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Should I File A Tax Extension?


The deadline to file your taxes is right around the corner on May 17, extended from April 15. However, you may be questioning whether you should file a tax extension request with the Internal Revenue Service (IRS), which would grant you additional time to file your tax return. If the tax extension request is approved, your filing deadline is pushed to October 15. Although the date to file your taxes is pushed out, you are still required to pay any owed taxes by the tax deadline.

But under what circumstances should you submit IRS Form 4868 asking the IRS for a tax extension? AA Tax & Accounting Services has put together a list of common reasons for requesting an extension.

Incomplete Tax Documentation

Depending on your situation, you may have a lot of documents to procure to file this year’s tax return accurately. If you’re waiting on documents to arrive or you’ve misplaced the W-2 that your employer sent, you shouldn’t file and submit your taxes without it.

Instead, you’re better off applying for a tax extension with the IRS so you can properly fill out a tax return with all the necessary tax documentation to minimize the need for corrections.

Unexpected Events

Sometimes life just happens, and things get in the way. If you intended to file your taxes with the Internal Revenue Service by April 15, but life events delay your ability to file on time, you may want to consider applying for a tax extension. Unexpected life events include the death or illness of a family member, encountering a natural disaster, or other events that hinder your ability to file. Even though an explanation isn’t required to file for a tax extension, it’s best to only apply when you fit within one of these reasons.

IRA Conversions

Filing for a tax extension isn’t always for unexpected reasons. Sometimes you may opt to file for an extension as a strategic decision so that you can increase your tax savings. If you converted a traditional IRA into a Roth IRA during the tax year, you must pay taxes on the entire balance. To avoid paying tax on the total balance of the converted IRA, you can “recharacterize” a Roth IRA back into a traditional IRA. This process can take time, which means you may benefit from a tax extension so you can lessen your tax obligations.

Late-Payment Penalties

Whether you file your taxes by the April 15 or October 15 deadline, you are required to pay back any owed taxes by the filing deadline. If your taxes aren’t paid by the deadline, you can expect to face expensive Internal Revenue Service penalties.

For each month after the missed deadline, you will owe an additional one-half percent on the amount of taxes owed. Missing the tax filing deadline also comes with penalties from the IRS, costing you an additional five percent per month, for a maximum penalty of 25 percent.

Tax Consulting Services in Cedar City, Utah

If you’re unsure whether filing for a tax extension is the right choice for you, we recommend consulting certified public accountants like AA Tax & Accounting Services for help making any decisions related to your tax return.

From one-time tax consulting services to ongoing consulting services, our tax consultants work with many clients as their tax advisor and tax preparer — ensuring that your tax team understands your taxes backward and forwards. You can have peace of mind knowing that our team has the experience to provide you with the most effective strategies for maximizing deductions and tax credits with our tax consulting services.

The AA Tax & Accounting Services team can help you execute the right tax strategies and decide if a tax extension is the best choice. Contact us to schedule an appointment.

Due To The Coronavirus Utah Tax Deadline Is Now July 15th

Due To The Coronavirus Utah Tax Deadline Is Now July 15th
If you’ve been delaying bringing your taxes into your local Cedar City accountant, all while dreading the April 15 deadline, you are in luck. Due to the novel coronavirus—also called COVID-19—the tax deadline has been pushed back to now be July 15, 2020. But, instead of procrastinating a little longer, it’s time to tackle your taxes, especially since it can impact your stimulus check.

COVID-19 Taxes Deadline Automatically Extended

Unlike a standard tax deadline extension, the federal tax deadline is automatically extended to be July 15. You don’t need to apply for an extension to be able to file your taxes on July 15 as the extension has been set down by the IRS. Also, if you owe taxes, they can be paid on July 15, rather than the former tax deadline without any late penalties being applied.

If you do want to extend your tax filing further, you will need to file for that, and then your taxes will need to be filed by October 15. The shift of the tax deadline to July 15 has not moved the extension deadline.

Those who are self-employed can also expect an automatic extension to July 15. The benefit of this deadline move also means the self-employed can wait to make their first-quarter estimate taxes on July 15.

Utah Tax Day Also Extended

While some states have not moved their tax deadlines, the Utah statute mandates that state taxes are due to be filed with federal taxes. Thanks to this statute, you can file your Utah state taxes by July 15, 2020, without a penalty being applied.

