May 9, 2011
Tax Strategies Scan: Hiring Your Kids
September 22nd, 2015

Our weekly roundup of tax-related investment strategies and news your clients may be thinking about.
See the IRS’s iOur weekly roundup of tax-related investment strategies and news your clients may be thinking about.
See the IRS’s incredibly generous tax benefits for hiring your own child: Aside from the Child Tax Credit, clients can also take advantage of another child-related tax benefit if they hire their own children in their business, according to Forbes. By hiring their children and paying them a salary, parents can reduce their business’ taxable income since the children’s wages are tax-deductible. The wage should not exceed $6,300 annually so the children will be exempt from paying taxes and filing a tax return. — Forbes
Understanding education tax credits: Clients who are looking for ways to save on taxes on their 2015 tax returns can claim the American Opportunity Tax Credit or the Lifetime Learning Credit if they incur education-related expenses this year, according to The Cincinnati Enquirer. They qualify to get one or both of these tax breaks if the expenses were for the taxpayers themselves, their spouse or a child. Education expenses qualified for the AOTC include tuition, fees and other related costs, while only tuition and other enrollment fees are eligible for the LLC. — The Cincinnati Enquirer
3 tax-efficient retirement-saver portfolios: Maintaining a tax-efficient retirement portfolio should be a goal not only of clients but also those who are in the accumulation stage, according to Morningstar. They need to minimize their trading in their portfolio for lower taxable capital gains distributions and also look for stock funds with patient, low-turnover strategies, Benz writes. “Exchange-traded funds, index funds, and tax-managed funds all tend to have very low turnover and, in turn, do a good job reducing the tax collector’s cut of their portfolios’ returns.” — Morningstar
How variable annuities are taxed: Variable annuities are subject to tax rules that also apply to fixed annuities, but the earnings from investment choices are tax-deferred, according to Investopedia. Taxes on the earnings are paid when annuity holders start collecting payments or opt to take distributions before the annuity’s starting date. Payments or distributions received before the starting date will consist of a tax-free portion and earnings which are to be taxed as an ordinary income. — Investopediancredibly generous tax benefits for hiring your own child: Aside from the Child Tax Credit, clients can also take advantage of another child-related tax benefit if they hire their own children in their business, according to Forbes. By hiring their children and paying them a salary, parents can reduce their business’ taxable income since the children’s wages are tax-deductible. The wage should not exceed $6,300 annually so the children will be exempt from paying taxes and filing a tax return. — Forbes

Understanding education tax credits: Clients who are looking for ways to save on taxes on their 2015 tax returns can claim the American Opportunity Tax Credit or the Lifetime Learning Credit if they incur education-related expenses this year, according to The Cincinnati Enquirer. They qualify to get one or both of these tax breaks if the expenses were for the taxpayers themselves, their spouse or a child. Education expenses qualified for the AOTC include tuition, fees and other related costs, while only tuition and other enrollment fees are eligible for the LLC. — The Cincinnati Enquirer
3 tax-efficient retirement-saver portfolios: Maintaining a tax-efficient retirement portfolio should be a goal not only of clients but also those who are in the accumulation stage, according to Morningstar. They need to minimize their trading in their portfolio for lower taxable capital gains distributions and also look for stock funds with patient, low-turnover strategies, Benz writes. “Exchange-traded funds, index funds, and tax-managed funds all tend to have very low turnover and, in turn, do a good job reducing the tax collector’s cut of their portfolios’ returns.” — Morningstar

How variable annuities are taxed: Variable annuities are subject to tax rules that also apply to fixed annuities, but the earnings from investment choices are tax-deferred, according to Investopedia. Taxes on the earnings are paid when annuity holders start collecting payments or opt to take distributions before the annuity’s starting date. Payments or distributions received before the starting date will consist of a tax-free portion and earnings which are to be taxed as an ordinary income. — Investopedia

IRS Phone Scam Ringleader Gets 14-Year Sentence
July 11th, 2015

Washington, D.C. (July 8, 2015)

By Michael Cohn

A scammer who organized a scheme in which taxpayers were threatened with calls purporting to come from the Internal Revenue Service and the FBI demanding payment has been sentenced to 14 years in prison.

