Category: Tax Season 2020

What Happens If You Can't Pay Your Tax Bill?

4/20/2021

Concerned if you'll be able to pay your tax bill this year? Today we are going to be talking about what to do if you're unable to pay your taxes on time!

With the original date of tax season come and gone, and with just around a month left before the new tax day of May 17th is here, there is still much to be done and much to be considered. While you do still have time to get your taxes in and prepared, you are cutting it down to the wire, which can cause a huge amount of stress and can lead to you making mistakes on your taxes in a rush to get everything finished. These mistakes can lead to a halt in getting your refund back and it could land you with a pretty sizable fine. The best way to avoid all of this is to work with tax preparers, like all of us at Hoods! However, this time of year when we are extremely close to tax day being upon us, we are just as busy as you could imagine. To help us help you, if you're still looking for us to help you with your taxes, please contact us as soon as possible!

With tax season on the minds of so many Americans this year, we have to stop and realize the effects this past year put on our finances and taxes. We know and understand the potential strain and confusion that you've gone through due to the pandemic; the loss of your job, being put on furlough, unemployment, returning to the working world again, making sure you've received all of the stimulus payments available to you, and now we have landed on a brand new tax day. While the most recent economic relief plan that the president released, which included our third stimulus check and the forgiveness of a big chunk of unemployment funds, taxes are still going to come calling and many will still have to pay a decent amount of money. Not only were many American hit with a surprising tax bill due to unemployment, but some were also bumped into new tax brackets, some dealt with self-employment taxes after starting their own business to make it through the last year, and others are dealing with multiple I9s and W2s from working multiple jobs to get through this year. This and many other new stressful situations have made this tax season one of the most unique and difficult to date for the average taxpayer. We've been discussing a lot of tips and how-tos to deal with this year's tax season, but today we are going to be changing the conversation a little and will be talking about some of the more challenging issues some Americans could be going through; what happens when you are unable to pay your tax bill?

First and foremost, take a deep breath and don't panic. The IRS uses the same sentiment on their website when you ask this question. If the IRS is telling you not to panic, then you are going to be okay. If you are unable to pay the full amount it is recommended by the IRS that you should still file your return by the deadline and pay as much as you can. This will help you avoid penalties and interest.
Don't waste any time, go right to the source. The IRS has published a number to contact them directly to discuss payment options with them if you are unable to pay your tax bill. Please call them at 800-829-1040.
The IRS may also be able to provide some kind of relief to you if you are honest and reach out right away and explain your financial situation. Not filing isn't an option.
You might be able to receive relief in the form of getting a short-term extension to pay, an installment agreement, or an offer in compromise.
You might also have the option of delaying collection by reporting your account as currently not collectible until you pay in full.
When you do follow through with this process, the IRS might in some cases, be able to wave any penalties that might arrive. Please note that they will not be able to wave any interest charges that will accrue on unpaid tax bills.
This year alone, 125 million Americans received a tax refund, leaving 43 million Americans that broke even or were left owing money. Know that you are not alone in your stress and worry as you read this.
When you chose to do a monthly installment plan, you will fill out an online payment agreement application after you file your return.
You can also send in the 9465 tax form when you mail in your taxes. This form will let the IRS know that you are interested in a payment or installment plan. This will give you 72 months to pay your bill. You can only use this option if you owe $50,000 or less in taxes.
Please note that you cannot use a payment plan or installment plan unless you are completely caught up with your taxes. If you haven't done them in a few years and you decide to try and get a payment plan, it will be denied,
When you request an offer in compromise after you explain to the IRS why you cannot pay, you will make them an offer on what you feel like you can reasonably pay. If they accept your offer, then you will only have to pay what you've offered. It is a compromise that allows you to settle your debt for less than the total amount that you owe.
You do have the option to file for an extension. However, remember that when you do this it will only help push back the date of when you need to file your taxes and has nothing to do with the money you owe.
If you're still at a loss on what to do, you can send in a little money every month the reduce penalties and interest that will build up down the road. This is also a boost in your direction as it will make you look good in the eyes of the IRS.
Make sure you are utilizing all of your deductions and tax credits that can be applied to your tax bill, this might drastically bring down the amount that you'll end up owing.
Asking for an extension to pay your taxes can give you up to 120 days to pay the IRS in full.
The current interest rate on payment plans is only 3%, which isn't terrible.
Know that if you do choose to do an offer in compromise (OIC) you will have to be very open and honest about your finances and your personal life to prove that you indeed are unable to pay. While this can be a saving grace for many people, this can also be a long-drawn-out process than the other examples of help and action that we've talked about today.
You will have the option to pay your taxes with your credit card. Discover, Visa, American Express, and MasterCard are all accepted by the IRS.
Remember that while it is not a fun or pleasant experience to owe a tax balance and not being able to pay it, in reality, it only becomes a true problem if you choose to do nothing about it and choose not to reach out and talk to the IRS.

