouse relief
»          Expiration of the Collection Statute

OPTION ONE – Full pay the tax owed
While seldom a popular option, sometimes the taxpayer does have the ability to pay the tax outright or borrow against an existing asset e.g. refinance a home mortgage or take out a home equity loan.

Surprisingly, in this situation, this option is usually the least costly of viable options available to the taxpayer. The reason for this is two-fold:
» The taxpayer’s equity in assets will usually disqualify the taxpayer from benefiting from options which grant debt forgiveness.
» Until the tax debt is paid in its entirety, it will continue to accrue additional penalties and interest.

OPTION TWO – Filing unfiled tax returns and replacing Substitute for Returns
When resolving a tax problem, it is relatively common to find that the taxpayer has back tax returns which have not been filed. There are three reasons why it is necessary to file the required back tax returns and get the taxpayer “Current” so to speak:
»         Failure to file tax returns may be construed as a criminal act by the IRS and can be punishable by one year in jail for each year not filed. Filing unfiled returns brings the taxpayer “Current”
»          Filing unfiled returns to replace “Substitute for Returns” may lower the tax liability owed and the associated interest and penalties
»          A settlement cannot be negotiated with the IRS until the taxpayer becomes “Current”

OPTION THREE – Dispute the tax on technical grounds
If there is a technical basis to dispute the amount of tax owed, there are a number of paths to consider, including:
» Filing an amended return if the statute of limitations to file has not expired
» Filing an Offer In Compromise – Doubt as to Liability

OPTION FOUR – Currently Not Collectable Status
If a taxpayer does not have positive cash flow above the level to pay their necessary living expenses or have equity in assets to liquidate, the taxpayer may qualify for Currently Not Collectable Status (CNC). This is most commonly seen when the tax payer is unemployed or underemployed. In this situation, the IRS places a temporary hold on the collection of the tax owed until the taxpayer’s financial situation improves. If over a longer period of time, the tax payer’s financial situation does not improve, the taxpayer may then become a viable Offer In Compromise candidate.

OPTION FIVE – Installment Agreements
In most cases, the IRS will accept some type of payment arrangement for past due taxes. In order to qualify for a payment plan the taxpayer must meet set criteria. They include:
»          The taxpayer must be current- all returns must be filed
»          Disclose all assets owned
»          The difference between the taxpayer’s monthly income and allowable monthly expenses will be the amount that the IRS will request that the taxpayer pay on a monthly basis
»          Monthly payments will continue until the taxes owed are paid in full

OPTION SIX – Offers In Compromise
The IRS Offer in Compromise program provides taxpayers that owe the IRS more than they could ever afford to pay, the opportunity to pay a small amount as a full and final settlement.

»          This program also allows taxpayers that do not agree that they owe the tax or feel that the tax has been incorrectly calculated, a chance to file an Offer in Compromise and have their tax liabilities reconsidered.
»          The Offer in Compromise program allows taxpayers to get a fresh start.
»          All back tax liabilities are settled with the amount of the Offer In Compromise.
»          All federal tax liens are released upon IRS acceptance of an Offer In Compromise and payment of the amount offered.

An Offer in Compromise filed based on the taxpayers inability to pay the IRS looks at the taxpayer’s current financial position and considers the taxpayers ability to pay as well as the taxpayers equity in assets. Based on these factors, an Offer amount is determined.

» Taxpayers can compromise all types of IRS taxes, penalties and interest.
» Even payroll taxes can be compromised.

If the taxpayer qualifies for the Offer In Compromise program, they may be able save thousands of dollars in taxes, penalties and interest.

OPTION SEVEN – Penalty Abatement
In most cases, penalties make up 10-30% of the total tax obligation. A penalty abatement request can eliminate some or all penalties if the taxpayer has reasonable cause for not paying the tax on time or paying the appropriate amount of tax.

