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Tax Tips

December 18, 2016 By jddesign

Choosing a Tax Professional:

Taxpayers who pay someone to do their taxes should choose a preparer wisely. If you choose to use a paid tax preparer, it is important that you find a qualified tax professional. Taxpayers are ultimately responsible for everything on their return even when it’s prepared by someone else.

The most reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions, and other items. By doing so, they have your best interest in mind and are trying to help you avoid penalties, interest, or additional taxes that could result from later IRS contacts.

A tax return preparer is trusted with your most personal information. They know about your marriage, your income, your children and your social security numbers – the details of your financial life.

Most tax return preparers provide outstanding service. However, each year, some taxpayers are hurt financially because they choose the wrong tax return preparer.

Anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN) and they sign and enter it on all returns they prepare.  However, tax return preparers have differing levels of skills, education and expertise.

Choose wisely when selecting a paid tax return preparer. For assistance see:

NATP.  NATP is the largest nonprofit organization, with members in all 50 states, focusing specifically on federal tax preparation. NATP members adhere to a superior standard of professional conduct and bring excellence to the more than 12 million taxpayers they assist worldwide.

Common Tax Schemes

December 18, 2016 By jddesign

Consumer Alerts
Please note that 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.

Due to the increase in fraud and identity theft, the IRS is increasing their fraud filters during the processing of all individual returns. This means that a larger number of returns will be reviewed therefore, processing will take longer and the refund will be sent out later for these returns.

The IRS messaging for refunds for the upcoming filing season will be that refunds will be sent to the taxpayer within 21 days from the time the return has been accepted. This message will be the same on the IRS website, “Where’s My Refund?” page, and when a taxpayer calls the IRS help desk.

The IRS urges people to avoid these common schemes:

Misuse of Trusts
Promoters of abusive tax transactions are increasingly urging taxpayers to transfer assets into trusts. The promoters promise a variety of benefits, such as the reduction of income subject to tax, deductions for personal expenses paid by the trust and reduction of gift or estate taxes. Taxpayers should be aware that abusive trust arrangements will not produce the tax benefits advertised by their promoters and that the IRS is actively examining these types of trust arrangements. More than a dozen injunctions have been obtained against promoters, and numerous promoters and their clients have been criminally prosecuted. Before entering any trust arrangements, taxpayers should seek the advice of a trusted tax professional.

“Claim of Right” Doctrine
In this emerging scheme, people file returns and attempt to take a deduction equal to the entire amount of their wages. The promoters advise them to label the deduction as “a necessary expense for the production of income” or “compensation for personal services actually rendered”. The deduction is based on a complete misinterpretation of the Internal Revenue Code and has no basis in law.

Corporation Sole
The idea is that the arrangement entitles the individual to exemption from federal income taxes as a nonprofit, religious organization as described in tax laws. When used as intended, Corporation Sole statutes enable religious leaders — typically bishops or parsons — to become incorporated as individuals as a way of separating themselves legally from the control and ownership of church assets. But the rules have been twisted at seminars where promoters charge fees of up to $1,000 or more per person. Would-be participants are mistakenly told that Corporation Sole laws provide a “legal” way to escape paying federal income taxes, child support and other personal debts.

Offshore Transactions
Some people use offshore transactions to avoid paying United States taxes. Use of an offshore bank account, brokerage account, credit card, wire transfer, trust, offshore employee leasing or other arrangement to hide or underreport income or to claim false deductions on a federal tax return is illegal. A taxpayer involved in these schemes could be subject to payment of taxes, interest, penalties and potential criminal prosecution. This was the top scam in the 2003 “Dirty Dozen.” A special program last year has yielded more than $170 million in taxes, interest and penalties, and the IRS and the states continue to aggressively pursue taxpayers and promoters in this area.

Employment Tax Evasion
The IRS has seen a number of illegal schemes that instruct employers not to withhold federal income tax or other employment taxes from wages paid to their employees. These schemes are based on an incorrect interpretation of “Section 861” and other parts of the tax law and have been refuted in court. Recent court cases have resulted in criminal convictions of promoters. Employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest. Employees who have no withholdings are still responsible for payment of their personal taxes.

Return Preparer Fraud
Unscrupulous return preparers can cause a lot of problems for taxpayers who use their services. Abusive return preparers derive financial gain by diverting a portion of the taxpayer’s refund for their own benefit, charging inflated fees for the return preparation services, and increasing their clientele by advertising guaranteed larger refunds. Taxpayers should choose carefully when hiring a tax preparer — no matter who prepares the return, the taxpayer is ultimately responsible for all of the information on that return.

Americans with Disabilities Act
Another scheme seen for several years involves the purchase of equipment and services that the promoter alleges meets the strict criteria of the Disabled Access Credit, which was created with the passage of the “Americans with Disabilities Act”. A minimal payment is made and a non-recourse note signed. The investor then provides insignificant services to complete the purchase agreement. This scheme is based on an incorrect interpretation of law and an over-inflated value of the services rendered.