As we've mentioned before, not filing is never an option. File your taxes and you will be able to take care of the rest. The key to this situation is to be proactive about it. If you stay silent and choose to do nothing, that's when it gets messy. If you need help or have any questions, please don't hesitate to reach out. We will make it to and through this tax season in one piece and together! Remember, if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

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Hidden Tax Breaks for 2020

3/17/2021

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Still figuring out your tax deductions for your 2020 taxes? Here are a few you might have missed helping you save even more than you expected!

Hello readers, and welcome to the Hoods Tax and Accounting Services Blog! We are just a little under two months away from tax day on April 15th, are you ready? Have you already sent in your taxes and are already enjoying your tax return? Or are you still working on a few odds and ends before sending it in? Where ever you might be in your tax preparation journey, we are here to help. Just as a reminder for those new to Hoods, we have recently moved and we have updated our hours! We moved right around the corner to 105 Etling Ave. in Goose Creek, SC and we are open Monday-Tuesday 9-5 pm, Wednesdays from 1-7 pm, and Thursday-Friday 9-5 pm! We are currently offering Zoom meetings for tax prep and quick and easy drop-offs. Please contact us with any concerns or questions! Tax day is getting closer and closer and we are getting busier by the day! Make sure to contact us as quickly as possible to schedule working with us if you're still wanting Hoods to prepare your taxes this year!

Are you still looking for ways to cut down your tax bill? The secret and sometimes the most overlooked element in helping you save money when it comes to your taxes are tax deductions. Before we get started, it is very important to remember that these write-offs and deductions need to be handled with respect, handled correctly, and never made with any assumptions. The IRS pays very close attention to these when you add them to your taxes, and if done improperly they can lead to an audit. Improperly using deductions can also lead to not getting your return promptly, tax fees, and many other issues. While you are adding up and including deductions, make sure to do your research on what exactly you can write off and how to properly do so before writing off everything and the kitchen sink. However, with that being said, there are still many "hidden" and overlooked tax breaks and deductions that so many people don't know about. To help make your tax season a little less stressful, we wanted to share and talk about the many hidden tax breaks and deductions you might still be missing out on!

One of the main reasons why so many tax breaks and deductions aren't used is because they're not common knowledge. With tax laws changing all the time it also makes it difficult to keep up with what you can and cannot write off, and how much you can and cannot write off. Remember that there is a difference between deductions and tax credits. A deduction lowers the amount you're taxed on and a credit will lower your tax bill directly. It's important to know how they work and to use them to your advantage! When working with a tax deduction, once you have gathered and reported all that you're going to use as a deduction, you subtract the amount of your deduction from your income, lowering the amount you'll be taxed on. A tax credit is an actual dollar-for-dollar reduction in your overall tax bill. There are some refundable tax credits out there, for example, if you owe $500 in taxes but you qualify for a $1500 tax credit, you would get a check for the difference of $1000. While this sounds fantastic, most tax credits aren't refundable.

Today, we are primarily going to be focusing on tax write-offs and deductions, to focus on lowering the amount of money you are going to be taxed on. With this list, we hope to help you save money and to make sure you don't overpay your taxes! There are two different types of deductions, the standard deduction, and the itemized deduction. While it would be nice to be able to do both on your taxes, you have to pick one or the other when filing. Make sure to do your research on which will be best for you and which will lower the amount you'll owe the most.

