Quick Tax Tips for Single Parents

Being a single parent can bring its own unique challenges and concerns in life, but filing taxes shouldn’t be one of them!

Here are some basic things to consider before filing your taxes this year.

Dependents:

Determining who you claim as dependents affects your ability to receive some credits and deductions. In a separation or divorce, this is usually a stipulated agreement between the two parents. However, the both parents can benefit if the parent who normally claims the child agrees to sign a waiver allowing for the non-custodial parent to make the claim. While you cannot split the deduction for a single year, parents can alternate years making the claim or only claim certain children if there are more than one. Remember that a child can only be a dependent if the child has lived with a parent for at least six months out of the year and was financially supported from that parent.

Head of Households:

You can file as head of household if you were not married on December 31, 2014, your kids live with you for at least 50% of the year, and you earn at least 50% of your household income. Head of household status will allow you a lower tax rate and higher deductions.

Exemptions:

For every dependent child you are allowed to deduct $3,950 for 2014. Head of households earning $275,650 or more are phased out.

Tax Credits:

Single parents earning $75,000 adjusted gross income or less can take $1,000 off their tax bill for each dependent 16 and younger in 2014.

Child Care:

Head of households who have an income or are full-time students can claim up to $3,000 per child for qualifying health care. This includes day care, summer day camps, and after school programs. Phaseout starts at $75,000 for single head of household filers.

Earned Tax Income Credit:

The maximum credit is $6,143. If you have three or more children and earn less that $46,997 as a single parent you can take this credit. If you have two children you can still qualify if you have a smaller income.

We hope this will help you begin to file your taxes! For all your tax preparation and tax debt needs call 888-737-0200. The tax experts at Advocate Tax Solutions are here to be your one stop shop for every tax question and problem. Visit www.advocatetaxsolutions.info for more information today!

Obama’s State of the Union Tax Proposal

Last night, President Obama proposed several tax changes in the State of the Union. The proposals will benefit middle-class taxpayers but will cost the wealthy taxpayers and financial services more. According to White House estimates, the proposals could raise $320 billion over 10 years. President Obama hopes to use that money to give middle class taxpayers $175 billion in tax breaks and to make community college free for two years.

The tax breaks:

• A tax credit of up to $500 for two-earner filers. Tax credits reduce your tax dollar for dollar, unlike deductions that reduce your taxable income. The full credit would be available for two-earner families with incomes up to $120,000. Partial credits would be available for those with incomes up to $210,000.
• The tax breaks would increase the income level at which the credit phases out and expand the earned income tax credit for workers without qualifying children. It would be made available to workers 21 years of age and older.
• Increase the child care tax credit to $3,000, and make the maximum credit available to most families with incomes up to $210,000.
• Simplify the student loan interest tax deduction.
• Make the American Opportunity Tax Credit permanent.
• Give full time college students a tax credit of up to $2,500 a year for five years and part-time students would be eligible for a $1,250 AOTC. In order to pay for some of the students’ tax credits, the proposal would roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions and the proposal would make distributions on 529 plans taxable to students.

Retirement Plans:

• Every employer with 10 employees would have to enroll workers automatically in an individual retirement account. Workers would be able to opt out if they chose.
• Any employer with 100 or fewer employees would get a $3,000 tax credit for offering an auto-enroll IRA. Employers would get a $1,500 start-up credit for setting up a plan.
• Long-term part-time employees would be eligible to enroll in company retirement plans.
• The proposal would target individual retirement accounts with unusually high balances and limit contributions and accruals of IRA benefits higher than about $3.4 million.

The Tax Increases:

• A higher capital gains tax, or the tax on long-term capital gains, for the wealthy. Currently the maximum gain capital is 23.8%. The proposal would set the rate at 28%. In the 2014 tax season, single filers with taxable income above $406,750 and joint filers with taxable income above $457,600 pay the highest capital gains rate.
• Currently, you can pass stocks onto your heirs without paying capital gain tax. When you inherit an asset your basis in the asset is the higher of the fair market value at the time of death or the decedent’s original basis. Usually, the fair market value is higher. The Obama proposal would eliminate that. When you inherit an asset your basis while simply be the decedent’s original basis. Capital gains would be owed at death, and in the case of couples, at the death of the second spouse. Capital gains of $100,000, or $200,000 for joint filers, would be free from tax. Couples would have an exemption of $500,000 on the gains of their personal residences. No taxes would be due on inherited small-family businesses until those businesses were sold.
• The proposal would instate a fee on large financial institutions, 0.07% of liabilities annually, levied on about 100 companies with $50 billion or more in assets in order to discourage excessive borrowing.

