Who Do You Notify For A Name Change?

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If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

  1. If you took your spouse’s last name — or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.
  2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
  3. Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.
  4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/ by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
  5. If you adopted your spouse’s children after getting married and their names changed, you’ll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

If you need assistance with name change notification, contact Steve Siesser at ssiesser@verizon.net

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Do I Have To Repay First-Time Homebuyer Credit?

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The IRS has developed an online tool to help people who have to repay their First-Time Homebuyer Credit. The IRS will no longer be mailing reminder notices to taxpayers who have to repay the credit but you can now use their online lookup tool on the IRS website to check your repayment obligation.

The following four tips will help you look up information on your First-Time Homebuyer Credit:

  1. Who needs to repay the credit? If you bought a home in 2008 and claimed the First-Time Homebuyer Credit, the credit is similar to a no-interest loan and must be repaid in 15 equal annual installments that began with your 2010 return.  If you did not comply in 2010, you will have to file amended returns.
  2. If you bought your home after 2008 and claimed the First-Time Homebuyer Credit, and then sold the home, or stopped using it as your main home within the 36 month period beginning on the purchase date, may have to repay the entire credit.  This includes situations where the home was destroyed, condemned, lost through foreclosure or converted to business or rental property. There are some exceptions.
  3. Information needed to access the tool: The First-Time Homebuyer Credit Tool will provide critical account information to help you report your repayment obligation on your tax return. To access the tool you will need: your Social Security number, date of birth and complete address. If you file a joint return, you’ll only be able to access your portion of the First-Time Homebuyer Credit account information.
  4. What the tool provides: The tool will show the original amount of the credit, annual repayment amounts, total amount paid and the total balance left to be paid. You will be able to print your account page to share with your tax preparer and keep for your records.
  5. How to repay the credit: To repay the First-Time Homebuyer Credit, add the amount you have to repay to any other tax you owe on your federal tax return. This could result in an additional tax owed or a reduced refund. To repay the credit, you report the repayment on line 59b on Form 1040, U.S. Individual Income Tax Return. If you make an installment payment, you do not need to attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, to your tax return. However, if you are repaying the credit because the home stopped being your main home, you must attach Form 5405.

You can access the First-Time Homebuyer Credit Lookup Tool, 24 hours a day, seven days a week, visit the IRS.gov website.

If you have any questions feel free to contact Steve Siesser at ssiesser@verizon.net

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Where Is My W-2?

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It’s a good idea to have all your tax documents together before preparing your 2012 tax return. You will need your W-2, Wage and Tax Statement, which employers should send by the end of January. Give it two weeks to arrive by mail.

If you haven’t received your W-2, the IRS suggests you follow these four steps:

  1. Contact your employer: If you have not received your W-2, contact your employer, or former employer, to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or issue the W-2.
  2. Contact the IRS: If you do not receive your W-2 by Feb. 14, you may contact the IRS for assistance at 800-829-1040. When you call, be prepared to provide your name, address, Social Security number, phone number and have the following information:
  • Employer’s name, address and phone number
  • Your employment dates, and
  • An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2012. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.
  1. File your return: You still must file your tax return or request an extension to file by April 15, 2013, even if you do not receive your Form W-2. If you have not received your Form W-2 in time to file your return by the due date, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  The IRS may delay processing your return while it verifies your information.
  2. File a Form 1040X:  If you receive the missing W-2 after filing your tax return and the information on the W-2 is different from what you reported using Form 4852, then you must correct your tax return. File Form 1040X, Amended U.S. Individual Income Tax Return to amend your tax return.

If you need assistance, contact Steve Siesser at ssiesser@verizon.net or 301-593-6766.

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Avoid “Nanny Tax” Pitfalls

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Remember Zoe Baird?  She was nominated for Attorney General.  Everything was going well until it was disclosed at her Senate confirmation hearings that she had failed to report money she paid to her domestic help.  The media called it “Nannygate”.   Years later, there was speculation that the issue influenced Caroline Kennedy’s decision to pull out of contention for New York’s vacant United States Senate seat and Timothy F. Geithner’s nomination for Treasury secretary hit a snag over an issue relating to a housekeeper.

