Author Archives: c06675329

Identity Theft Update

Most recent statistics indicate the IRS has seen a drop of identity theft cases reported in 2017 by individual taxpayers. While these latest statistics are encouraging, it is still important to be diligent with your personal information, especially while online. Identity theft remains on the top of the IRS list of the dirty dozen tax scams.

Reported Identity Theft Cases to the IRS*:
Jan – May 2017 107,000
Jan – May 2016 204,000
Jan – May 2015 297,000

Be familiar with red flags the IRS watches for to alert of potential identity theft such as:

  1. Tax returns without a PTIN (this is a paid preparer number issued by the IRS). All paid tax-preparers are required to have a PTIN. If your tax-preparer does not have a PTIN, you should not have them prepare your tax return and most importantly, do not give them your personal information!
  2. Tax returns prepared outside of a professional tax office. All tax offices that are registered with the IRS have an EFIN number which allows the tax office to electronically submit your tax return (E-File).

Do not respond to emails requesting personal information. The IRS and any legitimate business is not going to ask for personal information online or by email.

If you receive an email that appears to be from your tax-preparer, do not respond by email with personal information. Pick up the phone, call your tax professional, and ask questions about the information they are requesting. Don’t automatically assume the email is from your tax-preparer. It could have been sent to you by an identity-thief seeking to file a tax return using your information.

As always, if you suspect identity theft of your personal information, file Form 14039 with the IRS, notify your bank and the major credit bureaus. For more information, see https://www.irs.gov/uac/taxpayer-guide-to-identity-theft.

*Statistics provided through our partnership with Federal Direct Tax Services, Indianapolis IN.

Why Now is a Good Time for Tax Planning

As the dog days of summer are here, please take a moment to cool off, relax, & enjoy our attached brochure of 2017 Tax Changes. Click here – 2017 Tax Changes

As 2017 begins to wrap up, now is a good time to review your tax situation. Tax planning before year-end is important because you still have time to adjust strategies that will make a difference when preparing your 2017 tax return. Our Tax Planning Roadmap tool will identify opportunities to increase your tax refund, decrease your tax liability, and help you save for retirement! Each Roadmap is personalized to your situation based on last year’s tax return and any new information provided to us.

Our Tax Planning Roadmap is provided to us through our membership with Thomson Reuters – a leading provider of tax research, step-by-step guidance, and quality control relied upon by thousands of firms as the industry standard!

Did you know…

– Contributions to a Traditional IRA may be deductible on your Tax Return

– You have until April 15, 2018 to Contribute to your Traditional IRA

– If you turned 70 1/2 during 2017, you may need to take RMD’s by April 1, 2018

– Failure to take your RMD’s can result in 50% penalty

 

_____ Yes! Please schedule my FREE Tax Planning Consult for (circle day & time):

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Please return the above to tinak@integrityintaxllc.com or call 920-277-2991 to schedule your Tax Planning Consult!

A Good Reminder of Business vs. Hobby Activities

The following court case is a reminder for us all to look at the activities of our business and ask ourselves – is it really business or could it be considered a hobby?

Film Festival Activity Was a Hobby: The taxpayer was the sole member of an LLC that organized film festivals at colleges and universities. He didn’t create a formal business plan, prepare profit projections, or undertake a market analysis for the business. On Schedule C of his income tax return, the taxpayer reported a net loss of over $32,000 attributable to the film festivals. The IRS disallowed the loss, arguing that the activity lacked a profit motive and was therefore a hobby. The Tax Court agreed, holding that the taxpayer didn’t conduct the film festival activity in a businesslike manner and lacked the requisite profit objective. Eric Zudak, TC Summ. Op. 2017-41 (Tax Ct.).

Generally, all activities engaged in that earn income must be reported on your tax return per IRS Code Sec. 61(a) that states “gross income means income from whatever source derived…unless there is a specific exclusion” (IRC Sec. 61(a) Gross Income Defined).

Hobby Activity:  Hobby income is not an exclusion of income.  Thus, hobby income is reported on Line 21 Other Income on page 1 of your 1040 tax return. Hobby expenses are allowable deductions on Schedule A (subject to 2% AGI limitation) not to exceed the hobby income reported on Line 21. Therefore, you cannot have a net loss from a hobby activity.  Hobby income is not subject to self-employment tax.

Business Activity:  Generally, when there is an intent to earn a profit, the activity is considered business in which all ordinary and necessary expenses can be used to offset income.  Sole Proprietors are deemed to be a disregarded entity, therefore income and expenses are reported on Schedule C of your tax return. Business income is subject to self-employment tax.

When determining hobby vs. business activity, the IRS looks at each case separately.  To help, the IRS has nine factors you can use to determine whether you have a hobby or business activity.  While these nine factors should be considered, other factors may also need to be considered. No single factor is determinative, and the final decision does not depend on the number of factors indicating a “for profit” activity versus the number indicating a “not for profit activity.”   For a checklist of the nine factors to consider and additional information, email us at research@integrityintaxllc.com.

 

I have a Blog!

Thank you for coming to my blog!  Remember to check back each week for new posts and updates.  The primary focus of my blog will be to provide tax and accounting updates, information, and answer questions, as well as provide education on what exactly an IRS Enrolled Agent is and why it is so important that your tax preparer be an Enrolled Agent.  Also, I will discuss the enormous responsibility of being an Enrolled Agent.  As most of you reading already know, I have earned the privilege of being an IRS Enrolled Agent.  In addition, I am a Certifying Acceptance Agent which means I have an agreement with the IRS to assist those who are not eligible to receive a social security number, apply for what is known as an individual taxpayer identification number (ITIN), by verifying and confirming their Identity and Foreign Status.  I am by no means employed or an employee of the IRS.  Rather I help individuals and small businesses to be compliant and up to date with their tax responsibilities and obligations.  I can represent you before the IRS to resolve & settle tax liabilities and disputes.  I have helped numerous clients get IRS penalties waived and apply for Offer in Compromise (OIC). In addition, I can assist you in the Appeals process which saves you, the taxpayer, time and money spent on litigation involving attorney fees.

I also will post about many other topics such as, yes, you guessed it dogs.  I love the many personalities of dogs and how they seem to say so many words by just expressions on their face. As my commitment to the community, I donate a portion of my business income to local animal rescues and shelters.  This year after tax season, we made a donation to Saving Paws to help raise funds for a new transport van.

For those in Northeast Wisconsin, I will also post updates on local community events.

If you have a tax question – feel free to send an email to research@integrityintaxllc.com and it may appear in a future blog!

If you are a tax professional – feel free to submit articles or writings to research@integrityintaxllc.com and I may post in a featured blog!

Thank you for reading my blog.  I hope you find it informational and useful.

Tina M. Kleckner EA, CAA