The standard deduction is a simple way of doing your deductions, it is very cut and dry and to the point, and relies on how you plan to file; single, married and filing together, married and filing separately, or filing as head of the household. It is also very important to remember that those who are 65 and over and those who are blind are eligible for a larger standard deduction. This standard deduction is a set amount of money that you will not be taxed on depending on your filing status, your age, and your spouse's age. The standard deductions are listed below:

Single filer $12,400 (add $1,650 if blind)
Married and filing jointly $24,800 (add $1,300 if blind)
Married and filing separately $12,400 (add $1,650 if blind)
Head of household $18,650 (add $1,650 if blind)

Like we mentioned before, if you are 65 and older and/or blind, your deduction amount will be more. Also, if you and your spouse are filing as a married couple but filing separately, you must both choose the same kind of deduction. You both will either have to choose the standard deduction or itemized deduction, it can't be both.

Itemized deductions are a little bit different. Instead of a set amount of money based on how you're filing that's not taxed, itemized deductions are qualified expenses that are subtracted from your adjusted gross income. You may have one item that you would like to write off in your itemized deductions, but most taxpayers who choose this option will have many qualified expenses they are subtracting from the AGI. When a taxpayer chooses to do an itemized deduction instead of a standard deduction, it usually means that the number of qualified expenses that they are writing off is more than what they would be writing off for the standard deduction. Please note that choosing to do an itemized deduction will take you much longer to prepare your taxes compared to doing a standard deduction. An itemized deduction takes more detailed work to claim and prove everything you're writing off. Depending on what you do and how many deductions you can take will be the deciding factor in choosing if you should do an itemized or standard deduction. It has been noted that the standard tax deduction has gone up a significant amount in the last few years, so it might be best to take that standard deduction. This choice will vary from person to person, and you will need to consider what is best for you when deciding! Here are a few other tax-saving options to help as you prepare your return!

Charitable deductions that you make throughout the year are a very common itemized deduction, however, you might be missing a part of your charitable deduction that you can write off. You can write off the donation, but you can also write off all the out-of-pocket expenses you rack up when doing work for a charity. This can include the groceries you buy for meals you're donating or dishes you're donating to a non-profit soup kitchen. You can also write off your gas if you are using your car to drive for charity and charity events. You can deduct 14 cents for every mile you drive, and the money you spent on parking, tolls, and more. Please keep your receipts from everything you do and give when involved with a charity. If you do give more than $250 in contributions and you wish to write this off, you'll need to provide proof to the IRS from the said charitable organization to prove that you did indeed donate the amount you're claiming.
While trips to Las Vegas and other casinos were out of the question in 2020, gambling was still available virtually thanks to our electronic devices. If 2020 was not a good gambling year for you, you might have the opportunity to deduct these losses. To do this you have to choose to itemize your taxes, and you must keep all of your receipts that track and prove what you spent on gambling throughout the year. To take advantage of this write-off, it is limited only to the number of winnings that you report on your taxes as taxable income.
Have you been spending a lot on childcare, especially throughout the last year due to the pandemic? There might be an opportunity for a tax credit for you! Remember, credit is so much better than a deduction, and this is one of those rare dollar for dollar refundable examples! If you pay your childcare bills with a reimbursement account through your job, you might be eligible for a tax credit. You have $5000 that, by law, you can spend in a tax-favored reimbursement account through your job. If you hit that maximum amount, but you spend more on work-related childcare, you can claim up to $1000 of that extra money spent.
Taxpayers who have children that are probably very familiar with the $2000 tax credit for children 16 years and younger. You can also get a $500 tax credit for your children that you still claim who are over the age of 16, and you can also claim older relatives that you're taking care of in your home.
For all of our teachers and educators, you can deduct up to $250 every year in what you spent on supplies for the classroom. Please remember to keep all of your receipts for this!
Many of us have been working from home thanks to the pandemic, so don't forget about your home office deductions. Be very careful with this deduction as the IRS has very strict rules about it. You can write off expenses connected to rent, utilities, repairs made on the home, real estate taxes, and a few other options!
If you've been contributing to your Health Savings Account (HSA), those contributions are tax-deductible. For an individual HSA, you can contribute up to $3550 and $7100 for a family for 2020 taxes. If you are 55 and older, you can contribute an extra $1000 to your HSA.
There are some qualified health care expenses that you can also deduct. This includes what was spent on the diagnosis, treatment, and prevention of disease, and this amount is subtracted from your AGI. However, you can only deduct medical expenses that cannot be reimbursed up to 7.5% of your AGI, and you can only deduct necessary procedures. Procedures like cosmetic surgery can not be used as a deduction.
For all of our homeowners, don't forget about the option for mortgage interest deductions. This option can help make owning a home more affordable, and make tax season a little less expensive. This option cuts a homeowner's federal income tax by subtracting the amount of mortgage interest they pay!

