• Security reviews—The IRS and its partners continue to strengthen security reviews to help protect against identity theft and refund fraud. Your tax return may be receiving additional review, which makes processing your refund take a bit longer.
• Errors—It can take longer for the IRS to process a tax return that has errors. Fortunately, electronic filing has reduced the number of errors, which are more common in paper returns.
• Incomplete returns—Here again, electronic returns make the most sense. It takes longer to process an incomplete return. The IRS contacts a taxpayer by mail when more info is needed to process the return.
• Earned income tax credit or additional child tax credit—If you claim the earned income tax credit (EITC) or additional child tax credit (ACTC) before mid-February, the IRS cannot issue refunds as quickly as others. The law requires the IRS to hold the entire refund. This includes the portion of the refund not associated with EITC or ACTC.
• Your bank or other financial institutions may not post your refund immediately—It can take time for banks or other financial institutions to post a refund to a taxpayer’s account.
• Refund checks by mail—It can take even longer for a taxpayer to receive a refund check by mail. Direct deposit is a better bet.

In an unusually poetic statement, the IRS explains that “tax returns, like snowflakes and thumbprints, are unique and individual. So too, is each taxpayer’s refund.” So keep this in mind. Fortunately, you can track your refund status online by entering your Social Security number and other key information.  IRS Refunds information.

For FTB refund info click here.

©

The post What To Know About Getting a Tax Refund appeared first on The Accountancy.

What do you get when you put the words “THE” and “IRS” together. THEIRS. They will get THEIRS one way or another, but you do have a say in the matter, even when you owe them. Here is a primer.

Whatever you do, file your return on time.

Even if you can’t pay what you owe. The failure-to-file penalty is the most onerous of all: 5% of the tax due for any month, or fraction of a month it is late, up to 25%.

Make a partial payment.

Even if you can’t pay the whole tax bill, pay as much as you can. As long as you owe, the interest and penalties keep adding up. But, it also depends on the length of time, amount and where the money is coming from. Consider IRS does not report what you owe to credit bureaus as long as no liens are filed.

Request a payment extension.

If you haven’t applied for a payment extension before, this could be another option. After you file your tax forms without payment, the IRS will contact you to ask whether you would be able to pay within 120 days. If you choose this option, the agency will charge you a monthly fee of 0.5 percent of the amount owed.

Consider an installment plan.

This is a good option if you need more than 120 days to pay your tax bill and you owe less than $50,000. When you file your tax return, fill out an online payment agreement or Form 9465. The IRS will then set up a payment plan, which can last up to six years. You’ll incur a setup fee, which ranges from about $31 to $225 depending on how much you owe.

Ask for leniency due to hardship.

You’ll need to prove that paying your tax debt would cause you a tremendous burden, perhaps forcing you to sell your home. But this could get you more time to make your payment, and in some cases, the IRS will also waive any payment penalties. If the delays are for illness, or other relevant reasonable causes, and not due to neglect on your part, you may be able to have the penalties removed from your record. However, they usually require that you pay them first and then request abatement.

Apply for an “Offer in Compromise.”

This is a way to reduce your tax debt permanently. The IRS says that an offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or if doing so creates a financial hardship. Before applying for an offer in compromise, the IRS requires applicants to have filed all their tax returns. So, if you didn’t file in previous years, you will need to finish those missing returns. It also requires that you pay the current year’s estimated tax payments.

The post Tax Series Part 3: What to do if you owe money to the IRS appeared first on The Accountancy.

When my kids were younger, we wanted to modernize their bathroom without a complete remodel. The first priority was to swap out old faucets made of the kind of plastic that turns yellow. When my wife and I agreed, we then disagreed (married readers will understand). She expected me to call a plumber and I was expecting to do it myself. How difficult could it be? Initially, I prevailed and was committed to proving her wrong. We went to Home Depot and picked out the replacement faucets. I went back home and, armed with my tool chest, proceeded to scope out the project. It should be noted that I seldom used my own tools, and trepidations aside, it was too late to turn back. “I got this!” was my valiant refrain, that is, if I could find a wrench that would fit underneath the sink. After 30 minutes of futility and frustration, I tried disconnecting the faucets from the top, only to see, to my horror, the plastic break and water start gushing everywhere. Only then did I suffer the indignity of asking my wife to shut off the water main, after which I called a plumber. I was happy to pay to get it done right.

1. You all know I am a CPA, but I assure you this cautionary tale is not meant to be self-serving. It is simply intended to share the conclusions I came to:
2. What seems simple on the surface could have underneath several layers of complexity that are not visible to the untrained eye. You don’t know what you don’t know. Literally.
3. You should not approach a task unless you are prepared and confident, and have the right tools to do it properly.
   Don’t do your own plumbing, or hair, car repair, construction, and especially not your taxes!

The benefits, both tangible and intangible, to using a CPA more than outweigh their cost. It is important to distinguish between the mechanical process of filling out a tax return versus working with an objective advisor who can be part of the team and collaborate with your financial planner, attorney, insurance and mortgage professionals, and bankers, and integrate their advice to your financial strategies. The more financial complexity you have, the more important it is for you to do this.

Since this is Part I of a series, here is the outline of the next parts coming up:

Part 2 – Demystifying the Tax Benefits of IRA’s and ROTH IRA’s

Part 3 – What to do if You Owe Money to the IRS

The post Tax Series Part 1: Why You Should NOT Do Your Own Taxes! appeared first on The Accountancy.

Perhaps best-known today for the Getty Museum in Los Angeles, Mr. Getty was chiefly responsible for developing oil reserves in Saudi Arabia, and then the “supertankers” that transported the oil. He was an infamous miser as well. Once boasting in the media that he installed a pay phone in his mansion for the courtesy of his guests. He was also a voracious art collector which leads to the point of this piece, and the legacy of Mr. Getty.

Federal Income Tax

Mr. Getty never paid Federal income or estate taxes and avoided them legitimately through a charitable trust. His aversion to paying tax was so overwhelming that when his grandson was kidnapped, he haggled with the captors over the ransom. It wasn’t until they sent him the grandson’s ear in an envelope did he agree to pay, but only up to the amount he could deduct from his taxes. The excess was loaned to the parents of the kidnapped grandson. At the time of his death in 1976, Getty would have been worth over 2 billion, about 4-5 times that amount in today’s dollars, the bulk of which went to his charitable trust.

Mr. Getty’s life is a dichotomy of extremes. From extreme wealth to extreme misogyny. He was miserly with family and friends and yet founded the wealthiest charitable trust ever known. If you have a chance to visit the Getty Museum, you will marvel at its collection of beauty.

Legacy

In re-examining Getty’s life, a few elements struck me that could apply to any of us. For one thing, what do we want our legacy to be? What do we want to be remembered as? By whom? Second, for everything we gain, we give something up. There is a very compelling scene in the movie when Getty comes close to apologizing to his son for not being a better father, chalking it up to building his career as the reason he wasn’t around more. I bet he wishes he could do over.

Lastly, it is unavoidable to think about tax and charitable planning, both for income and estates, as it permeates throughout the movie. Undoubtedly, most of us would approach it with more balance than Getty did, but it should not be dismissed as a means of retaining and preserving wealth in the family. We will be ready to have a conversation about this, or anything else on your mind, whenever you are.

The post Your Legacy and All the Money in the World appeared first on The Accountancy.