Reasonable cause includes:
»         Prolonged unemployment
»         Business failure
»         Major illness
»         Incorrect accounting advice
»         Incorrect advice from the IRS

To prevail in a penalty abatement request, as in most tax matters, the burden rests with the taxpayer to be able to adequately document the reasonable cause.

OPTION EIGHT – Discharging Taxes in Bankruptcy
Bankruptcy can discharge federal income taxes if certain requirements are met. However this depends upon both the type of bankruptcy and the type of tax owed.

Chapter 7 is the chapter of bankruptcy law that provides for the liquidation of non-exempt assets and the discharge of dischargeable debts. Chapter 11 and Chapter 13 provide for repayment of debt in whole or in part.

To discharge taxes in bankruptcy, a number of criteria must be met including:
»         36 months have expired from the tax return due date
»         24 months have expired from the date the tax was assessed
»         240 days have passed since the tax was assessed and filing bankruptcy
»         All tax returns must have been filed

OPTION NINE – Innocent Spouse relief
Sometimes a taxpayer will find themselves in trouble with the IRS because of their spouse’s or Ex-spouse’s actions. The IRS realizes that these situations do in fact occur.

In order to help taxpayers that have tax problems which are due to the actions of their spouse, the IRS has developed guidelines for taxpayers to qualify as an innocent spouse. If a taxpayer can prove they meet these guidelines, then the innocent taxpayer may not have to pay some or all the taxes caused by their spouse or ex-spouse.

OPTION TEN – Expiration of the Collection Statute
The IRS has 10 years from the date of assessment (usually close to the filing date) to collect all taxes, penalties and interest from the taxpayer. The taxpayer does not owe the tax after the 10-year date has passed.

Listed below are some of the most common exceptions to this rule:
»          If the taxpayer agrees in writing to allow the IRS more time to collect the tax
»          If the taxpayer files bankruptcy during the 10 year period
»          If the taxpayer files an Offer In Compromise.

By Administrator|2014-11-20T15:33:14-06:00November 20, 2014|Categories: Tax Talk|Tags: Collection Statute Expiration Date, Discharge Taxes In Bankruptcy, IRS CNC, IRS CSED, IRS Currently Not Collectible, IRS Debt solution options, IRS Innocent Spouse Relief, IRS Offer In Compromise, IRS OIC, IRS Penalty Abatement, IRS reasonable cause, IRS Resolution options, SFR, SUbstitute For Returns|Comments Off

I’m a failure; but so are most people.

Me? Big Time Failure!

I worked for 4 companies throughout my corporate career and never lasted longer than 4 years at any of them. My failure to be able to “tolerate” simply doing something because someone said it should be done is what routinely led to my departure.

I’ve failed, many times over, to keep my weight in check. While I’m nowhere near obese, I am also nowhere near my svelte days when I was on the football team in high school or when I rode as a bike messenger. I get the weight off by riding hundreds of miles on my bike, and then manage to gain it back months (sometimes years) later. Blame this failure on my immense love of food and inability to control my desire to feed my face!

After three years of running this company night and day, I’ve failed to achieve the revenue or profit goals that we outlined in our original business plan. What’s worse is that people would consider me a “smart” finance person and I’m supposed to be good at numbers right? So why then could I not accurately project the revenues and expenses of this company over that three year period? Oh yeah, because this was uncharted territory for me – having to figure out exactly how many clients you get when you spend $X on a marketing campaign. Better yet, figuring out which marketing campaign even works!

On top of the above, I’ve failed my family for years. I’ve failed to spend as much time with them as I both want and should. I’ve failed to be there when they’ve rung me on the phone and I thought “I’m busy with something, I’ll just call them back later.” I’ve failed my wife and daughter by not giving them all the hugs, kisses and love that I can possibly muster. With all these failures, I’m surprised that I am even loved at all.

So why do I keep failing? Well, I wrote about that extensively in this post so I won’t rehash any of it. But you want to know the interesting thing? Most people are failures. Let me explain.

