Falsely increasing income to secure larger refundable credits such as the Earned Income Tax Credit can have serious repercussions. This scam involves inflating or including income on a tax return that was never earned, either as wages or self-employment income. Taxpayers can face a large bill to repay the erroneous refunds, including interest and penalties. In…
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Employee vs Independent Contractor Tax Tip
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services…
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Tax Effects of Divorce or Separation Tax Tip:
If you are divorcing or recently divorced, be aware of this event can have an impact on your taxes. Any child support payments you receive/pay are not taxable or tax deductible. However, alimony received from your former spouse is taxable income in the year received. Alimony paid under a divorce, separation decree are tax deductible.…
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Child Tax Credit
Tax Tip: The child tax credit is a tax credit that may save taxpayers up to $1,000 for each eligible qualifying child. Taxpayers should make sure they qualify before they claim it. A qualifying child must pass several test regarding age, relationship, support, dependency, filing of a joint return, citizenship, and residency. If you need…
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Contributions to Traditional IRA
Tax Tip: Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. If neither the taxpayer nor…
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Early Withdrawals From Retirement Plans
An early withdrawal normally is taking cash from a retirement plan before the taxpayer is 59 1/2 years old. If a taxpayer took an early withdrawal from a retirement plan last year, they must report it to the IRS. Additionally, the taxpayer may have to pay an additional 10% in taxes. If you need assistance with…
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Tax Scam
If you receive a surprise call from the IRS, it almost certainly not the IRS. The IRS generally sees a surge in scam phone calls that threaten police arrest, deportation, license revocation, and other things during the filing season. Be aware that the IRS generally initially contacts taxpayers by mail. If you need assistance preparing…
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Correct Filing Status
If taxpayers are married, they can only chose the following tax filing status: married filing jointly or married filing separately. Two legally married taxpayers are not allowed to file single or head of household. If a spouse died in 2016, the widowed spouse can often file a joint return for that year. If you need…
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