Sahil Patel was sentenced to 175 months in prison and $1 million in forfeiture for his role in organizing the U.S. side of a massive fraud and extortion ring run through various “call centers” located in India, through which Patel and his co-conspirators impersonated American law enforcement officials and threatened victims with arrest and financial penalties unless those victims made payments to avoid purported charges.

In addition to the prison sentence, Patel, 36, of Tatamy, Pa., was sentenced to three years of supervised release.
Patel pleaded guilty in January 2015 before U.S. District Judge Alvin Hellerstein, who imposed the sentence Wednesday. “The nature of this crime robbed people of their identities and their money in a way that causes people to feel they have been almost destroyed,” said Hellerstein.

According to prosecutors, from Dec. 2011 through the day of his arrest on Dec. 18, 2013, Patel participated as a leader in a sophisticated scheme to intimidate and defraud hundreds of innocent victims of hundreds of dollars apiece. Throughout the course of the fraud, telephone call centers located in India hired English-speaking employees to place telephone calls to individuals living in the U.S.

Armed with long lists of potential victims, referred to by Patel and his co-conspirators as “lead sheets,” those India-based callers systematically placed thousands of calls to individuals in the U.S. in the hopes of intimidating the call recipients into providing a payment to the co-conspirators. To extort these victims, the India-based callers impersonated law enforcement officials of the FBI and IRS and threatened their victims with financial penalties and arrest in connection with fabricated financial crimes.

“Sahil Patel’s elaborate scheme involved impersonating law enforcement officers and using intimidation and fear to bilk over a million dollars from hundreds of unsuspecting victims,” said Manhattan U.S. Attorney Preet Bharara in a statement.

In order to receive funds in a manner that would mask the identity of Patel and his co-conspirators, the ring undertook several measures to anonymize itself, including by using anonymized voice-over-internet technology, which was subscribed under fraudulent names in order to give the appearance of being related to U.S. law enforcement agencies.

Patel and his co-conspirators also used several layers of wire transactions in order to conceal the destination and nature of the extorted payments, which totaled at least $1.2 million.

The scam has been continuing and on the rise this year despite Patel’s arrest. Taxpayers who have been targeted by the scam can report the incident to the Treasury Inspector General for Tax Administration at www.tigta.gov and clicking on the IRS Impersonation Scam Reporting tab in the upper right corner, or call the TIGTA hotline at 1-800-366-4484.

More Taxpayers Will Get Their Refunds by Mail, Like It or Not
March 10th, 2015

March 6, 2015
By Suzanne Woolley
Bloomberg Business

(Bloomberg Business) States have been pushing taxpayers to get their refunds via direct deposit for years. Now people choosing that option may be surprised with a paper check instead.
South Carolina informed residents this week that, in response to a recent spike in fraud, the state is converting some refunds for people who requested direct deposit to paper checks; Colorado announced a similar move in mid-February.

In Connecticut, all first-time filers and all refunds flagged as potentially suspicious will get paper checks. And Utah’s increase in paper checks is “dramatic,” because requests for refunds on certain types of debit cards are all being issued checks, says Charlie Roberts, a spokesman for the Utah State Tax Commission.

Those examples are “the tip of the iceberg,” says Verenda Smith, deputy director at the Federation of Tax Administrators. “We don’t have a lot of numbers, but there’s more of these conversions going on now, and more that will go on.” Smith says that while state revenue departments have always had the option of flipping a direct deposit refund to paper, it’s being done more publicly now. “It’s a minor inconvenience to taxpayers but very helpful in stopping fraud,” she says, and tax officials don’t get a lot of heat politically for doing it.

Any legitimate filer surprised with a paper check may never learn why his filing was targeted. In South Carolina, checks will come with a letter saying that the refund was flagged as potentially fraudulent, but that “for security purposes, we are unable to disclose additional details related to this determination.” Colorado’s release about its new antifraud measures, which include issuing more paper checks, notes that “sending a paper check to the taxpayer’s mailing address is intended to prevent criminals from easily diverting fraudulent refunds to their own prepaid, reloadable cards or debit cards.”

