AG Morgan Tax & Accounting wants to remind you...
Tax Extension Deadline
The due date for your tax returns are as follows:
Now it’s time to complete the process and we can help.
Gather your tax documents
AG Morgan Tax & Accounting can email you a list to help you know what to look for and make sure nothing is missed.
Just get a hold of us by phone 888-999-0829 or email email@example.com to request a reference list.
Once your documents are all gathered, send them our way through our secure link: Upload Tax Documents Here
Can’t pay the tax currently due?
Some people ask, “What if I can’t pay the full tax?”
You need to file your taxes anyway and pay what you can when you can. This will greatly reduce the non-filing penalties and we can work out a payment plan with the IRS and states.
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IR-2017-119, July 11, 2017
WASHINGTON — The IRS, state tax agencies and the tax industry today warned tax professionals to beware of spear phishing emails, a common tactic used by cybercriminals to target practitioners.
Spear phishing emails, often tailored to individual practitioners, result in stolen taxpayer data and fraudulent tax returns filed in the names of individual and business clients.
Information about spear phishing kicks off a new “Don’t Take the Bait” awareness campaign aimed at tax professionals. This is the first of a special 10-part series that will run each week through mid-September.
“We are seeing repeated instances of cybercriminals targeting tax professionals and obtaining sensitive client information that can be used to file fraudulent tax returns. Spear phishing emails are a common way to target tax professionals,” said IRS Commissioner John Koskinen. “We urge practitioners to review this information and take steps to protect themselves and their clients.”
The IRS, state tax agencies and the tax industry, working together as the Security Summit, urge practitioners to learn to recognize and avoid spear phishing emails. See Protect Your Clients; Protect Yourself for more information.
Phishing emails target a broad group of users in hopes of catching a few victims. Spear phishing emails pose as familiar entities, and the cybercriminals have done extensive research and homework in order to target a specific audience. Tax professionals and taxpayers are among the groups that regularly receive phishing emails.
The security software firm Trend Micro reports that 91 percent of all cyber attacks and resulting data breaches begin with a spear phishing email. The email, disguised as being from a trusted source, may seek to have victims voluntarily disclose sensitive information such as passwords. Or, it may encourage people to open a link or attachment that actually downloads malware onto the computer.
Note that the sender has done their research, obtaining the name and email address of the tax pro. And, the email is conversational but ungrammatical and oddly constructed: “hope your (sic) doing good (sic) and actively involved in the tax filing season.” This is potentially a sign that English is a second language. Finally, note the hyperlink using a “tiny” URL is used to mask the true destination – this is another red flag.
There are several other versions of spear phishing emails in which the criminal poses as a potential client. In one version, the prospective “client” directs the tax professional to open an attachment to see the 2016 tax information needed to prepare a return. However, the attachment in reality downloads malware that tracks each keystroke made by the tax professional so that the criminal can steal passwords and sensitive data.
Most spear phishing emails have a “call to action” as part of their tactics, an effort to encourage the receiver into opening a link or attachment. The example above asks the preparer to review their tax information and provide a cost estimate.
Other spear phishing emails impersonate the IRS, such as the IRS e-Services tools for tax professionals, or in some instances a private-sector tax software provider. In those examples, preparers are warned that they must immediately update their account information or suffer some consequence. The link may go to a website that has been disguised by the thieves to look like the login pages for IRS e-Services or a tax software provider.
Cybercriminals are endlessly creative. This year, some identity thieves hacked individuals’ emails accounts. Noticing that the individuals had been in email contact with tax preparers, the criminals used the individual’s email address to send a note to their preparer asking that the direct deposit refund account number be changed. The scam prompted an IRS alert to preparers about last-minute refund changes. See IR-2017-64.
Protecting Your Clients and Your Business from Spear Phishing
There is no one action to protect your clients or your business from spear phishing. It requires a series of defensive steps. Tax professionals should consider these basic steps:
June 26th, 2017
Each year taxpayers struggle to decide how to file their returns. Doing returns takes time, technical skills and patience. Instead of adding another stress to your busy life, you should hire a professional accountant to do you returns next tax season.
Here are five simple reasons why.
Non-business filers, who make up 68% of all returns spend an average of eight hours on their returns. Your time is valuable. Hiring a professional will eliminate the burden put on you of taking the time to actually sit down (for hour after hour) and do the work!