The practice of paying domestic help off the books is still widespread. Did you pay a babysitter working in your home more than $1,700 in 2011? Unless that babysitter is your parent, spouse, under-age-21 child or someone under age 18 whose principal occupation is not household employment (a student, for example), then you owe the “Nanny” tax.

Any time you hire someone to work in your home that you pay directly AND whose total payments in the calendar year meets the IRS household employment threshold of $1,700, they must receive a W-2 from the employer (family) and the employer must pay the payroll taxes. It makes no difference whether the employee is full time, part time, or simply temporary. The employer payroll taxes include Social Security, Medicare, federal Unemployment and state unemployment taxes. The employee withholding includes Social Security and Medicare and possibly, federal, state and city income taxes.

If you’re thinking, “Why should I pay nanny taxes? No one else pays them and I’m not running for public office,” think again.

The IRS will catch you. Form 1040 requires you to check the box for Schedule H if you owe household employment taxes.  Schedule H asks “Did you pay anyone working in your home $1,700 or more?” If you check yes, the IRS looks for your nanny tax payments. If you say no, you compromise your federal income tax return and may be audited. Furthermore, if you pay an employee working in your home $1,000 or more per calendar quarter, you must pay nanny taxes and file them quarterly.

Of course, there are several other ways you can be “caught” by the IRS.

  • Your employee doesn’t work out and you fire her. The former employee may apply for unemployment benefits. If you haven’t paid nanny taxes, the state unemployment office will fine and penalize you, and report you to the IRS.
  • Your employee becomes disabled, cannot work and files for social security disability benefits. If you haven’t paid nanny taxes, the Social Security Administration will impose back taxes, interest and penalties.
  • Your employee files a tax return and includes the wages from your employment. If you have not provided a W-2 to the employee, the IRS will fine and penalize you for the back taxes.
  • Your employee retires and applies for Social Security benefits.

There is no statute of limitations for failing to report and pay federal payroll taxes.

You are not required to withhold income taxes unless your employee asks you to and you agree. If you do not withhold income taxes, your employee must pay these taxes. If your employee pays these taxes themself, they may need to make quarterly estimated tax payments.

The Internal Revenue Code maintains that the immigration status of your nanny or other employee has no bearing on your obligation for employment taxes.

Since so many households employ illegal immigrants as nannies, housekeepers or groundskeepers, noncompliance with the Nanny tax is high. With all of the various proposals being discussed in Washington with regard to immigration status include either a Guest Worker program, an amnesty program with a citizenship path for illegal immigrants already working in the U.S., or both, there is a greater likelihood that applicants for immigration legalization will be required to disclose their employment history in the U.S.

It is expected that all immigrants applying for a Green Card or other legalized status will be required to document tax compliance. All plans include an examination of tax return records going back a minimum of 3 years. The illegal immigrants will be highly incented by the promise of legal status, and it is expected there will be significant pressures on current employers who have been paying these immigrants ‘under the table’ to come clean and catch up on tax payments so the immigrant can take advantage of a legalization program. Remember, it is the household EMPLOYER who pays the employment taxes AND provides the W-2 forms.

Once you’re paying on the books, you can use a flexible spending account through your employer to cover up to $5,000 in eligible child or elder care expenses each year. If you don’t have access to such an account, you may also be eligible for the federal Dependent Care Tax Credit.

Getting it wrong can cost you serious money. We prepare back tax returns. Call for fees.  See our link in the Resource section

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What You Need to Know When Selling Your Home

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The Internal Revenue Service has some important information to share with individuals who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may qualify to exclude all or part of that gain from your income. Here are ten tips from the IRS to keep in mind when selling your home.

  1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
  2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
  3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
  4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
  5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
  6. You cannot deduct a loss from the sale of your main home.
  7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
  8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
  9. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
  10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
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