To all of our readers and taxpayers, know that these ten common examples are only a few examples. This is one of the many reasons why it is so beneficial to work with a tax preparation company like Hoods! There are so many tax credits and deductions out there that are constantly being changed and added, it's hard to keep track of them all! It's part of our job to keep up with each of the common and uncommon tax credits and deductions. While it might seem like it costs a lot to work with a tax preparation company upfront, it can save you money and then some. Working with a tax preparation company can lower your tax bill and can get you an even larger refund. Sounds pretty great, right? We think so! We are here for all taxpayers, so please give us a call today! Remember, if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

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The Dangers Of The Stimulus Scams

3/3/2021

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With the potential of a third stimulus check heading our way, a brand new round of stimulus fraud has made its ugly appearance. We wanted to shed some light on the topic and to help avoid any issues that might get you in trouble!

Welcome to the Hoods Tax and Accounting Service blog! While we are inching closer to the end of tax season, we wanted to bring a very important topic to our reader's attention! With the possibility of a third or even more stimulus checks coming our way, the rise of stimulus fraud has begun to show its ugly head yet again. When the country needs support now more than ever, you'd think that these scammers and spammers could take a break. Sadly, this is not the case. When people are in need, they are an easy targets for these horrible people to hit. They have taken advantage of people many times before and have been very active during these last 11 months of this global pandemic. While we will get through the pandemic, we might never be able to get through or get over these scammers and spammers. We wanted to share some more information about these ugly scams and how to keep yourself protected and safe!

These thieves, scammers, and spammers are taking advantage of honest taxpayers during this current tax season and have been through the stimulus payment periods. With the constant back and forth of the media on the current political atmosphere, it's easy for many to not know if that third potential stimulus check is a reality or not. Tax season is also in its own flurry, as many Americans are trying to file as quickly as they can to get much-needed funds from their tax return. In this fiscal pandemonium that is where these criminals are striking. It is very important to know that a third stimulus has not been distributed nor has it been confirmed, it is still in the works. Also, please remember that you will not receive your tax return until you've filed your taxes, and you will receive it one of two ways. You will either receive it in the form of a direct deposit to your bank account that you have set up with the IRS by providing your banking information, or in the form of a check in the mail. They will not ask you for any personal information directly to access your refund money. They already have all of this information about you. Also, they will never try to send your return to you in any other way nor can you do anything extra for the IRS (outside of filing your taxes) to receive your return.

While we know finances are still strained and you need that money, please do not accept any other offers baiting you to receive your tax return early. Also, please do not give away any personal information in exchange for your tax return. That is most likely some kind of scam or criminal target you. Please note, criminals do not discriminate. They will go after anyone to get any information or money that they can. It is also important to understand that the main form of contact for the IRS is through your mailbox. If you receive a text message, phone call, email, or voice mail from someone who claims to be the IRS without you prompting these responses, that too is most likely some kind of spam or attack.

While not directly linked, according to ABC 7 Chicago, another scam is to keep your eyes open for is fake COVID packages and test kits. These scams include offers to sell bogus cures, pills, the vaccine, and other medical advice for false and unproven COVID-19 treatments. Please do not give anyone information to receive such materials. These packages are fake, as are the items inside of them. If you are looking for a vaccine or help with a COVID diagnosis, please contact your doctor.