Keeping up with the Tax Code
The IRS states that since 2001, Congress has made nearly 5,000 changes to the Tax Code. That's more than a change per day. The Tax Code is becoming more complex every day it’s challenging to keep up.
What if you missed something?
Peace of mind is something you gain when hiring a professional to handle your returns. Professionals are trained and experienced to handle your taxes.
You can lose money by yourself
If you miss deductions or triggering an IRS letter or audit a tax professional can help eliminate errors and ensure your returns are prepared correctly.
It can save you money. Lots of it.
Your tax preparer can find even just one deduction or tax credit you may have missed. That deduction can easily exceed the fee it costs to have a professional prepare your return. You never know!
If you plan to hire a tax professional to prepare your taxes, you will need to gather all of you records. So keep in mind to be organized because it saves your tax preparer time and keeps the fees down!
June 19th, 2017
My younger cousin started his first part time job at the age of fourteen at an amusement park. After working two long weeks for $7.25/ hour (the minimum wage in 2012), he was thrilled about receiving his first pay check. He quickly opened his envelope with a huge smile on his face but suddenly the smile transformed into a puzzled frown. He looked up at his parents and screamed, “Who is this FICA and why is he stealing from me?”
What (or who) is FICA?
Federal Insurance Contributions Act (FICA) tax is a United States federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare. FICA is comprised of a 6.2 percent Social Security Tax and 1.45 percent Medicare tax. The 6.2 percent Social Security tax helps fund benefits for retirees, disabled people, and children of deceased workers. The 1.45 percent of Medicare tax is used to provide medical benefits for certain individuals when they reach the age of 65.
Who is paying the FICA tax?
Unlike federal or state income taxes, employers are required by law to withhold a percentage of an employees’ wages for FICA. So how much does the employer pay? The same amount! Employers must pay 7.65% of each employee’s wages so both the employer and employee contribute the same amount. The IRS receives 15.3% of each employee’s wages for FICA tax.
FICA Tax Exemptions
Some individuals in F-1 and J-1 non immigrant status are exempt from FICA payments for a certain time period. Below are a few of the common FICA tax exemptions:
General Student FICA Exemption: FICA taxes do not apply to payments received by students employed by a school, college or university where the student is pursuing a course of study.
Qualifying Religious Exemption: Members of certain religious groups could qualify for the exemption, but it must be recognized religious sect opposed to accepting Social Security benefits. The exemption isn’t automatic; you must apply for it by completing Form 4029.
Nonresident aliens: A nonresident alien working in the U.S usually pays Social Security tax on any income made here. However, there are some exceptions. For example, foreign students and educational professionals in the U.S on a temporary basis don’t have to pay Social Security taxes.
The 2016 tax return preparation season is finally upon us! We can now electronically file your tax returns as soon as you have all of your 2016 tax documents. W-2's, 1099's and most 1098's are required to be mailed to the taxpayers by January 31, 2017. If you do not receive your tax documents by the first few days of February, we suggest that you contact your employers and financial institutes to request a copy. Feel free to contact us with any questions at all.
As tax season begins, the Internal Revenue Service, the states and the tax industry remind taxpayers to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud.
Every tax season, there is an increase in schemes that target innocent taxpayers like yourself by email, by phone and on-line. The IRS and Security Summit partners remind taxpayers and tax professionals to be on the lookout for these deceptive schemes.
If you receive an unexpected call, unsolicited email, letter or text message from someone claiming to be from the IRS, here are some of the tell-tale signs to help protect yourself.
The IRS Will Never:
Dividends paid to you out of a corporation’s earnings and profits are taxable as ordinary income. The corporation will report dividends on Form 1099-DIV (or equivalent statement). Mutual-fund dividends and distributions are also reported on Form 1099-DIV (or similar form). Corporate dividends and mutual-fund distributions of $10 or more are reported on Form 1099-DIV (or equivalent) whether you receive them in cash or they have been reinvested at your request.
Form 1099-DIV for 2015 gives you a breakdown of the dividends and distributions paid to you during the year. You do not have to attach the Form 1099-DIV (or similar statement) to your tax return.
Ordinary dividends taxed to you are shown in Box 1. These are the most common type of distribution, payable out of a corporation’s earnings and profits. Your share of a mutual fund’s ordinary dividends is also shown on Form 1099-DIV; short-term capital gain distributions are included in the Box 1a total.
