Tax Tips

Townsend Tax Services prides itself on our role as protectors of your tax information. Through our continuing education and vast resources from the IRS we can help you side step the worst of fraudulent scams and help you pay the least amount of tax possible under the law.

Preventing and Detecting Identity Theft

Your information can be stolen in many ways, from bogus IRS emails and unscrupulous return preparers to large scale thefts of information from banks, schools and hospitals. In the recent hacking of the IRS’s website, thieves apparently trolled social media to obtain answers to questions only taxpayers would know. IRS has now issued 1.5 million Identity Protection PINs, a unique number for victims of fraudulently filed returns to use when filing. Keep in mind IRS does not contact you by email, telephone, or knock on the door. Their first contact with you is always by U.S. mail.

The Health Care Law and Your Tax Return

The individual mandate penalty is the higher of 2.5 percent of yearly household income or $695 person per year, with a maximum penalty per family of $2,085. Two new forms 1095-B and 1095-C, which were optional last year, will be sent to you by your insurance provider this year. Be on the lookout.

Long Term Care

Approximately 70% of people turning age 65 can expect to use some form of long term care during their lives. On a happier note, you should know you can deduct these premiums!

Special Reporting for Foreign Accounts

IRS requires U.S. resident to report all worldwide income, including income from foreign accounts. In most cases, taxpayers only need to complete Part III of Schedule B answering few questions about these assets. If value of foreign accounts exceed $10,000 during year, taxpayer must file Report of Foreign Bank and Financial Accounts (FBAR). In addition, if value of assets exceeds certain higher thresholds, taxpayers may also need to file Form 8938. We can help you.

Miscellaneous deductions can cut taxes

These may include certain work related expenses you paid for as an employee. You must itemize deductions, so if you usually claim the standard deduction, think about itemizing. These are only deductible if sum is more than two percent of adjusted gross income. Unreimbursed employee expenses. Office in home for employees who do not go into regular office. Job search costs for a new job in the same line of work. Some work clothes and uniforms and union dues or tools your job. Work-related travel and transportation. The cost you paid to prepare your tax return. These Deductions are not Subject to AGI limit Certain casualty and theft losses. Gambling losses up to the total of your gambling winnings. Losses from Ponzi-type investment schemes.

1099-C: What You Need to Know

Most people are in for a surprise when they receive a 1099-C, never realizing canceled debt is often treated just like any other ordinary income. Creditors record canceled debts on a form 1099-C, which is then sent to debtor and IRS. Some common triggers for receiving a 1099-C include canceled credit card debt, home foreclosure or short sale (which results in the sale of a home at a price below your mortgage), or if you haven’t paid a debt in the last three years and lender hasn’t tried to collect in the past year.