Skip to main content Skip to search

Archives for IRS Information

Tips for the Newly Married

Being united in wedded bliss brings a myriad of changes and that extends to your federal income tax return. If you were married by Dec. 31 of the current year, the IRS considers you married for the entire year. The following are some things you need to know, do and be aware of before filing your taxes.

Name Change and Address

You need to ensure that your Social Security card reflects your name change or your return could be rejected and a name change can take weeks to process. Don’t forget to report any change of address to your employer to ensure your address is correct on your W-2 and it arrives in a timely manner. You’ll also need to change your address with the Postal Service.

Standard Deduction

As a married couple, you’re eligible to file jointly and take the standard deduction instead of itemizing. You can choose not to file jointly, but the deduction will be less.

Saving for Retirement

If you or your spouse works while the other stays at home to care for children, and you file a joint return, the working spouse can contribute to the other’s IRA up to a specified amount.

Selling a Home

You may be able to retain more of your profit if you sell a home. Part of the amount may be tax free. To qualify, it must have been your primary residence for 2 of the last 5 years, but the years don’t have to be consecutive.

A Word of Warning

If your spouse has questionable ethics and you can’t trust them to be honest, don’t file a joint return. Filing a joint return makes you equally responsible for any lies, omissions or misrepresentations. Other reasons to file separately is if your spouse has defaulted on a student loan, is in arrears on child support, or owes back taxes. Filing jointly means the IRS can take any refund to which you’re entitled.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

Read more

Run Your Business More Efficiently by Outsourcing

As a business owner, you’re always looking for strategies to maximize your profitability. Many enterprises are reaping the benefits of outsourcing to accomplish financial goals. Even the smallest of companies can take advantage of outsourcing. The practice has been prevalent since the late 1980s and has given rise to an increasingly large gig economy.

What is Outsourcing

It’s a popular practice that many businesses utilize to save money. Business owners hire a third-party individual or firm outside the company structure to perform services, complete tasks, or provide products that would ordinarily be done in-house by regular employees. Outsourcing services are most often delegated to resources in other countries where labor costs are cheaper.

How it Can Save You Money

Unlike an on-site employee, there are no employee-based insurance costs or benefit packages the business must provide. Outsourcing enables businesses to provide high-quality services at a fraction of the cost. The practice enables business owners to focus on the core aspects of their enterprise, while delegating other tasks that they may not be able to provide as well as another.

Outsourcing can help businesses expand their range of services. It’s also helpful for providing enterprises with access to high-tech resources, eliminating the need to purchase expensive and specialized software or equipment.

Many Ways to Save

One of the most well-known examples of outsourcing is customer service call centers. Payroll and accounting are often outsourced instead of performed on-site. Products ranging from ties and hats to T-shirts are often outsourced. Other examples include:

  • Marketing and advertising
  • Information technology
  • Legal services
  • HR department duties
  • Cleaning services

A great many services are regularly outsourced by companies without realizing what it’s called.

Solutions for Any Business

No matter what industry a business operates within, there are opportunities for outsourcing. Contracting with a third-party can help a business operate more effectively and cost efficiently.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

Read more

The Tax Man Commeth – Are You Ready

Tax time is right around the corner and if you haven’t already filed your taxes, now is the time
to get your paperwork in order and get the deed done. No one enjoys filing their taxes, but
waiting until the last minute opens the door to mistakes and the potential for missed deadlines.
You’re going to need a variety of documents, depending on your filing status. The following are
just some of the most common forms that may apply.

W-2s
These detail all the income you had from employers throughout the year, whether you were
employed full- or part-time.

Form 1099
If you worked in the gig economy or had side hustles, the IRS considers that as being self-
employed. That makes you subject to a higher rate of taxation. Due to third-party payment
platforms, it can be difficult to differentiate self-employed income from gifts or repayments.
Form 1099 tells the IRS how much you made via self-employment. Be sure to keep accurate
records of expenses associated with self-employment or a small business.

Form 1098
This is provided by your mortgage company if you’re a homeowner. It will tell how much
mortgage interest was paid.

Form 1099-DIV
The form is for any income or dividends received from investment distributions. That includes
stocks and bonds, along with investment or rental properties.