Part of the Box 1a amount may be qualified dividends. Qualified dividends reported in Box 1b are generally taxed at the same favorable rates (zero, 15% or 20%) as net capital gains.
Capital gain distributions (long term) from a mutual fund are shown in Box 2a. Box 2b shows the portion of the Box 2a amount, if any, that is unrecaptured Section 1250 gain from the sale of depreciable real estate. Box 2c shows the part of Box 2a that is Section 1202 gain from small business stock eligible for a 50% exclusion, or a 60% exclusion in the case of qualified empowerment zone business stock. Box 2d shows the amount from Box 2a that is 28% rate gain from the sale of collectibles. If any amount is reported in Box 2b, 2c, or 2d, you must file Schedule D with Form 1040 .
Nontaxable distributions that are a return of your investment are shown in Box 3.
If you did not give your taxpayer identification number to the payer, backup withholding at a 28% rate is shown in Box 4.
Your share of expenses from a non– publicly offered mutual fund is shown in Box 5 and may be deductible as a miscellaneous itemized deduction subject to the 2% floor. This amount is included in Box 1a.
The foreign tax shown in Box 6 (imposed by the country shown in Box 7) may be claimed as a tax credit on Form 1116 or as an itemized deduction on Schedule A.
Cash and non-cash liquidation distributions are shown in these boxes are shown in Boxes 8 and 9.
A distribution that is not paid out of earnings is a nontaxable return of capital, that is, a partial payback of your investment. The company will report the distribution in Box 3 of Form 1099-DIV as a nontaxable distribution. You must reduce the cost basis of your stock by the nontaxable distribution. If your basis is reduced to zero by a return of capital distributions, any further distributions are taxable as capital gains, which you report on Schedule D of Form 1040.
A flexible spending arrangement (FSA) allows employees to get reimbursed for medical or dependent care expenses from an account they set up with pre-tax dollars. Under a typical FSA, you agree to a salary reduction that is deducted from each paycheck and deposited in a separate account. The salary-reduction contributions are not included in your taxable wages reported on Form W-2. As expenses are incurred, you are reimbursed from the account. Reimbursements used to pay qualified medical expenses are excluded from your income even though the contributions to your account were also not taxed to you.
The tax advantage of an FSA is that your salary-reduction contributions are not subject to federal income tax or Social Security taxes, allowing your medical or dependent care expenses to be paid with pre-tax rather than after-tax income. The salary deferrals are also exempt from most state and local taxes; check with the administrator of your employer’s plan.
In the case of a health FSA, paying medical expenses with pre-tax dollars allows you to avoid the adjusted gross income (AGI) floor that limits itemized deductions for medical costs.
However, to get these tax advantages, you must assume some risk. Under a “use-it-or-lose-it” rule, if your qualifying out-of-pocket expenses for the year are less than your contributions, the balance of the contributions will be forfeited unless your employer allows a carryover or gives you an additional 2 ½ months to spend the funds, as discussed below.
An election to set up an FSA for a given year must be made before the start of that year. You elect how much you want to contribute during the coming year and that amount will be withheld from your pay in monthly installments.
Once the election for a particular year takes effect, you may not discontinue contributions to your account or increase or decrease a coverage election unless there is a change in family or work status that qualifies under IRS regulations.
The use-it-or-lose-it rule in IRS regulations discourages employees from making “excessive” salary-reduction contributions. Generally, salary-reduction contributions made in one year cannot be used to pay expenses incurred after the end of that year. Any unused account balance as of the end of the year must be forfeited to the employer.
However, the use-it-or-lose-it rule has been strongly criticized over the years, and in response to pressure from Congress, the IRS has given employers some options that can ease the impact of the use-it-or-lose-it rule. Depending on the type of plan, a limited carryover or a grace period for unused contributions may be offered. Keep in mind that the law does not provide for a carryover or grace period. There are options that the IRS allows an employer to offer after amending the plan document.
The end-of-year balance of health FSA funds may only be applied to health expenses incurred during the grace period and not to dependent care or other expenses. Similarly, unused dependent care FSA amounts may be used only for dependent care expenses incurred during the grace period. During the grace period, unused amounts may not be cashed out or converted to any other benefit (taxable or nontaxable). The employer may allow additional time following the end of the grace period to submit reimbursement claims for qualified expenses paid during the plan year and the grace period. For example, many calendar-year plans allow up to March 31 for submitting reimbursement claims.