We know the proposal will ignite many party differences in Washington, but we want to know what you, the taxpayers, think! Leave a comment below and lets us know what you think is good or bad about the proposal and what tax reforms are important to you.

If you have any tax problems, Advocate Tax Solutions, your tax team is here for you to use as a resource. We can settle your taxes with the tax solutions that make sense. Call 888-737-0200 or visit www.advocatetaxsolutions.com for a free consultation.

The New Tax Laws in 2015 That Could Affect You

Every year the U.S. tax code undergoes changes that can affect the amount we owe the IRS. Knowing and planning for these changes can help you save money and confusion this year.

Here are some key changes to be aware of.

401 (k) Contribution Limits

For the past two years, 2013-2013, the contribution limit for 401 (k) retirement account was fixed at $17,500 plus another $5,500 “catch up”. This year the amount has risen to $18,000 with a $6,000 catch up for those 50 years of age and above.401 (k)s, or employer-based retirement plans can be a powerful savings builder. In order to qualify for the catch up contributions you must be of age or turn 50 any time during 2015.

IRA Deduction Eligibility

While IRA contribution limits will remain the same in 2015 ($5,500 plus a $1,000 catch-up for those 50 and older), the deduction for taxpayers making contributions to a traditional IRA is more generous. Here’s what the IRS states, “The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.”

Roth IRA Eligibility

The Roth IRA’s eligibility is also expanding. The AGI phase out range has risen from being between $181,000-$191,000 in 2014 to $183,000-$193,000 in 2015 for married and filing jointly couples. For taxpayers filing as single and head of households, the range has risen from $114,000-$129,000 to between $116,000-$131,000.

IRA Rollovers

Beginning this year, taxpayers will only be able to execute one IRA rollover per year. A rollover involves removing money out of one IRA and putting it into another IRA after holding it for less than 60 days.

myRA

The myRA, my Retirement Account, is a new retirement account created by the U.S. Department of the Treasury, designed to be offered through employers. The myRA doesn’t have any fees and offers modest, guaranteed growth, ensuring that you won’t lose any money. A myRA account can be started with as little as $25 and you can add a minimum of $5 at a time. The contributions levels for myRA are the same as for IRAs ($5,5000 with a $1,000 catch-up). Once your account reaches $15,000 it has to be transferred into a private sector Roth IRA.

SEP IRA Contribution Limits

For taxpayers who are self-employed, contribution limits rise to $53,000 in 2015 and compensation limits rise to $265,000. These limits apply to solo 401 (k)s as well.

SIMPLE IRA Contribution Limits

In 2015, you will be able to contribute as much as $12,500 plus a $3,000 catch up if you are 50 and older.

Health Savings Account Eligibility

This year you will no longer be eligible for a Health Savings Account if you forward any FSA money. This new rule has confused many people. You can read more here or contact your tax professionals.

Health Insurance Penalty

The penalty for opting out of healthcare coverage has risen this you. In 2014, the penalty for opting out of the “minimum essential coverage” had a penalty of 1% of their income above the tax filing threshold ($95 per adult, $47.50 per child, and a $285 family maximum. For 2015, the penalty has doubled to 2% of your income ($325 per adult, $162.50 per child, and a family maximum of $975). The penalty will continue to rise in 2016.

While these new tax laws are the ones that will most likely affect you, there are many other new tax laws in 2015 that are worth learning about as well. If you have questions concerning the new laws and how they affect you contact your tax team at 888-737-0200 or visit http://www.advocatetaxsolutions.com

Things to Check Before Open Enrollment Ends On February 15

Millions of Americans who receive health insurance through work are benefiting from the Affordable Care Act (ACA), and millions of others have signed up for the Health Insurance Marketplaces to lower their monthly premiums.

As the end of 2015 Health Insurance Marketplace open enrollment period quickly approaches, there are some questions you should ask yourself to make sure you’re complying with the Affordable Care Act (ACA) to avoid being hit with a tax penalty when  you file your 2015 federal income taxes next year.

1. Do I have coverage? If not, do I need it?

The ACA requires most Americans to carry a health insurance plan. If you choose not to, you will be choosing to pay a fine to be uninsured. Call one our tax experts at 888-737-0200 to see if you can qualify for an exemption.

2. Does my current plan comply with the ACA?

Most employment-based plans comply with the law and if you already have a plan from the Health Insurance Marketplace or your state Marketplace you are in compliance. Medicare, Medicaid, the Children’s Health Insurance Program, TRICARE and any other qualified coverage also complies with the health law.