However, with both your federal and state tax deadlines being extended, you really should take advantage of accounting services and get your taxes filed sooner, rather than later. Part of it is due to the fact that you could have a tax refund waiting for you. The other part is due to the stimulus check that has been issued as part of the US response to the economic impact of COVID-19.

How Your Taxes Impact COVID-19 Stimulus Check

At this time, the economic stimulus check is being sent out. This check is based on your 2018 tax filing, or if you have already filed your 2019 taxes, it will be based on that more recent tax filing. However, if you have had an income change from 2018 to 2019 filing where you made less in 2019, you will want to file quickly to ensure that your stimulus check is calculated properly.

Single tax filers who make an adjusted gross income (AGI) under $75,000 are able to receive the stimulus check full amount, which equals $1,200. The amount will decrease as your income is above $75,000. For those single filers who make over $99,000, no check will be received.

Married filing jointly couples who make an AGI under $150,000 are able to receive the full amount of the stimulus check of $2,400. This check amount will decrease in amount until AGI $198,000 is reached.

Dependent children will also qualify tax filers for an extra $500 on top of the stimulus check. A qualifying child will be under the age of 17.

For those individuals who normally don’t file taxes due to low income but would still like to receive the stimulus check, the IRS has provided a way to input your information to receive this benefit.

Let AA Tax & Accounting Services Take Care Of Your Taxes

Here at AA Tax and Accounting Services, we are still working on our clients’ taxes and accounting needs. We are open for document drop-off and can help you get your taxes in order in time for the July 15 deadline.

So, if you would like our accountant’s help with your taxes this year, feel free to contact us so that we can arrange what needs to be done, and help you maximize your tax return.

Government Shutdown Might Mean Refund Delay, Let Your Accountant File It Quickly

When the government shutdown occurred earlier this year, the IRS was one of the main areas where funding stopped. As a result, the tax return process was in jeopardy. The question, at the time, was how quickly would tax refunds be processed, if at all, and how long would people have to wait to receive them.

But because of a few loopholes in the policy about government offices operating during a shutdown, the IRS has been able to stay the course, with some minor delays, in processing returns.

Prior Shutdowns and the Antideficiency Act

If a government shutdown occurs, some government areas still remain in operation. One of those areas is, of course, the IRS. In the past, the only contingency was while returns would be processed, refunds might be delayed until the government was again funded.

Your local Tax Accountant, however, is probably going to continue doing the work of helping people prepare their returns as most tax filers like to complete them as soon as the tax season starts.

Last year, 18.3 million people claimed around $12.6 billion in early refunds. This year, the IRS stated that tax filing season would begin on January 28th, despite the Antideficiency Act that states what type of work can be done during a government shutdown.

IRS Employees Still Worked

In spite of the shutdown, the Trump Administration vowed that the processing of returns and refunds would not be interrupted. This meant the IRS had to keep-on around 46,000 employees (57% of its workforce).

But those employees did their work without pay with the promise of back-pay as soon as the government was funded and operational again.

In the interim, the IRS assigned staffing to functions it deemed a necessity, such as processing electronic returns, processing returns with payments, mailing tax forms, appeals, criminal law enforcement and investigations, and technical work to maintain computer systems. Other job functions like audits, returns, non-automated collections, and legal counsel, etc., were all temporarily stopped.

The IRS Tried to Serve Taxpayers

Despite the fact it only had half its workforce in place during the shutdown, the IRS still tried to help taxpayers with any concerns they might have. 38% of calls to its Automated Collection System were answered with callers waiting close to 50 minutes. As far as the IRS’s Installment Agreement/ Balance Due line, only seven percent of calls were answered with an over 80 minute wait time.

The IRS also had five million pieces of mail that needed to be processed. And it had over 80,000 responses to the fiscal year 2018’s Earned Income Tax Credit audits that went unanswered. Add to that the 87,000 amended returns that no one addressed.

The IRS’s Old Computer System

Although it is probably one of the most important areas of the government, the IRS is highly underfunded, and this point goes beyond normal funding the agency receives when the government is fully operational. One of the areas where it is behind the times is in its computer systems, which haven’t been updated since the 1960s.
Currently, taxpayer information is stored in 60 different case management systems that aren’t linked together and the agency lacks a central database. The problem is IRS employees are unsure if they are servicing the right taxpayer accounts or not. These antiquated systems also make the audit process highly imprecise and ineffective.

