Is Your Gift Taxable?


The IRS wants you to know that if you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.

  1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
  2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
  3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
  4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
  5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
    Gifts that are do not exceed the annual exclusion for the calendar year,
    Tuition or medical expenses you pay directly to a medical or educational institution for someone,
    Gifts to your spouse,
     Gifts to a political organization for its use, and
     Gifts to charities.
  6. You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion
  7. You must file a gift tax return on Form 709, if any of the following apply:
     You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
     You and your spouse are splitting a gift.
     You gave someone (other than your spouse) a gift of a future interest that he
    or she cannot actually possess, enjoy, or receive income from until some time in the future.
     You gave your spouse an interest in property that will terminate due to a future event.
  8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

For more information contact Steve Siesser at


How Taxes May Impact Your Retirement Venue


Location, as they say, is everything. In retirement, that’s especially true according to SunTrust. In a recent article, SunTrust ponted out that you might be looking for a place with favorable weather, a bevy of amenities and low cost-of-living that allows you to stretch your fixed-income dollars until they squeak. But how much you pay for a house or a loaf of bread in Boston, Massachusetts, vs. Boone, North Carolina, is only one factor in the total cost-of-living equation. Another is taxes, which vary wildly from one place to the next. Alaska’s typical tax burden is 6.3 percent, according to the nonpartisan Tax Foundation, and almost twice as much in New Jersey (12.2 percent). Types of taxes vary from state to state, but here are a few of the big ones to consider:

Personal income tax. Nine states don’t have a state income tax: Alaska, Washington, Nevada, Wyoming, South Dakota, Texas, Tennessee, Florida and New Hampshire. But New Hampshire and Tennessee tax dividends and interest, an important source of income for many retirees. On the other hand, 12 states, even though they may have a personal income tax, leave Social Security and pensions untaxed.

Property tax. For retired homeowners, property taxes are probably their biggest tax burdens and these have no relation to income or ability to pay. Louisiana’s mean property tax ran $243 in fiscal year 2009. But in New Jersey the mean was $6,579. New Hampshire has no income or state sales tax, but property taxes can run high. The good news is that some locales have tax abatement, deferment or tax-freeze programs for seniors.

Sales tax. Oregon, New Hampshire, Alaska, Montana and Delaware don’t have a retail sales tax. However, cities and counties within these states sometimes make up for this through sales taxes of their own. Other times, a town in a state that already has a sales tax may have one too, giving you a double tax whammy. In Tuba City, Arizona, for example, the sales tax is 13.725 percent, combining state, county and tribal sales tax.

Gasoline excise tax. Again, there’s a wide range of how much states tack on to the already climbing price of gas, from 8 cents per gallon in Alaska to 46.5 cents in California.

Bottom line. If your goal is to trim expenses in retirement, then moving to (or staying in) a state with a combination of low cost-of-living and low taxes is one way to do it. Not every type of tax is applicable to every retiree. The concerns for someone who lives mainly on Social Security and rents an apartment are different from a person who gets dividends and owns several homes. And for some, proximity to friends and family far outweighs these financial considerations.  If you have questions concerning the impact of taxes on retirement, contact Steve Siesser at


What Do I Do With An IRS Refund Check When I Wasn’t Owed A Refund?


What should you do if you receive a tax refund check from the IRS that is unexpected, or that you suspect is incorrect or otherwise in error.  Do not cash the check. Instead, contact the IRS to determine the nature of the check and to confirm its propriety. Any refund that you receive by mistake must be returned to the IRS, to help insure that you won’t be assessed any unnecessary interest or penalties.

If you receive an erroneous paper refund check from the IRS:

  1. Do not cash the check.
  2. Write or type “VOID” in the endorsement section on the back of the check.
  3. Send the check to the correct IRS location listed here. The location is based on the city on the bottom text line in front of the words TAX REFUND, written on the refund check.
  4. Do not staple, bend, or paper clip the check.
  5. Include a note stating “Return of erroneous refund check because (and give a brief explanation of the reason for returning the check).”

You may also return the check in person, to your local IRS Taxpayer Assistance Center (“TAC”).

If you have already cashed the check, then you will need to repay the funds to the IRS as soon as possible. Follow these steps:

  1. Submit a check for the refunded amount to the appropriate IRS location listed here. The location is based on the city on the bottom text line in front of the words TAX REFUND, written on the refund check. If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 and explain to the assistor that you need information to repay a cashed refund check.
  2. Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number.
  3. Include a brief explanation of the reason for returning the refund.
  4. You may instead bring the repayment check to your local TAC.

It is important to note that repaying an erroneous refund in this manner may result in interest and/or penalties due to the IRS.

There is no guarantee that returning an uncashed refund check to the IRS will allow you to avoid interest and penalties. However, it is much more likely that IRS will assess interest and penalties if you cash the check and attempt to repay the funds later. Returning or repaying the refunded amount in a timely manner will also help mitigate any potential assessments.


IRS Warnings About Telephone Scams


The Internal Revenue Service and the Treasury Inspector General for Tax Administration continue to hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.  Based on the 90,000 complaints that TIGTA has received through its telephone hotline, to date, TIGTA has identified approximately 1,100 victims who have lost an estimated $5 million from these scams.

The Internal Revenue Service issued a consumer alert providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“There are clear warning signs about these scams, which continue at high levels throughout the nation,” said IRS Commissioner John Koskinen. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS. These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of these scams include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

  • If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
  • If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at
  • If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the email to

For more information on reporting tax scams, go to and type “scam” in the search box.

Additional information about tax scams are available on IRS social media sites, including YouTube and Tumblr where people can search “scam” to find all the scam-related posts.  If you need additional assistance, contact Steve Siesser at


Five Basic Tax Tips for New Businesses


If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips from the IRS that can help get your business off to a good start.

1. Business Structure.  As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Instead, it “passes through” any profits or losses to its partners. Each partner includes his or her share of the partnership’s income or loss on his or her tax return.  Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.  S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.  A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and you should check with your state if you are interested in starting a Limited Liability Company.  Owners of an LLC are called members. Most states do not restrict ownership, and so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.  All businesses except partnerships must file an annual income tax return.  Partnerships file an information return.  The form you use depends on how your business is organized.

3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on to find out if you need this number. If you do need one, check out the IRS’s Interview-style online EIN application. No need to file a Form SS-4! If you don’t have your EIN by the time a return is due, write “Applied for” and the date you applied in the space shown for the number.

4. Accounting Method.  An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.

5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.  For additional information about starting a new business, contact Steve Siesser