3. Can I get subsidized insurance?

If you are uninsured or buy your own coverage visit Healthcare.gov or your state’s Marketplace to find out if you qualify for subsidized insurance. Depending on your household income you may be eligible for an advanced premium tax credit and cost-sharing assistance. If you have a limited income you can also find out if and how you can qualify for Medicare. If you already have a Marketplace plan, you have until February 15 to purchase different coverage if your plan is no longer right for you. Just remember to cancel your old policy!

4. Did I report my life changes?

If you had any major life events this year such as marriage, divorce, having a child or a change in income, makes sure to update your information on your plan. You could be eligible to receive more financial assistance or you could have to repay money when filing your income taxes.

If you have any more questions about how the ACA could affect your taxes,call 888-737-0200 or visit http://www.advocatetaxsolutions.com. The tax experts at Advocate Tax Solutions are your one stop resource for all of your tax issues.

This Tax Season Could Be One of the Worst

This tax season is predicted to be the worst in years for both the IRS and for taxpayers. Nina Olson, the national taxpayer advocate, believes it could be as bad as 1985, which lost returns and delayed refunds due to a computer failure.

This year it is a potential disaster because the IRS budget keeps getting smaller and the tax code more complicated. This is also the first year the IRS will have to administer premium tax credits, the Foreign Account Tax Compliance Act and individual mandates under the Affordable Care Act.

While firsts are never perfect, the IRS has limited resources due to budget cuts. Congress has dropped the IRS budget by 10% in the past five years, and has not accounted for the cost increases.

While the number of taxpayers has grown by about 7 million people, the number of IRS personnel has dropped by 8%.

IRS Commissioner John Koskinen warned that refunds may be possibly delayed and that there will be less taxpayer service.

According to CNN, Olson “estimates that 47% of the calls coming into the IRS probably won’t be answered during the filing season. The other 53% of people lucky enough to get through will have to wait an average of 34 minutes to talk to a human being.”

Koskinen promises the IRS will keep everything running as smoothly as possible, but the agency will still be stretched thin.  “All we can try to do is maximize the resources available in that January to May time frame to make sure that … we do as well as we can. And ‘as well as we can’ is still going to be miserable,” he said.

If that misery includes greatly delayed refunds, Americans won’t like it. Currently Americans have one of the best tax compliance rates in the world and it would costs the government billions if that was to change.

We hope this tax season isn’t as miserable as it’s predicted to be! It may be best to start filing your taxes as soon as possible. Since the tax code is increasingly complex this year, it could be a good idea to consult a tax professional. At Advocate Tax Solutions, our tax consultants will prepare this year’s taxes for you as well as file any prior year’s unfiled tax returns. For all your tax preparation, accounting, and back tax questions call your tax representatives at 888-737-0200 or visit www.advocatetaxsolutions.com.

Received an IRS letter? Here are some tips.

Have you received a notice from the IRS? We recognize a letter from the IRS can put an instant knot in your stomach, but before you decide to fight or pay up there are some basic facts you should look at. Here are some tips to help calm your nerves.

You Are Not Alone.

Millions of Americans owe back taxes every year. The IRS is big, faceless, and bureaucratic. They send millions of letters and notices to taxpayers.

Don’t Panic

If you get a letter from the IRS open it before you worry. Not every envelope from the IRS is a bill or bad news. Many IRS letters can be dealt with simply and quickly. Make sure you read carefully. There are many reasons the IRS sends letters and notices. It could simply request payment, notify you of a payment made, tell you of a change in your account, or request additional information for your account.

Keep Copies and Follow Instructions.

Everything the IRS sends provides specific instructions and time periods. Make sure you respond in a timely manner, but for some cases you may not even need to reply. Sometimes letters and notices don’t need a response if you agree with the IRS and sometimes they are just notices saying you will be billed. Read carefully and keep copies. Copies will be helpful to your case wherever proof is needed. Plus, if you have a power of attorney on file, the IRS will send a cope to you as well as your designated attorney. It is a good idea to have an attorney on file if you are ever worried about missing something.

You can ask for more time.

For many notices, the IRS will grant you  an extension of time if requested. If you do ask for an extension, confirm it in writing. Everything you do with the IRS needs to be confirmed in writing.

Get Some Help

Consider getting professional help. A tax lawyer, accountant, or tax consultant may do a better job with the issue than you can. These experts can help you get a better resolution with the IRS and sometimes pay less than you would have to. Here at Advocate Tax Solutions we have tax attorneys, CPAs and tax consultants on staff to help you get the best resolution possible.

For more information call 888-737-0200 or visit http://www.advocatetaxsolutions.com today! All consultations are free and of course confidential.