Failure is defined as the state or condition of not meeting a desirable or intended objective, and may be viewed as the opposite of success. The key component in the preceding sentence is “may be” and should not be misconstrued with “is.” In other words, failure is simply not meeting an objective. This doesn’t mean that you are not succeeding or will not achieve your goal at some point. The key in moving from failure to success can be summed up in the following quotes:

“I can accept failure, everyone fails at something. But I can’t accept not trying.” – Michael Jordan

“Success consists of going from failure to failure without loss of enthusiasm.” – Winston Churchill

“Only those who dare to fail greatly can ever achieve greatly.” – Robert F. Kennedy

“Giving up is the only sure way to fail.” – Gena Showalter

“Failure should be our teacher, not our undertaker. Failure is delay, not defeat. It is a temporary detour, not a dead end. Failure is something we can avoid only by saying nothing, doing nothing, and being nothing.” – Denis Waitley

“I have not failed. I’ve just found 10,000 ways that won’t work.” – Thomas A. Edison

With that said, yes, I am a failure. Most of us are failures. But mark my word, at some point in the future someone will say “Jared Rogers a failure? That guy has to be one of the most successful people I know!” Yet, they won’t be saying this because I was a failure; they’ll be saying it because I didn’t quit.

Until next time…

By Administrator|2020-09-16T10:34:26-06:00October 30, 2014|Categories: Who's The Boss?|Tags: failure definition, failure quotes, I'm a failure, I'm a failure; but so are most people., I'm a loser, michael jordon failure quote, most people are failures, thomas edison failure quote, weight loss failure, why I'm a failure, winson churchill failure quote|Comments Off

Understanding The Gift Tax

So a few weeks ago, someone posed the following question to us regarding gift giving:

Can you please explain how the gift-tax system works and what its rationale is? I know that if I give someone a gift below a certain amount, then I don’t have to pay gift tax. But what happens if I give over that amount? My contribution was made with after-tax money. Why do I have to pay a gift tax? It just feels like I am being double taxed.

We thought it was a good question, so let’s explain what the so-called gift tax is really all about.

Lifetime Exclusion
Our current tax system essentially treats the transfer of wealth the same whether the transfer was made during the donor’s lifetime or posthumously. However, the IRS grants taxpayers a life time exclusion (also called the lifetime exemption) that allows them to give away $5,340,000 (in 2014) at either stage or a combination of the two. Thus, a taxpayer can give up to this amount during their lifetime or after death without either the recipient or the donor owing any tax on that transfer.

Annual Exclusion
A common source of misunderstanding surrounding gift tax has to do with how the lifetime exclusion amount relates to the annual exclusion. The annual exclusion allows a taxpayer to give $14,000 (in 2014) to another person per year without it counting against the lifetime exemption. You and your spouse can combine this annual exclusion to double the size of the gift to a done if you would like (up to $28,000). So what happens when you give more than the above amounts? Well, you then have to deduct the difference against your $5,340,000 lifetime exclusion. Just how do you do this?

Reporting
You, or your estate if the taxpayer is deceased, must file Form 709 United States Gift Tax Return by the same date that your Individual Tax Return is due (April 15^th). You will owe no tax on your gifts unless you have already given more than the lifetime exclusion. Once you file Form 709, the government notes what your remaining exemption is. The same process is followed every time you exceed the annual exclusion limit (e.g. $14,000). Then at your death, any bequest beyond the remaining limit is subject to taxation. Thus, it’s not until you reach this point that your gift is subject to double taxation so to speak.

If you want more information on the gift tax and reporting, check out this nifty little IRS site
on the topic. Still have questions? Why not give us a call or shoot us an email via our contact information below and we’d be happy to chat with you.