African-Americans Get a Special Tax Refund
Thousands of African‑Americans have been misled by people offering to file for tax credits or refunds related to reparations for slavery. There is no such provision in the tax law. Some unscrupulous promoters have encouraged clients to pay them to prepare a claim for this refund. But the claims are a waste of money. Promoters of reparations tax schemes have been convicted and imprisoned. And taxpayers could face a $500 penalty for filing such claims if they do not withdraw the claim. Related scams include claiming an illegal tax credit by misusing Form 2439, “Notice to Shareholder of Undistributed Long-Term Capital Gains.” The slavery reparations scam was at the top of the 2002 “Dirty Dozen,” and, although claims have fallen considerably, the IRS continues to see activity in this area.

Improper Home-Based Business
This scheme purports to offer tax “relief” but in reality is illegal tax avoidance. The promoters of this scheme claim that individual taxpayers can deduct most, or all, of their personal expenses as business expenses by setting up a bogus home-based business. But the tax code firmly establishes that a clear business purpose and profit motive must exist in order to generate and claim allowable business expenses. This scam has been around for years, but the IRS continues to see activity in this area.

Frivolous Arguments
Frivolous arguments are false arguments that are unsupported by law. When a scheme promoter says “I don’t pay taxes – why should you” or urges you to “untax yourself for $49.95,” beware. The ads may claim that the promoter knows the “secret” for never paying taxes again, but that’s just plain wrong. The U.S. courts have continuously rejected this and other frivolous arguments. Unfortunately, people across the country have paid for the “secret” of not paying taxes or have bought “untax packages.” Then they find out that following the advice contained in them can result in civil and/or criminal penalties. Numerous sellers of the bogus schemes have been convicted on criminal tax charges. More than a dozen injunctions have been issued.

Identity Theft
Identity thieves use someone’s personal data to steal his or her financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name and even file fraudulent tax returns. The IRS is aware of several identity theft scams involving taxes or the IRS. In one example, fraudsters sent bank customers fictitious bank correspondence and IRS forms in an attempt to trick them into disclosing their personal and banking data. In another, abusive tax preparers have used clients’ Social Security numbers and other information to file false tax returns without the clients’ knowledge. For taxpayers, it pays to be choosy about disclosing personal and financial information. And the IRS encourages taxpayers to carefully select a reputable tax professional.

Share/Borrow EITC Dependents
Unscrupulous tax preparers “share” one client’s qualifying children with another client in order to allow both clients to claim the Earned Income Tax Credit. For example, one client may have four children but only needs to list two to get the maximum EITC. The preparer will list two children on the first client’s return and the other two on another client’s tax return. The preparer and the client “selling” the dependents split a fee. The IRS prosecutes the preparers of such fraudulent claims, and participating taxpayers could be subject to civil penalties.

Source: irs.gov

Proceeding With A Purpose Scholarship

December 18, 2016 By jddesign

Scholarship Opportunity sponsored by Tax Bracket. There are three available scholarships that value $500.00 each.

PURPOSE
You were created with a purpose! As you continue to explore the world, you will discover all the potential and possibilities that surround you. Every new discovery will strengthen you to take another step forward. As you proceed, proceed with a purpose! Through the “Proceeding with a Purpose Scholarship Fund”, Tax Bracket is committed to recognizing your achievements, encouraging your academic excellence, as well as providing financial assistance to you. Your purpose awaits you!

  • Applicant must be a Tax Bracket client or the child/ grandchild of a Tax Bracket client.
  • Applicant must be accepted as a full time student at a college, university, or trade school program for the upcoming academic/fall semester. ***Proof of Enrollment must be submitted***
  • Applicant must have a GPA of 2.5 higher.
  • Applicant must submit a completed application form by April 1st.

***Tax Bracket will examine each application for completion. There are three available scholarships that value $500.00 each. The scholarship recipients will be chosen based on accurate completion of the scholarship application and performance in several categories: academics, essay quality, work experience, honors received, volunteer and extracurricular activities.***

Download application here >

Please mail OR submit application in person to:

Tax Bracket
Attn: Scholarship Program
5751 Nanjack Circle
Memphis, TN 38115

Client Appreciation Days

December 18, 2016 By jddesign

Client Appreciation Days are just what they sound like.  We don’t have customers, we have clients.  We appreciate each and everyone that chooses to allow us to prepare such important and confidential work.

As a token of that appreciation, these days are always about the clients.  Nothing but free food and fun.  It cost you nothing except your attendance.  Client days are always open to family and potential clients.  Just RSVP upon invitation and enjoy.

Please click on the subtitles, of 2010 and 2011 to see a few pictures of the fun we have.

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