South Carolina’s release reminds taxpayers that if you get a refund check but haven’t yet filed your return—a sign that someone has filed a fraudulent return using your name—don’t cash the check. Smith says every year there are people for whom a few hundred dollars in the bank is a big deal, and they’ll cash a check that obviously wasn’t meant for them. That can get messy, she says, because it can turn into a collection issue, and interest can be levied.

The states’ actions come in the wake of reports of a spike in suspicious state income tax refund claims that started in late January. Minnesota temporarily stopped accepting e-filed returns on Jan. 30. On Feb. 5, Intuit, the maker of TurboTax, stopped transmitting e-filed state income tax returns for 24 hours. Now the FBI and the criminal division of the IRS have investigations under way.

CCH Predicts Tax Relief from 2015 Inflation Adjustments – Part 3
October 28th, 2014
Riverwoods, Ill. (September 18, 2014) By

AMT Exemptions Indexed
Jones observed that ATRA provided for annual inflation adjustments to the exemptions from the alternative minimum tax. Previously, Congress was required to explicitly increase the amounts by statute every time the so-called “AMT patch” was set to expire.

Before ATRA, Congress relied on one- or two-year AMT patches to account for inflation from the initially set amounts of $33,750 and $45,000, respectively. However, the new law now provides for base exemption amounts of $78,750 for married joint filers and surviving spouses, $50,600 for single taxpayers, and $56,000 for heads of households.

Wolters Kluwer, CCH projects that for 2015, the AMT exemption for married joint filers and surviving spouses will be adjusted upward to $83,400, up from $82,100 for 2014. For unmarried single filers and heads of households, the 2015 exemption will be $53,600, up from $52,800 for 2014. For married single filers, the exemption will increase to $41,700, up from $41,050 in 2014.

Standard Deduction, Personal Exemption Rise
The standard deduction and personal exemption amounts are also subject to indexing. Projections for 2015 indicate that the trend will continue, with increases across the board. The standard deduction for single taxpayers, heads of households and married couples filing jointly will all show increases for 2015, by $100, $150 and $200, respectively.

The standard deduction for joint filers, for example, would rise from $12,400 to $12,600 in 2015. Any increase in the standard deduction, of course, can produce lower taxes by decreasing the taxpayer’s taxable income.

The additional standard deduction for those aged 65 years old and older or who are blind will increase to $1,250 for 2015, up from $1,200 in 2014 for married individuals and surviving spouses, but the $1,550 additional amount for single aged 65 or older or blind filers will remain the same. The personal exemption amount gets bumped up by inflation by $50, to $4,000 in 2015, up from $3,950 in 2014 after having increased $100 between 2012 and 2013.

Taxpayers for many years have had to lose a good portion of the value of personal exemptions and itemized deductions when their incomes rise above certain levels, which have also been adjusted for inflation. Starting in 2010, these “phase outs” disappeared from the Tax Code, but ATRA reintroduced them starting last year for certain higher-income taxpayers. ATRA set forth base amounts for the phase-out ranges, which represented increases from their pre-2010 levels, even before inflation adjustments.

The 2014 phase-out range for personal exemptions under ATRA begins at $309,900 for joint filers and $258,250 for single filers. The phase-out is complete once these levels reach, respectively, $432,400 and $380,750. The same income ranges apply to the phase out of itemized deductions.
For a complete look at how income ranges for each tax bracket are projected to shift next, see the Wolters Kluwer, CCH tables below.

“Kiddie” Deduction, Gift Tax Exemption
In general, inflation adjustments are rounded to the next-lower multiple of $50, so if the adjustment produces an increase of less than $50, no increase is made. The “kiddie” deduction, used on the returns of children claimed as dependents on their parents’ returns, increased only six times in the years 2001 through 2014 because of rounding. It last rose for the 2013 tax year. For 2015 the deduction will increase again, to $1,050.

The Tax Code only allows the gift tax exemption to rise when the inflation adjustment would produce an increase of $1,000 or more. The last increase occurred in 2013, when it rose to $14,000. It remains unchanged for 2015.

TO BE CONTINUED>>>>>>>>

Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.