One of the biggest things we can recommend is to not engage in any of these criminal efforts. Do not respond to any phone calls, text messages, emails, or letters, even if it's asking them to not bother you. At the end of 2020, CNBC reported that Americans lost over $211 million to these types of scams, and the FTC has received over 275,000 complaints. When the first round of stimulus checks were released and time passed, fraud activity did quiet down. Now that the second has been released and tax season is here, there is no doubt that this rate will rise and continue until tax season is over on April 15th. If a third stimulus check is released, this pattern will repeat itself all over again. Scammers are always looking for an opportunity for their next payout. Remember that one of the many tactics these criminals use is fear, scamming taxpayers into giving them private information, or else! The IRS will not send unprompted emails, texts, nor will they call you with threats of sending you to jail or filing a lawsuit against you. They will also not demand wiring money or gift cards in return for your tax payments.

What Are Some Current Scams and Spam Threats?
Along with offering cures, vaccines, and help to fight or stay safe from the COVID-19 virus, some current scams look like this:

Fake donations for areas, groups, and people heavily affected by COVID-19. Please be aware these scams could appear in the same form but will be referencing natural disasters like the wildfires California saw last year, the hurricanes Texas and Louisiana saw last year, and the horrific ice and snow damage so many have suffered from in recent weeks. Please research before donating money, especially right now!
Phishing and scamming schemes online that use keywords that help a reader believe that they are legitimate. Some of these keywords include words like "stimulus", "refund", "COVID-19", and "corona virus".
Text messages that ask for your bank account number claiming they will deposit your stimulus money right away if you provide them with this information.
Receiving emails or text messages asking the recipients to verify their personal information. The IRS already has the information needed, and if not, they would not ask you to verify it in such an unprofessional or relaxed manner.
Another common tactic is that people are being contacted by these criminals and they claim that if you pay them a certain amount of money, wire them money, or send them gift cards of their choosing, they will send you your stimulus money faster. There is no such thing as getting it sooner, the IRS will send any stimulus payments and your tax returns based on their decisions and when you file your taxes.
Another scam to look out for is look-alike checks. Scammers send these very believable-looking checks to individuals, and then they are deposited on the trust that they are indeed real. The scammer will then contact the recipient of the check saying the amount of the check was incorrect and they need to return the amount of money they were overpaid. This leaves the recipient out of the check they believed to be real once it bounces, and the money they gave back as a "refund".
Also, please do not put in or give any of your personal or financial information to a non-government website when it comes to anything regarding the IRS. These phony websites can download malware on your device and steal any personal information your computer has access to, including your banking information.

How Do I Protect Myself from Tax and Stimulus Fraud?
With all of these very intelligent criminals hitting their targets on so many different platforms and in so many different ways, how can you protect yourself?

As we mentioned before, do not engage with these forms of communication; do not respond, and do not follow up with them!
Do not answer any phone calls from anyone you don't know, the same goes with text messages. Also, avoid visiting questionable websites and never open any attachments on any emails this so-called "government" worker has sent you. Avoid clicking on any links that any suspicious emails invite you to click on. The IRS would not have you do any of these things.
If you do answer a call from someone you don't know, claiming to be the IRS, and they begin to threaten you, take a deep breath and hang up. They will not be calling the police, they will not be calling their lawyers, and they will not be coming to your home. If you feel unsafe, please contact your local authorities and provide the phone number used to contact you.
If an email looks suspicious or too good to be true, it probably is. Go ahead and trash it. You can and should report all scams to the National Center for Disaster Fraud Hotline at 866-720-5721.
To learn more about these scams, please visit the IRS or FTC website. Please find those links below. After reporting the phone numbers or email addresses you've dealt with, please block them from your phone and your inbox and toss them out!

Tax season, tight finances due to a global pandemic, and dealing with staying up to date with potential future stimulus payments is difficult enough. Stay alert and educate yourself to avoid any fraud or scams that could potentially make your life even more difficult. Please never hesitate to contact us if you have any questions, and we are here and ready to help you through your 2020 tax season! Remember, if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

To learn more and to report fraudulent activity, please visit the IRS or FTC website by following the links below.

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Hoods Tax &
Accounting Blog

What Happens If You Can't Pay Your Tax Bill?

Hidden Tax Breaks for 2020

The Dangers Of The Stimulus Scams

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​Hoods Tax &Accounting Blog

What Happens If You Can't Pay Your Tax Bill?

Hidden Tax Breaks for 2020

The Dangers Of The Stimulus Scams

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Archives

Categories

Hoods Tax &
Accounting Blog