By Administrator|2020-09-16T10:48:03-06:00October 26, 2014|Categories: Tax Talk|Tags: annual gift tax exclusion, Form 706, gift tax, gift tax exclusion, gift tax exclusion amount, gift tax exemption, gift tax exemption amount, gift tax return, gift tax rules, irs gift limit, irs gift tax, irs gift tax form, lifetime gift tax exclusion, understanding gift tax|Comments Off

Restricted Stock Unit (RSU) Taxation

Employee compensation is a major expenditure for most corporations. As such, some firms find it easier to pay, at least a portion of, their employees’ compensation in the form of stock. This post will discuss the tax implications one should be aware of if they are the recipient of Restricted Stock Units or RSUs.

How do Restricted Stock Unit Plans work?
A RSU represents an unsecured promise by the employer to grant a set number of shares of stock to the employee upon the completion of the vesting schedule. Once an employee is granted RSUs, the employee must decide whether to accept or decline the grant. If the employee accepts the grant, they may be required to pay the employer a purchase price for the grant.

After accepting a grant and providing payment (if applicable), the employee must wait until the grant vests. Stock is not issued at the time of the grant. However, once the recipient of a unit satisfies the vesting requirement, the company distributes shares, or the cash equivalent of the number of shares used to value the unit.

Income Tax Treatment
The following example reflects a salary of $65,000, a grant of 400 shares of hypothetical XYZ Company stock and a sale of said stock one day after vesting.

Step 1: Compensation Income From The Vesting Of The RSU Award
Under normal federal income tax rules, an employee receiving Restricted Stock Units is not taxed at the time of the grant. Instead, the employee is taxed at vesting (when the restrictions lapse) unless the employee chooses to defer receipt of the cash or shares. In these circumstances, the employee will have compensation income or “ordinary income” in tax parlance. The amount of income subject to tax is the difference between the fair market value of the grant at the time of vesting or distribution, minus the amount paid for the grant (if any).

In our example, the compensation is calculated as 400 shares vesting times the $20 per share fair market price on that date. The employee now has compensation income of $8,000. This will also be the stock basis of said shares for use in the next step. On the employees W2, this $8,000 will be added to the $65,000 in wage compensation and taxed at “ordinary income’ tax rates.

Step 2: Calculating Capital Gains or Losses
For grants that pay in actual shares, the employee’s tax holding period begins at the time of distribution (which may or may not coincide with vesting depending on the plan rules), and the employee’s tax basis is equal to the amount paid for the stock plus the amount included as ordinary compensation income.

In our example, the employee has 400 share of stock with a basis of $8,000. The very next day they sell all 400 shares when the stock is trading at $22 per share. The employee has just created a capital gain of $800, which is the difference between their $8,800 sales price and $8,000 basis. As they held the stock for less than one year between when they obtained it and sold it, the $800 gain will be reported on their tax return as a short term capital gain via Form 8949 or Schedule D (depending on if they had any other adjustments).

Special Consideration – Tax Withholding Choices
Sometimes when one is granted RSUs, they would like the employer to “withhold” some taxes to cover the amount that will be included on their W2 as compensation income. Generally speaking those options will include:

Net Issuance – The employer will deduct a number of shares from your vested shares and give you the rest (broker remits net proceeds to employer, employer remits the value of the deducted shares to Government, money shows up as “withholding” on paycheck).
Same Day Sale – If you make this choice, you sell everything on the day of vesting. The employer will then withhold a portion of the proceeds as “withholding” and report them on your W2.
Sell To Cover – If you make this choice, or if you don’t have a choice, your employer sells just enough shares to cover the tax withholding. The key difference between Sell to Cover and Net Issuance is that the employer uses a broker in Sell to Cover but doesn’t use a broker in Net Issuance.

By Administrator|2014-10-19T21:25:32-06:00October 19, 2014|Categories: Tax Talk|Tags: Restricted Stock Units, Restricted Stock Units and taxation, Restricted Stock Units IRS, Restricted Stock Units tax reporting, RSU Tax Reporting, RSU Taxation|Comments Off

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