CCH Predicts Tax Relief from 2015 Inflation Adjustments – Part 2
September 25th, 2014

Riverwoods, Ill. (September 18, 2014) By

Higher-income Taxpayers Also Benefit
The 2015 year represents the third year that the 39.6-percent tax bracket for higher-income taxpayers, enacted by the American Taxpayer Relief Act of 2012, also known as ATRA, will be imposed. For 2015, Wolters Kluwer, CCH projects that the minimum income amounts at which this top tax rate will kick in will rise to $464,850 (from $457,600) for married joint filers, $439,000 (from $432,200) for heads of households, $413,200 (from $406,750) for unmarried filers, and $232,425 (from $228,800) for married separate filers. These inflation-adjusted amounts also trigger a 20-percent tax on that portion of taxable income attributable to net capital gains and qualified dividends that exceed these bracket amounts.

“Higher-income” taxpayers also must face the new “Medicare” taxes that started in 2013, CCH noted. They are the 3.8-percent surtax on net investment income and a 0.9-percent Medicare contributions tax on earned income. The net investment income tax is triggered when adjusted gross income exceeds: $250,000 (married joint filers and qualifying widowers), $200,000 (for heads of households and single filers), and $125,000 (for married single filers). The additional Medicare contributions tax is triggered when a taxpayer’s wages, compensation, or self-employment income exceed these same threshold amounts. These amounts, however, are not adjusted for inflation and therefore remain the same for 2015.

Inflation Adjustments
Since the late 1980s, the U.S. Tax Code has required that federal income tax brackets be adjusted for inflation annually, and inflation adjustments have been inserted into the Internal Revenue Code in recent years with increasing frequency.

For example, the Code now requires over 50 other inflation-driven computations to determine deduction, exemption and exclusion amounts in addition to the 40 separate computations needed to inflation-adjust the tax bracket tables each year. In fact, the Patient Protection and Affordable Care Act added an even greater number of inflation adjustments to the tax code, including figures affecting the Code Sec. 36B premium assistance tax credit, the income level under which an individual may not be penalized for failure to comply with the individual mandate, and the amount of salary reductions that can be made through a flexible spending arrangement. Some of these health-related inflation adjustments, however, have been delayed for tax years after 2014 or beyond.

Notable as one of the provisions that ATRA now requires to be permanently adjusted for annual inflation is the estate and gift tax applicable exemption. Set at a $5 million level for 2011, the amount has been adjusted for inflation by Congress to $5,120,000 for 2012, $5,250,000 for 2013, $5,340,000 for 2014, and now projected at $5,430,000 for 2015. A spousal portability election can now effectively protect double that amount against estate and gift tax ($10,860,000 for 2015).

Most of the adjustments are based on the Consumer Price Index for all urban consumers’ figures for September through August immediately prior to the adjusted year. However, some inflation-adjusted figures are computed earlier and some later. For example, amounts such as the 2015 vehicle depreciation limits won’t be available until later in 2014, while the 2015 standard business mileage rate (that is currently set at 56 cents for 2014) isn’t expected to be computed and released until December 2014.

TO BE CONTINUED>>>>>>>>

Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.

CCH Predicts Tax Relief from 2015 Inflation Adjustments – part 4
September 24th, 2014

Riverwoods, Ill. (September 18, 2014) By

CCH cautioned that its projections should be used for illustrative purposes only and should not be used for federal tax returns or other tax-related purposes.

Married Filing Jointly (& Surviving Spouse)

Tax Rate

2015 Taxable Income

2014 Taxable Income

10%

$0 – $18,450

$0 – $18,150

15%

$18,450 – $74,900

$18,150 – $73,800

25%

$74,900 – $151,200

$73,800 – $148,850

28%

$151,200 – $230,450

$148,850 – $226,850

33%

$230,450 – $411,500

$226,850 – $405,100

35%

$411,500 – $464,850

$405,100 – $457,600

39.6%

$464,850+

$457,600+

 

Unmarried Individuals (Other Than Surviving Spouses and Heads of Households)

Tax Rate

2015 Taxable Income

2014 Taxable Income

10%

$0 – $9,225

$0 – $9,075

15%

$9,225 – $37,450

$9,075 – $36,900

25%

$37,450 – $90,750

$36,900 – $89,350

28%

$90,750 – $189,300

$89,350 – $186,350

33%

$189,300 – $411,500

$186,350 – $405,100

35%

$411,500 – $413,200

$405,100 – $406,750

39.6%

$413,200+

$406,750+

 