Form 1098-E
Report student loan interest from this form. Depending on your income, it could potentially
qualify you for a deduction of up to $2,500.

Form 5498
Contributions throughout the year to your individual retirement account are reported on this
form. The amount may be tax deductible.

Form 1095-A
It’s a statement from the Health Insurance Marketplace. You can receive a tax credit for
premiums paid, offset by healthcare costs.

Letter 6419
Anyone who received advanced child tax credits will receive a letter outlining the amount they
received.

 

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!

Contact Us Today

Read more
tax deductions

First Steps to Take When Audited by the IRS

The IRS is one of the few governmental agencies that has the ability to make people freeze in terror – and for good reason. The IRS has the authority to garnish wages, levy fines, take money from your bank accounts, and confiscate your car, home and other personal property. When the IRS notifies you of an audit, there are specific steps to take.

Don’t Panic

Difficult as it may be, you need to remain calm if you’re to discover the extent and reason for the audit. It may be the result of an innocent mistake and easily rectified. The IRS notification will explain why you’re being audited.

It may not even be the result of an actual error. The IRS uses computer technology that screens and selects returns to be audited. They’re often chosen based on a statistical formula against what the IRS considers the “norm.”

People with incomes of 25,000 or less and those making $500,000 or more are the most likely to be audited. If the company you work for is audited, you might be, too.

The Process

Most IRS audits are conducted via mail and there’s no need to sit face-to-face with an auditor. However, if you receive a notice that you’re being audited, providing a timely response is critical. You should know that the IRS has up to three years in which it can start and conclude the audit process from one of your tax returns.

Hire a Professional

It’s an excellent idea to hire a tax professional that’s legally able to represent you in an audit. Collect all the documentation that you used to complete your return in the year for which you’re being audited. The more information you can provide to the tax professional, the better he/she can advocate for your interests.

Findings

You should know that if the auditor finds you at fault, you have the right to appeal within 30 days. The IRS will send a letter indicating the audit is closed, at which time you can appeal. Unfortunately, many people only see the decision rendered in the letter, not their ability to dispute the findings. You must appeal within 30 days of receiving the letter.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more
reduce taxable incom

Top Five IRS Audit Triggers

An IRS audit is one of the most dreaded events on the planet. It fills the heart with dread knowing the potential penalties for even an innocent misreporting or mistake. Each tax return is rated by a computer scoring system called the Discriminant Function System (DIF) System. It rates each return on the potential for change, compared with similar returns.

Income

Failure to report all income from W-2s and 1099s will trigger an audit. Employers must supply workers with a W-2 and they’re also required to provide a copy to the IRS. The same is true for independent contractors that receive a 1099. The IRS knows from employer records that an individual has received the income and failure to report it will result in an audit.

Earned Income Tax Credit

A surprising number of low-income earners are audited each year that claim the Earned Income Tax Credit (EITC). The program has a long history of fraud since taxpayers can receive money back when they claim it. The EITC is designed to help qualifying low- and moderate-income families reduce their tax liability and, in some instances, increase their refund.

Self-Employed

Independent contractors, sole proprietors, and those engaged in the gig economy are a collective group that are highly scrutinized and even the smallest anomaly will trigger the DIF System. It especially looks at income compared to business expenses that are claimed. Individuals are entitled by law to claim allowable work-related expenses, but should be sure they’re actually work related.

Hobby vs Business

The IRS has very clear rules about what qualifies as a hobby and what’s considered a legitimate business. Claiming a hobby as a business allows individuals to claim business expenses, but it doesn’t quality as a business according to the IRS if a net profit hasn’t been reported in the prior 5 years.

High Income

The more money an individual makes, the more loopholes there are in which to hide assets and income. Those with incomes of $1 million are more likely to be audited than other income brackets. If a business suddenly starts posting a significant amount of income or losses, the owners can expect to be audited.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more
accoutant

Why E-Filing is the Best Way to Get Your Refund

When you’re entitled to a refund at tax time, it’s understandable that you want to receive it as quickly as possible. E-filing your tax return is efficient, reduces errors, and it’s the quickest way to get your refund.