Tax Reform Questions Unanswered

In 2014, the IRS instituted a policy of answering tax law related questions in a specific fashion and only during the tax season months of January through April. But the Trump Administration’s tax reform changed that policy, especially in regard to questions about the Tax Cuts and Job Acts reform.

But callers were told those questions couldn’t be answered due to budget restrictions and instead were directed to an automated answering system where they were promptly disconnected. Those taxpayers who actually got a live person were told that IRS employees had not been trained on the reforms and apologized for not being able to answer their questions.

Tax Returns and Refunds Were Still Processed

With all the problems the IRS faces with old computer systems and insufficient training on new tax laws in addition to being short of staff during the shutdown, the agency was still able to process returns and refunds, although not at the same level as the prior year. In the first week of the tax season, the IRS was still able to process 13, 306, 000 returns with 4,672,000 refunds paid out. The average refund, however, went down from the prior year from $2,035 to $1,865.00.

Conclusion

The government shutdown finally did end, although President Trump threatened another one might follow. Thankfully, that didn’t happen. All IRS employees are most likely back at work, but the fact remains they are plagued with old systems and not enough training about tax reforms to answer taxpayer questions.

Have you done your 2018 taxes yet? Are you worried the tax reforms of last year might make doing your tax return difficult and negatively impact your refund? It’s not too late to contact your Cedar City Accountant to help you through your federal as well as with your Cedar City taxes.

Tax Code Updates: Will St George Business’ See Tax Cuts In The Near Future?

The Tax Cuts and Jobs Act, sometimes called the Trump Tax Reform, passed several tax reforms that will impact businesses in St. George. To see how the tax reform will affect our local businesses, our accountant has brought together a basic overview so you can clearly see the changes.

Tax Changes For Pass-Through Businesses In St George

The majority of American businesses qualify as pass-through businesses. Because of this, the tax changes which affect pass-through businesses have been some of the most heavily scrutinized. On the surface, the changes seem fairly straightforward. A 20% tax deduction is now applied to all pass-through business entities. But there are several different business aspects which may affect that 20% tax deduction.

  • Service-based business – If your business relies on you providing a service such as medical, accounting, consulting, or other services (except architect and engineering services) your business will only receive the 20% deduction if you make less than $157,500 a year as a single taxpayer. Married couples who own service-based businesses will receive the 20% deduction if they make less than $315,000.
  • Qualified business income – The base of a qualified business income is the net income your business generates. Under the new tax reform, say your income is $60,000 and qualified business income is $50,000. With the 20% tax deduction, you can deduct $10,000 from your taxable income. As all this is below the deduction threshold, you will not need to make any more adjustments to your qualified business income.

This formula is also affected by qualified properties, W-2 employee wages, business equipment purchases and more. Our accountant is well versed in business accounting and can help you understand how these changes will affect your particular business.

Be Aware Of These Corporate Tax Changes

One of the more dramatic changes in the tax laws was the change of corporate tax rate from 35% to 21%. Lawmakers said this was to attract corporations bring work to the United States. Another large change was the elimination of the corporate alternative minimum tax.

As more financial analysts dig into the new tax laws, more changes become apparent. Some things such as business entertainment expenses and employee benefits, which have been previously 100% deductible have changed. These changes apply to both pass-through business and corporations. There are many other such changes which may or may not apply to your specific business venture.

To receive advice on the new Tax Cuts and Jobs Act, set up an appointment with our accountant. He can help you determine your eligible tax deductions and help you decide how to best utilize your business so you will receive the biggest benefits from the new tax laws.

Tax News: Trump’s New Tax Reform

Tax Changes Via The Trump Admin

Many people are concerned how the new tax reform will affect their taxes. Yet, for the uninitiated, reading through legal documents to understand the new tax laws can be difficult. To help you better understand, AA Tax and Accounting Services has sorted through the tax reform and compiled it in a way to make it more understandable.

Tax Changes For Individual Filers

The majority of the tax changes were directed at individual filers, though they will only last until 2025. The first major change was the individual filers rates as shown below.