Bad News Saleen Fans: Automotive Company Out of Money and Owes Millions

       Saleen Automotive recently unveiled a modified Tesla Model S and announced plans to tune the 2015 For Mustang, but information contained in the company’s latest quarterly report has some wondering if Saleen will soon fall to the same fate as Hummer and Saab.

 

Jalopnik reported that as of September 30, “Saleen owed $583,900 in unpaid payroll taxes; $1,148,574 of accounts payable was greater than 90 days past due; $352,795 of outstanding notes payable were in default; and $398,176 is owed to a bank as of November 2014, which the Company has not paid and expects to be in default unless the bank agrees to another extension.”

Saleen’s cash assets were listed at $7,261 at the end of the quarter; definitely not enough to run a car company. The situation is so bad that Saleen is counting on another bank extension so the company can continue operating and hopefully turn things around.
This news casts doubt for Saleen enthusiasts and buyers. Saleen’s recently modified Tesla Model S, the Saleen FourSixteen, and the new Saleen 302 Black Label, that just started coming to the market, could be quickly put on hold.
It’s a sad day when ingenious companies come to a struggle due to financial issues and tax debts. We hope Saleen has the turnaround it hopes for and gets the representation it needs. Saleen if you need new accountants, we’re here for you!

 

Do you owe over $10, 000 in back taxes? Call us today@: (888)737-0200 

or visit www.AdvocateTaxSolutions.com to learn more about back tax resolutions and IRS debt help.

 

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SIMPLE BACK TAX LESSONS FROM AL SHARPTON

Advocate Tax Solutions gives their views on the recent back tax problems of the rich and famous

 

“If we owed $4.5 million in ’08 then how could we owe this now, unless you’re saying that everybody just went to sleep on this and just gave us a pass, which is ridiculous,” Sharpton said in the CNN article.

This week Civil Rights Leader Al Sharpton blasted the extensive New York Times Report saying he owed $4.5 million in back taxes. Sharpton argued that it wasn’t  possible for him to owe that much. “The MSNBC host said in a press conference Wednesday that the $4.5 million was the original figure he was ordered to pay back in 2008, but that he has been making regular payments since then and the amount is now less,” reports CNN.

“If we owed $4.5 million in ’08 then how could we owe this now, unless you’re saying that everybody just went to sleep on this and just gave us a pass, which is ridiculous,” Sharpton said in the CNN article.

The Times articles describes poor planning, with Mr. Sharpton’s entities paying for and owning everything. This could include his personal items. If Sharpton is trying to merge personal and business expenses he is not adhering to the fundamental tax law that separates them.  While you can write off many things with a dual motive, your tax life will be easier if you avoid them and keep records.

The IRS keeps good records and so should you. Keeping records will help you in a tax dispute and can help you keep out of tax trouble.  The IRS audits may reject your tax deductions unless you have records to validate them.

Despite the great amount Mr. Sharpton owes in tax liens, he is not alone in his problems and went through the same process as everyone with back tax problems.  The process starts with notices. The IRS can only file a Notice of Federal Tax Lien after the IRS assesses the liability and sends a Notice and Demand for Payment, which states how much you owe. The IRS automatically has a tax lien if you don’t send the full payment within 10 days.

An IRS tax lien covers all of your property before and after the lien filing. IRS tax liens last 10 years, but it is better to remove them immediately. This involves paying the tax, interests, and penalties; or posting a bond guaranteeing payment.

Mr. Sharpton says he has been compliant to this process and is doing his best to pay his back taxes.  The IRS still has not revealed how much Mr. Sharpton owes and Sharpton believes his name is being dragged through IRS-ruin because of politics. He told Business Insider the negative story by the New York Times comes just as a grand jury is about to release its findings in the shooting of Michael Brown by a white Ferguson, Mo., police officer.

“Every time there’s a Sean Bell or a Ferguson or a Trayvon Martin, we go through my taxes. It’s the same agreement y’all. It’s the same thing we announced in ’09. It is the same thing we’ve been paying every month,” he said.

That could be possible, but either way it is evident that the best way to get out of IRS debt is to keep records and be compliant and active with your payment agreement.  Millions of American’s owe back taxes, and we hope Rev. Sharpton found the representation he needed to resolve his back tax debt.  However, if we were his accountants he probably wouldn’t have had this problem in the first place!  Tax per return is usually the result of either not making estimated tax payments or improperly filing your return.  Al Sharpton, we are available if you are seeking new representation!

Do you owe over $10, 000 in back taxes? Call us today@: (888)737-0200 

or visit www.AdvocateTaxSolutions.com to learn more about back tax resolutions and IRS debt help.

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