The maximum salary-reduction contribution that could be made to a health FSA for 2015 was $2,550. A plan must apply the dollar limit to remain a qualified cafeteria plan; otherwise, all plan benefits are includible in the employees’ gross income. The $ 2,550 limit is the maximum salary-reduction contribution that the plan can allow, but employers may set a lower limit.
The annual limit applies per person and not per household. If you and your spouse each work and both of you are offered health FSA coverage, you may each elect to make salary-reduction contributions up to the annual limit. This is true even if you and your spouse work for the same employer.
Funds from a health FSA may generally be used to reimburse you for expenses that you could claim as a medical expense deduction, such as the annual deductible under your employer’s regular health plan, co-payments you must make to physicians or for prescriptions, and any other expenses that your health plan does not cover. These may include eye examinations, eyeglasses, routine physicals, and orthodontia work for you and your dependents. Over-the-counter medications such as cold remedies, pain relievers, and allergy medications can be reimbursed tax free from an FSA only if a physician provides a prescription for the medication; this restriction does not apply to insulin.
In addition, a health FSA may not be used to reimburse you for premiums paid for other health plan coverage, including premiums for coverage under a plan of your spouse or dependent. Also, expenses for long-term care services cannot be reimbursed under a health FSA. You may not receive tax-free reimbursements for cosmetic surgery expenses unless the surgery is necessary to correct a deformity existing since birth or resulting from a disease or from injury caused by an accident. Non-qualifying reimbursements are taxable.
At any time during the year, you may receive reimbursements up to your designated limit, even though your payments into the FSA account up to that point may add up to less. For example, if you elect to make salary-reduction contributions of $100 per month to a health-care FSA and you incur $500 of qualifying medical expenses in January, you may get the full $500 reimbursement even though you have paid only $100 into the plan. Your employer may not require you to accelerate contributions to match reimbursement claims.
Dependent Care FSA
You may contribute to a dependent care FSA if you expect to have expenses qualifying for the dependent care tax credit, but if you contribute to a dependent care FSA, any tax-free reimbursement from the account reduces the expenses eligible for the credit. If you are married, both you and your spouse must work in order for you to receive tax-free reimbursements from an FSA, unless your spouse is disabled or a full-time student.
The maximum tax-free reimbursement under the FSA is $ 5,000, but if either you or your spouse earns less than $ 5,000, the tax-free limit is the lesser earnings. If your spouse’s employer offers a dependent care FSA, total tax-free reimbursements for both of you are limited to $ 5,000. Furthermore, if you are considered a highly compensated employee, your employer may have to lower your contribution ceiling below $5,000 to comply with nondiscrimination rules.
You must use Part III of Form 2441 to figure how much of your reimbursement is tax free and how much must be included in your income. Unlike health FSAs, an employer may limit reimbursements from a dependent care FSA to your account balance. For example, if you contribute $400 a month to the FSA and in January you pay $1,500 to a day-care center for your child, your employer may choose to reimburse you $400 a month as contributions are made to your account.
“Cafeteria plans” is a nickname for plans that give an employee a choice of selecting either cash or at least one qualifying nontaxable benefit. You are not taxed when you elect qualifying nontaxable benefits, although cash could have been chosen instead. A cafeteria plan may offer tax-free benefits such as group health insurance or life insurance coverage, long-term disability coverage, dependent care or adoption assistance, medical expense reimbursements, or group legal services. Long-term care insurance may not be offered through a cafeteria plan under current law.
Employees may be offered a premium-only plan (POP), which allows them to purchase group health insurance coverage or life insurance on a pre-tax basis using salary-reduction contributions. Health savings accounts (HSAs) and their related high-deductible health plans (HDHPs) may be offered as options by a cafeteria plan. If so, employees may elect to have contributions made to an HSA and an HDHP on a pre-tax salary-reduction basis.
A cafeteria plan may also offer benefits that are nontaxable because they are attributable to after-tax employee contributions. For example, employees may be offered the opportunity to purchase disability benefits (short term or long term) with after-tax contributions. If a covered employee subsequently receives disability benefits that are attributable to after-tax contributions, the benefits will be tax-free. On the other hand, the plan may allow employees to elect paying for disability coverage on a pre-tax basis and, in this case, any benefits from the plan attributable to the pre-tax contributions will be taxable when received.