Head of Household

Tax Rate

2015 Taxable Income

2014 Taxable Income

10%

$0 – $13,150

$0 – $12,950

15%

$13,150 – $50,200

$12,950 – $49,400

25%

$50,200 – $129,600

$49,400 – $127,550

28%

$129,600 – $209,850

$127,550 – $206,600

33%

$209,850 – $411,500

$206,600 – $405,100

35%

$411,500 – $439,000

$405,100 – $432,200

39.6%

$439,000+

$432,200+

 

 

Married Individuals Filing Separate Returns

Tax Rate

2015 Taxable Income

2014 Taxable Income

10%

$0 – $9,225

$0 – $9,075

15%

$9,225 – $37,450

$9,075 – $36,900

25%

$37,450 – $75,600

$36,900 – $74,425

28%

$75,600 – $115,225

$74,425 – $113,425

33%

$115,225 – $205,750

$113,425 – $202,550

35%

$205,750 – $232,425

$202,550 – $228,800

39.6%

$232,425+

$228,800

 

Standard Deduction Amounts

Filing Status

2015

2014

Increase

Married Filing Jointly (& Surviving Spouse)

$12,600

$12,400

$200

Married Filing Separately

$6,300

$6,200

$100

Single

$6,300

$6,200

$100

Head of Household

$9,250

$9,100

$150

 

Standard Deduction for Dependents (“Kiddie” Standard Deduction)

2015

2014

Increase

$1,050

$1,000

$50

 

Personal Exemption Amounts

2015

2014

Increase

$4,000

$3,950

$50

 

Gift Tax Exclusion

2015

2014

Increase

$14,000

$14,000

$0

CCH Predicts Tax Relief from 2015 Inflation Adjustments -Part 1
September 24th, 2014

Riverwoods, Ill. (September 18, 2014)

By Michael Cohn

Taxpayers are expected to receive a modest amount of tax relief in 2015, thanks to the annual inflation adjustments provided under the Tax Code.

Wolters Kluwer, CCH released estimated ranges Thursday for each 2015 tax bracket, along with projections for a growing number of inflation-sensitive tax figures, such as the personal exemption and the standard deduction. Bloomberg BNA separately released its own set of estimates Wednesday (see Bloomberg BNA Forecasts 2015 Tax Rates).

“Indexing effectively provides an automatic tax cut for most individuals, without the need for Congress to agree on legislation each year to make it happen,” said CCH senior federal tax analyst George Jones in a statement. “Most taxpayers benefit from inflation adjustments since the adjustments tend to preserve the value of most, but not all, of the dollar-based benefits under the Tax Code year after year.”

When there is inflation, indexing of brackets lowers tax bills by including more of people’s incomes in lower brackets—in the existing 15 percent bracket, for example, rather than the existing 25 percent bracket. The formula used in indexing showed a slightly higher amount of inflation this year over last, representing a change of just under 1.58 percent. Nevertheless, so-called “rounding conventions” required under the Internal Revenue Code keep some tax amounts for 2015 the same as they are for 2014, such as the $14,000 gift tax annual exclusion and the $5,500 limit on IRA contributions, but most 2014 figures will move higher, CCH pointed out.

Most taxpayers will experience modest savings generated by indexing of the 2015 individual income tax rate brackets for taxpayers. Because of inflation adjustments, for example, a married couple filing jointly with a total taxable income of $100,000 should pay $125.50 less income taxes in 2015 than they will on the same income for 2014 because of indexing of their tax bracket for 2015. In another example, a single filer with taxable income of $50,000 should owe $62.50 less next year due to the adjustments to the income tax rate brackets between 2014 and 2015.

Add to those savings the additional tax savings realized in most cases by slightly higher 2015 standard deduction and personal exemption amounts, as well as amounts that might be claimed from an increase in the income ceilings imposed on tax benefits such as education credits, individual retirement account contributions and more. Combined, inflation-based tax savings for the 2015 tax year can become substantial.

TO BE CONTINUED>>>>>>

Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.