Income Bracket

Single Filers

Married, Filing Jointly

10% (remained the same)

$0 – $9,525

$0 – $19,050

12% (down from 15%)

$9,526 – $38,700

$19,051 – $77,400

22% (down from 25%)

$38,701 – $82,500

$77,401 – $165,000

24% (down from 28%)

$82,501 – $157,500

$165,001 – $315,000

32% (down from 33%)

$157,501 – $200,000

$315,001 – $400,000

35% (remained the same)

$200,001 – $500,000

$400,001 – $600,000

37% (down from 39.6%)

$500,001 or more

$600,001 or more

You should also be aware of many other important tax law changes:

  • Personal exemption – There is no more personal exemption for single filers or married joint filers.
  • Standard deduction – The standard deduction has almost doubled, going from $6,350 to the now $12,000 for single filers. Married couples who file jointly have had their standard deduction go from $12,700 to the present $24,000.
  • Child tax credit – Credit now gives filers $2,000 per child under 17 years old.
  • Non-child dependent credit – Parent can temporarily take a $500 credit for each and every non-child dependent they are financially supporting.
  • Cap on local and state tax deduction – The new deduction cap is now $10,000. The deduction will remain the same if you want to itemize.
  • Estate tax – Almost all estates are now exempted from the estate tax. Those who will still have to pay are those who inherit $5.49 million for individuals and $10.98 million for couples.
  • Alternative minimum tax – The income exemption rates for the alternative minimum tax has been raised and now single filers can exempt $70,300 and married filers can exempt $109,400.
  • Health insurance penalty – There is now no penalty for not having health insurance.
  • Mortgage interest deduction – With a new mortgage on your first or second home, you can only deduct the interest up to $750,000.
  • Inflation adjustments – Inflation will be measured more slowly, which will make your deductions worth somewhat less.

Tax Changes For Businesses And Corporations

The new tax reform has also changed things when it comes to business and corporate taxes. Below is a short overview of what has been changed.

  • Corporate tax rate – The corporate rate has gone from multiple income brackets to just one. All corporations will be taxed 21% of their taxable corporate income.
  • Pass-through business tax lowered – Will now require owners, partners, shareholders of LLCs, S-corporations, and partnerships to pay taxes on 20% of their income.
  • Pass-through business tax break – If the partner or owner of a business also draws a salary from their business, that income will be subject to task.
  • U.S. multinational taxes – U.S. companies who earn overseas will now be required to pay taxes on their taxable corporate income whether they bring the profits home or not. The tax reform requires corporate businesses pay 15.5% on their cash assets and 8% on their non-cash assets.

These changes can be complicated. If you want to be sure you have everything in order when it comes to your taxes, feel free to contact us today and set an appointment. Our accountant can walk you through the tax changes which apply to you so that you can feel comfortable when filing your taxes.

Tax Planning And Preparation Can Save You In The Long Run

Tax_Planning_and_Preparation_Can_Save_You_in_the_Long_Run

With today’s ever-changing economic climate, it’s imperative to have an expert in tax planning and preparation on your side. As everyone knows, tax laws are already complicated. But to make things worse, they still undergo frequent changes that could affect the way you do business, pay taxes, and file your year-end returns.

Many individuals and business owners believe they are well-equipped to handle their own tax planning and preparation. While some of them have the education and experience to handle it, the changing nature of tax codes makes it difficult to stay on top of it all.

That’s why professional and tax planning services are so helpful. Accounting firms and CPAs make it their full-time job to stay on top of the tax code and keep you out of trouble. They understand the laws and loopholes, and can take away the headache – and inherent risk – involved in doing your own taxes. A professional tax preparer can help you:

  • Relax — Doing their taxes is one of those things everyone dreads. At its best, it’s a tedious process – especially for businesses. At its worst, it can lead to audits, deficits, and legal nightmares. When you let the professionals handle your taxes, you know they’re done right. And that’s peace of mind.
  • Prepare — A professional accounting firm can keep your tax liability in mind as you do business throughout the year, so you don’t face unnecessary and unpleasant surprises on April 15th.
  • Save money — A lot of people and businesses hesitate to hire an accountant due to the expense. The truth is, it may cost less than you think to hire a qualified professional. If you’re receiving a return, many people will actually pay nothing “out of pocket” for the service. And most importantly, a certified tax preparer knows how to reduce your tax liability so you never pay more than you have to.
  • Save time — April 15th does’t have to loom large over your psyche like a clown with a chainsaw. People who hire a tax professional simply don’t have to worry. Just provide the necessary information and let them take care of the rest. No perusing tax manuals, searching for answers online, or waiting in line at the post office.

Filling your tax returns doesn’t have to cause indigestion. Hiring a professional accountant can not only take the worry off your shoulders, but could end up saving you fines, audits, and legal ramifications over the long run. It’s an investment that always pays off.

 

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