Under a flexible spending arrangement (FSA), employees may be allowed to make tax-free salary-reduction contributions to a medical or dependent care reimbursement plan.
A qualified cafeteria plan must be written and not discriminate in favor of highly compensated employees and stockholders. If the plan provides for health benefits, a special rule applies to determine whether the plan is discriminatory. If a plan is held to be discriminatory, the highly compensated participants are taxed to the extent they could have elected cash. Furthermore, if key employees receive more than 25% of the “tax-free” benefits under the plan, they are taxed on the benefits. Employers averaging 100 or fewer employees who agree to contribute a fixed amount towards benefits are treated as meeting the nondiscrimination tests.C
The value of employer-provided meals is not taxable if furnished on your employer’s business premises for the employer’s convenience. The value of lodging is not taxable if, as a condition of your employment, you must accept the lodging on the employer’s business premises for the employer’s convenience.
The IRS generally defines business premises as the place of employment, such as a company cafeteria in a factory for a cook or an employer’s home for a household employee. The Tax Court has a more liberal view, extending the area of business premises beyond the actual place of business.
Lodging in certain foreign “camps” is considered to be provided on the business premises of the employer. To qualify, lodging must be provided to employees working in remote foreign areas where satisfactory housing is not available on the open market, it must be located as near as practicable to where they work, and it must be in a common area or enclave that is not available to the public and which normally accommodates at least 10 employees.
The employer convenience test requires proof that an employer provides the free meals or lodging for a business purpose other than providing extra pay. In the case of meals, the employer convenience test is deemed to be satisfied for all meals provided on employer premises if a qualifying business purpose is shown for more than 50% of the meals. If meals and lodging are described in a contract as extra pay, this does not bar tax-free treatment provided they are also provided for other substantial, non-compensatory business reasons.
Your company may charge for meals on company premises and give you an option to accept or decline the meals. However, by law, the IRS must disregard the charge and option factors in determining whether meals that you buy are furnished for noncompensatory business reasons. If such business reasons exist, the convenience-of-employer test is satisfied. If such reasons do not exist, the value of the meals may be tax free as a de minimis benefit; otherwise, the value of the meal subsidy provided by the employer is taxable.
Where your employer provides meals on business premises at a fixed charge that is subtracted from your pay whether you accept the meals or not, the amount of the charge is excluded from your taxable pay. If the meal is provided for the employer’s convenience, the value of the meals received is also tax free. If it is not provided for the employer’s convenience, the value is taxable whether it exceeds or is less than the amount charged.
Lodging is necessary for you to perform your job properly, as where you are required to be available for duty at all times. The IRS may question the claim that you are required to be on 24-hour duty. For example, at one college, rent-free lodgings were provided to teaching and administrative staff members, maintenance workers, dormitory parents who supervised and resided with students, and an evening nurse. The IRS ruled that only the lodgings provided to the dorm parents and the nurse met the tax-free lodging tests because, for the convenience of the college, they had to be available after regular school hours to respond to emergencies.
If you are given the choice of free lodging at your place of employment or a cash allowance, the lodging is not considered to be a condition of employment, and its value is taxable.
If the lodging qualifies as tax free, so does the value of employer-paid utilities such as heat, electricity, gas, water, sewerage, and other utilities. Where these services are furnished by the employer and their value is deducted from your salary, the amount deducted is excluded from taxable wages on Form W-2. But if you pay for the utilities yourself, you may not exclude their cost from your income.
An employer may furnish unprepared food, such as groceries, rather than prepared meals. Courts are divided on whether the value of the groceries is excludable from income. One court allowed an exclusion for the value of nonfood items, such as napkins and soap– as well as for groceries– furnished to a doctor who ate at his home on the hospital grounds so that he would be available for emergencies.
Teachers and other employees (and their spouses and dependents) of an educational institution, including a state university system or academic health center, do not have to pay tax on the value of school-provided lodging if they pay a minimal rent. The lodging must be on or near the campus. The minimal required rent is the smaller of: (1) 5% of the appraised value of the lodging; or (2) the average rental paid for comparable school housing by persons who are neither employees nor students. Appraised value must be determined by an independent appraiser and the appraisal must be reviewed annually.