All You Need To Know About a Tax Sale
July 26th, 2014

For over 200 years, the US government has used the value of real estate to stand in when citizens don’t pay their taxes. Local taxes are important to pay so that your community municipalities can be funded. This includes hospitals, police and fire stations, public schools, municipal road maintenance and garbage service, and other public places, like parks. Federal taxes take care of federal programs, those that go beyond the state level. When these taxes go unpaid by an individual who owns property, the government can levy taxes against that property.

There is a program that allows the government or counties, states, and even the federal government to generate the lost income if someone doesn’t pay their state or federal taxes in cases where a lot of money is owed. At a tax sale auction, you have the ability to pay for a tax certificate giving you the right to collect on past due taxes. You are essentially loaning money to the property owner to fulfill their tax debt. In the case of a Deed sale, your act of fulfilling their taxes makes you the owner of the property.

A Tax Certificate Sale is a public auction tax sale where the right to collect on a delinquent taxpayer’s debt is sold to the highest bidder. These sales is held at the county level and there is generally one a year. When you buy a certificate, your money goes to the government in fulfillment of the debtors tax amount. In exchange you are given first lien on the title of the property, ahead of mortgages and subordinate only to state tax liens.

Terms of these agreements can vary from place to place depending on the area, but the general rule is that when a tax certificate, if the debt is not paid by the owner, you obtain all rights to the property as it’s new owner.

A tax sale for a deed is another auction based format where you are bidding for the deed to a delinquent taxpayer’s property. Legally all parties have been notified prior to the auction to give them a chance to pay their back taxes and remain owner of the house. The difference between this and a tax certificate is that you are buying the property outright instead of taking the risk on whether the owner will pay their taxes or not.

They are extremely different kinds of property auction items and there are usually separate auctions for each. Make sure you know what you’re getting into. Not only are there different rules and guidelines for each but, again, things differ from place to place, even within the same state might differ. It may be helpful to seek legal counsel if this is something you might be interested in investing in.

Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.

3 Tips to avoid an audit
July 22nd, 2014

Every business owner dreads receiving that letter with the words “you’ve been selected for an audit.” While it’s true that some audits are random, here are 3 tips you can use to stay in the clear:

1. Stay reasonable

Many times there is a fine line between personal and business expenses. If you and your friend have a business relationship it may be the case that your lunch meeting can be thought of as a business meeting. However, if you’re grabbing a steak a few times a week, it doesn’t seem all that reasonable that each lunch was really a business expense.

There is no rule of thumb to determine what is reasonable when it comes to personal vs. business expense, however, you can think of it in relation to your income level and industry. If you’re a marketing firm, it’s reasonable that you’ll be wining and dining prospective clients to win a large proposal. If you’re a neurosurgeon, it’s probably less likely that you’ll be finding patients this way. When adding an expense that seems to fall in that grey area, consider if it sounds reasonable relative to your industry and income level.

2. Stay organized

There are a few levels of audit. In a basic level, auditors may ask for the general ledger of a business and a few backup receipts or invoices. If they see that the books are not organized with proper accounting software (various spreadsheets, receipts in a shoebox, manual ledgers, etc.), that may raise red flags and trigger a deeper investigation. Keeping your books and records organized with software such as FreshBooks demonstrates that your accounting is in order and can prevent an in-depth audit.

3. Keep your records

In the U.S., the IRS outlines how long to keep your records for,  If you keep your receipts and invoices in plastic bags, you may need to renovate that walk-in closet to create some more space. Yet many audits do in fact investigate periods going back a few years. In most audits, a lot of time and resources are spent on simply searching for the relevant documents. Luckily Freshbooks makes this part easy by allowing you to store invoices and receipts in the cloud. Not only does this save you valuable storage space, but it also ensures that finding an important document can be done in a few clicks – saving time, money, and preventing a deeper investigation.

Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.