Speedy Refunds

By e-filing your tax returns, you can typically expect your refund within 3 weeks or less and choosing direct deposit further facilitates the process.

Quick Confirmation

When you e-file your returns, you’ll receive a text within 24-48 hours that your state and/or federal return has been accepted. Conversely, if for some reason an error has occurred, you’ll have the opportunity to go back and fix the problem before resubmitting via e-file.

Fewer Mistakes

According to the IRS, there’s only a 1 percent error rate on returns that are filed electronically, compared to a 20 percent error rate with paper returns. There are numerous online options for completing tax returns that will walk individuals through every step of the filing process and check for mistakes that can be rectified before sending the return.

Direct Deposit

Choosing the direct deposit option ensures your refund is deposited directly into your bank account. You won’t have to worry about having a refund check lost or stolen from your mailbox. It’s a common problem around tax time and once a paper check is gone, there’s no way to retrieve it. If you use one of the many cash apps available, you can also have your refund deposited into your cash app account.

Money and Deadlines

Depending on the taxpayer, some individuals can complete and e-file their taxes for free. Shop around to find the best option. Many companies advertise low-cost tax preparation and e-filing, but individuals only find out upon completion that they owe nearly as much as if they’d taken their taxes to a tax professional.

If you’re among the millions of people that procrastinate on their taxes, e-filing is an excellent way to ensure you beat filing deadlines and avoid penalties. You’ll still be able to receive your tax refund in 3 weeks or less.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more

How to Track Down Your Missing Stimulus Check

There are still millions of people that haven’t received one or more stimulus checks issued by the government during the COVID-19 pandemic. If you’re one of the people that are waiting, you can still receive the first, second or third stimulus checks you’re missing. The stimulus was delivered via direct deposit, by check in the mail, and by prepaid debit card that were also delivered by the U.S. Postal Service.

According to the IRS, first and second stimulus payments can only be clamed on a 2020 tax return. If you’re missing the third payment, it can only be claimed on a 2021 tax return. Individuals will need to know the amount of the missing stimulus payment they’re claiming. You can find that amount by logging into your secure IRS account online. It will provide you with the amounts of all three Economic Impact Payments made to you.

You can’t claim missing first or second stimulus payments on your 2021 tax return. If you haven’t filed an income tax return for 2020, you’ll need to file one now. If you did file a return and didn’t claim the Recovery Rebate Credit, you’ll need to file an amended return.

If you filed a 2020 tax return and it hasn’t been processed yet, don’t file a second return. The IRS is still behind on processing millions of tax returns from 2020 due to errors and lack of personnel. The IRS is also expecting significant delays in processing 2021 tax returns.

People that didn’t receive their third round of Economic Impact Payments can claim it on their 2021 tax return. You must file a federal tax return to claim the funds, even if you don’t normally file or aren’t required to file. Any funds to which you were entitled will be used to reduce the amount of taxes you owe or issued as a refund.

Using online tax preparation software and filing online will help reduce errors that can delay the return and the software will also help you determine your 2021 Recovery Rebate Credit. Depending on your individual circumstances, the stimulus payment will be used to reduce the amount of taxes owed or will be issued as a refund. You can have refunds deposited to a bank account, prepaid debit card or alternative financial product. You’ll need to provide your account and routing numbers.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more
tax brackets

Your Appeal Rights When Fighting The IRS

Are you in the middle of a disagreement with the IRS? One of the guaranteed rights for all taxpayers is the right to appeal. If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case. 

During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal. The IRS appeals system is for people who do not agree with the results of an examination of their tax returns or other adjustments to their tax liability. In addition to examinations, you can appeal many other things, including: 

  1. Collection actions such as liens, levies, seizures, installment agreement terminations and rejected offers-in-compromise,
  2. Penalties and interest, and 
  3. Employment tax adjustments and the trust fund recovery penalty.

Internal IRS Appeal conferences are informal meetings. The local Appeals Office, which is independent of the IRS office, can sometimes resolve an appeal by telephone or through correspondence. 

