Missouri Topics

Identity Theft & Taxes

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The 2015 tax filing season seems to be riddled with tax scams and identify theft. The IRS has used the term “rampant” to describe the situation when I spoke with them. I’ve seen two situations occur recently.

1) Falsely Filed Tax Returns:
I have spoken with many other CPAs, the IRS, and clients; and we’ve seen a lot of this going on.  Taxpayers have had their Social Security Numbers stolen and tax returns falsely filed on their behalf, many times with another, unrelated person, male or female. The IRS is sending out notices in some instances asking if you filed the tax return.  Be sure to respond to this notice in a timely manner so the return does not get processed.  One taxpayer actually received a refund at their home mailing address when he had not yet filed a return himself yet…we’re still scratching our heads trying to figure that one out.

2) Message from Fake IRS Agents: We’ve heard a lot about these messages and it has been in the news recently in St Louis.  I’ve received one of these calls myself.  They typically say that your account has been audited and you owe some balance.  They don’t appear to have your Social Security Number, just your phone number, name and address. They are tracking who they call and will only speak with you if they have your name and phone number in their database. In my case it was an obvious call from India.  I recorded a call with the would-be-scammer and will post the conversation shortly.  Don’t fall for their tactics, and, if you’re not sure if its real call your CPA and ask for assistance.

IRS Identity Theft Page:  https://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft

– Steve Scott

Selling your Home – Tax Implications

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For most Missourians your home is one of your most valuable assets.  Sales and purchases are typically high dollar transactions so it’s wise to educate yourself about the tax ramifications of buying or selling. There are several key tax topics homeowners should be aware of when planning to sell a home.  If you do have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten important tax rules to keep in mind when selling your home:

  1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
  2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
  3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
  4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
  5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
  6. You cannot deduct a loss from the sale of your main home.
  7. See IRS Publication 523, Selling Your Home, worksheets are included to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.  Your tax advisor can help you with this too.
  8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
  9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the
    Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
  10. When you move use Form 8822, Change of Address, to notify the IRS of your address change.  Be sure to update your address with the IRS, the U.S Postal Service, and any appropriate agencies within the State of Missouri to ensure you receive refunds due and correspondence from the IRS or Missouri Deparment of Revenue.

Related Publications & Forms:

Publication 523 – Selling Your Home
Form 5405 – First-Time Homebuyer Credit
Form 8822 – IRS Chane of Address Form

If you need assistance with your taxes contact Stephen Scott by sending an email to info@scottcpa.com or call 314-984-9829 and ask for Stephen Scott or Taylor Scott.

How to Keep Good Tax Records

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You may not be thinking about your tax return right now, but summer is a great time to start planning for next year. Organized records not only make preparing your return easier, but may also remind you of relevant transactions, help you prepare a response if you receive an IRS notice, or substantiate items on your return if you are selected for an audit.
Here are a few things the IRS wants you to know about recordkeeping.

1. In most cases, the IRS does not require you to keep records in any special manner. Generally, you should keep any and all documents that may have an impact on your federal tax return. It’s a good idea to have a designated place for tax documents and receipts.

2. Individual taxpayers should usually keep the following records supporting
items on their tax returns for at least three years:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other
    proof of payment
  • Any other records to support deductions or credits you
    claim on your return

You should normally keep records relating to property until at least three years after you sell or otherwise dispose of the property. Examples include:

  • A home purchase or improvement
  • Stocks and other investments
  • Individual Retirement Arrangement transactions
  • Rental property records

3. If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Examples of important documents business owners should keep Include:

  • Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
  • Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices, Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
  • Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

These publications are available at www.IRS.gov.

Resources:
Publication 552 – Record Keeping for Individuals
Publication 583 – Starting a Business and Keeping Records
Publication 463 – Travel, Enterrainment, Gift and Car Expenses

Contact Stephen Scott at info@scottcpa.com  if you have individual or business tax needs in the St Louis area.

Have you Received an IRS or State Tax Notice?

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Every year the Internal Revenue Service and the Missouri Department of Revenue send millions of letters and notices to taxpayers, but that doesn’t mean you need to worry. Here are nine things every taxpayer should know about IRS notices – just in case one shows up in your mailbox.

  1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
  2. There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
  3. Each letter and notice offers specific instructions on what you need to do to satisfy the inquiry.
  4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
  5. If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
  6. If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the lower left part of the notice. Allow at least 30 days for a response. (many times it will take longer…don’t panic)
  7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right corner of the notice. Have a copy of your tax return and the correspondence available when you call.
  8. It’s important that you keep copies of any correspondence with your records.
  9. If you don’t feel comfortable handling this on your own contact your tax preparer.  A tax preparer can complete the proper Power of Attorney forms so that they may communicate directly with the IRS, Missouri Department of Revenue, and other state taxing agency on your behalf to resolve the issue. 

If you need tax assistance contact Stephen Scott by sending an email to info@scottcpa.com