Are Looking For Your Tax Refund? This Is What You Need To Know So Far For 2014
February 6th, 2014

Dear really, really, really anxious taxpayers:

It’s that time of year again. You know, the time of year where you’re relegated to doing a lot of waiting. And waiting. It’s hard, I know, between the delayed opening for tax season and the terrible weather that we’re experiencing in parts of the country. Things are moving kind of slow. Plus side? They are moving. Here’s the skinny so far:

I know, you’re already fretting about where your refund might be. The good news is that I’ve heard that refund checks are slowly making their way to your bank accounts. If you’re wondering where yours might be, you can check the “Where’s Your Refund?” online tool at IRS: you can check on your status within 24 hours after the Internal Revenue Service has received your e-filed return or four weeks after you mail a paper return. The system is available pretty much all of the time but it does shut down from time to time for updating, specifically the system is unavailable every Monday from 12:00 am (Midnight) to 3:00 am EST.

There are three stages of refund claims according to the system: (1) Return Received, (2) Refund Approved and (3) Refund Sent.

Return Received means… well, you can figure that one out.

Refund Approved means that the IRS has processed your return and your refund has been approved. The IRS will send your refund to your bank via direct deposit or directly to you in the mail if you requested a paper check. The fastest way to get your refund is by using direct deposit.

Refund Sent means that your refund is on the way. If the IRS has sent your refund to your bank or other financial institution for direct deposit, it may take 1 – 5 days to deposit the funds into your account. If you requested a paper check, it could take several weeks for your check to arrive in the mail; the same time frame applies to debit cards.

Expect to see your refund in hand within 21 days though, anecdotally, if you use a combination of e-filing and direct deposits, last year taxpayers reported receiving their refunds with ten days of filing (fingers crossed). The system is only updated once a day (usually at night) so the IRS is imploring you to only check once a day – so many folks checked repeatedly last year that it crashed the system.

If you have limited access to internet, the IRS does have phone and walk-in updates for refunds. With limited available resources, they’re not excited about picking up the phone – but they will (maybe). But you will have to wait. They can only answer questions in person or by phone if it’s been 21 days or more since you filed electronically, or more than 6 weeks since you mailed your paper return.

It’s possible your tax return may require additional review and take longer. This can happen when the return has errors or is missing information. Take the extra time to double-check the return before you send it so that you can avoid any obvious and silly mistakes, like forgetting to sign the return. If there are other issues, like duplicate claims for dependents (happens with divorces quite often), injured spouse claims or identity theft or fraud, the IRS will have to investigate a little and that will slow your refund.

If you need to file an amended return, be prepared to wait. Processing times alone for amended returns can take up to sixteen weeks. You can check on the status of refunds related to amended returns by using the “Where’s My Amended Return?” tool on the IRS website.

And that brings up another issue: certain returns are a bit complicated. And processing times are longer for those returns. And you don’t want to wait. I know that you don’t want to wait because I’ve seen your emails – you know, the ones with all of your creative strategies for getting your refunds faster than you are supposed to. So let me help you out: don’t cheat to get your money faster. It’s simply not smart.

Yes, I’ve seen and heard all of the tricks. Filing as HOH to get the refund now and amending later. Filing with more dependents than you’re entitled to and figuring it out later. Overstating deductions. Understating income. And I know that you’re going to explain to me that it’s fine because you know your Uncle Jimmy did it and he got away with it. Well, super for Uncle Jimmy. But the reality is that lying on your return is wrong. It’s also criminal.

Even assuming that you don’t get charged criminally for fraud, the IRS does track patterns of tax behaviors. And if they notice that you happen to be the taxpayer who files for refund each February and amends each April, you’ll eventually be flagged. And in addition to slowing future refunds, you’ll also get socked with a pretty nasty punch. Trust me. These are the clients who end up in my office with a tax liability nearly two or three times the original amount owed once the penalties and interest have been piled on. It’s not smart. It’s wrong. And it’s completely not worth it.

So there you have it. The quick and dirty state of tax refunds for 2014 to date. Unlike last year’s fiasco with the educational credits, I haven’t heard of any patterns of errors on the part of IRS or any specific software companies. I’m constantly checking for you and I’ll be posting updates as they are made available.

Until then, be patient, be diligent and try not to rub that whole you’re-getting-a-refund thing in our faces. Some of us might be a little bitter.

Have a great season,

Custom Tax Services

Please feel free to contact me for ALL of your Tax and book keeping needs in Utah, North Carolina or any other state, you may be in.