The IRS also offers an option called Fast Track Mediation, during which an appeals or settlement officer attempts to help you and the IRS reach a mutually satisfactory solution. Most cases not docketed in court qualify for Fast Track Mediation. You may request Fast Track Mediation at the conclusion of an audit or collection determination, but prior to your request for a normal appeals hearing. Fast Track Mediation is meant to promote the early resolution of a dispute. It doesn’t eliminate or replace existing dispute resolution options, including your opportunity to request a conference with a manager or a hearing before Appeals. You may withdraw from the mediation process at any time.

When attending an informal meeting or pursuing mediation, you may represent yourself or you can be represented by an attorney, certified public accountant or individual enrolled to practice before the IRS. 

If you and the IRS appeals officer cannot reach an agreement, or if you prefer not to appeal within the IRS, in most cases you may take your disagreement to federal court. Usually, it is worth having a go at mediation before committing to an expensive and time-consuming court process.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more

Keeping your Business up to Date with Tax Laws

Tax laws change quickly and often with very little warning. It can seem like an impossibility to keep track of all the changes and utilize them to your business advantage. You have three choices when preparing your taxes – do them yourself, use tax preparation software, or have a professional do them.

No matter which option you choose, changes in tax laws will ultimately affect your business in some way. It’s much better to engage the services of a professional accountant than be surprised at tax time. It’s an accountant’s business to know about changes, inform clients, and help them develop a strategy to minimize tax liability.

Your business will need to remain legally compliant with all state laws – which will depend on where you live – along with federal tax laws. There will be different requirements, depending upon your business structure and you’ll need to ensure all certificates, licenses, and permits are current.

As a small business owner, you’ll be subject to a variety of different taxes unless you’re in a partnership – in which case you’ll be required to file an information return. You’ll be required to pay self-employment taxes and employment taxes on employees. Sole proprietors, S corporation shareholders, and partners will pay estimated taxes and you’ll need to have withheld a sufficient amount to meet tax liabilities.

There are also excise taxes, which can often seem very vague but cut across multiple industries. You’ll be liable for these if you operate certain types of businesses, sell specific products, offer certain types of services, or use specific types of equipment, facilities or products. Some classic examples are alcohol, fuel and tobacco, but the list is extensive.

Of special interest for business owners are changes for net operating losses, first-year depreciation, pass-throughs that include sole proprietorships, S corporations, and LLCs, and those that have significant operations overseas. Many individuals outsource their marketing and other functions when applicable through the gig economy and accounting for that can be a headache for you and the person that provided the services.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more
accounting

Tax Penalties you Need to Avoid

It doesn’t matter whether it’s time to pay your personal taxes or your business taxes, it’s easy to run afoul of the IRS. There are some common types of tax penalties that you may incur if you don’t stay focused. The following are the most common tax penalties you need to avoid.

Bad Checks

If you write a check to pay your taxes and the funds aren’t available when the IRS tries to withdraw the money, you can be penalized a set amount or the full amount of the check you wrote.

Charitable Contributions

Anyone caught operating for-profit activities while claiming the endeavor as a charitable organization will face considerable penalties. Non-profits that are caught operating for-profit activities can lose their tax exempt status.

Failure to File

There are some taxpayers that aren’t required to file a return, but if you do have to file, you need to do so by a specific date or file for an extension. An extension gives you six more months to file, but won’t absolve you from the need to pay any taxes owed by the usual deadline.

Failure to Pay

When you owe taxes to the IRS, you have 21 days to pay the entire amount. If you don’t, the IRS will charge you ½ of 1 percent per month on the amount you owe.

Fraud

Fraud occurs when you don’t report all your income or inflate the number of deductions you have to lower your taxes. The IRS can penalize you by 75 percent of what you actually owe and/or have you jailed. The IRS receives a copy of your earnings every year, just as you do.

Late Payments

If you fail to pay a balance owed the IRS by the filing deadline, there will be financial penalties that will be added to what you already owe. Those penalties accrue compound interest each month that they go unpaid.

Social Security Number

You have to provide a Social Security number for yourself, spouse, and anyone you claim as a dependent. You must disclose those numbers or face penalties for each instance of non-compliance.

Underpayment

For individuals that estimate their tax burden, you’ll incur a fine if you fail to pay the entire amount. There is also a fine for underestimating what you owe. The fine will be added to the amount you owe the next time you’re required to file.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

Read more