TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com

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TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
TAX GUIDE                                   JANUARY 2020 |           1

       YOUR GUIDE TO 2020
       TAX SEASON

       Money saving activities
       Calls from the IRS are often a scam
       New W-4 forms
                                                        FREEPIK.COM
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
2   | JANUARY 2020                                                                                                                                                                    TAX GUIDE

 STRUGGLING
     WITH BACK TAXES?
                 Here are the best
                 tax relief services

                                                  Considerations when

‌I
STEPH COELHO                                                                                      ing the following to help you solve your tax   sociated back tax penalties.
BestReviews ‌                                                                                     debt issue:                                       „„ Lower the amount of back taxes
                                                  choosing tax relief services
        f you’re the type of person who                                                             „„ Help structure a reasonable pay-          owed: Certain situations may call for a
        cringes at the mention of tax sea-          What does a tax relief service do?            ment plan: Tax relief services work in         reduction in money owed to the IRS. In-
        son, you’re not alone. There are            Regardless of the reason you have in-         tandem with the IRS to lay out a payment       dividuals who can prove their inability to
        many people just like you who are         curred tax debt, it’s vital that you deal       plan that works within the limitations of      pay back any amount in back taxes may be
        struggling to pay back taxes to the       with the issue head-on to prevent further       a client’s income and available resources.     eligible for an Offer in Compromise, which
        IRS. Enlisting a tax relief service can   problems. A tax relief service will help you    Penalties and interest, however, will con-     drastically limits or reduces any amount
help you face the problem with help from          avoid severe repercussions, including:          tinue to apply.                                owed.
professionals and prevent further debt and          „„ Penalties and interest incurred as a         „„ Remove the threat of liens and
fines.                                            result of not paying taxes, which may lead      levies: With a structured payment plan         Features
   Tax services all have the same aim — to        to further tax debt;                            in place, the IRS is more likely to release      Tax experts: A reputable tax relief ser-
negotiate with the IRS and help you settle          „„ wage garnishment;                          you from the risk of property seizure.         vice has a knowledgeable and experienced
your tax debt — but they vary in their fees,        „„ property liens that are only lifted once     „„ Eliminate the threat of wage gar-         staff consisting of licensed enrolled agents
specialties, and professional staff.              payments are made;                              nishment: Once an established payment          (EAs), tax attorneys and certified public
   To learn more about tax relief services,         „„ property seizure as a result of unpaid     plan is in place, wage garnishment may         accountants (CPAs). Always verify the cre-
continue reading our buying guide. Our            taxes.                                          cease.                                         dentials of a tax relief service’s staff before
favorite service, Anthem Tax Services, is                                                           „„ Reduce penalties: Depending on an         signing a contract.
a trusted name in the industry and is a fa-       Services provided                               individual’s situation, a tax relief service     Accessibility: Opt for a tax relief
vorite among customers.                             A tax relief service is capable of provid-    can help to limit or altogether remove as-     service that’s available 24/7 so there’s
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
TAX GUIDE                                                                                                                                                               JANUARY 2020 |   3

always someone ready to answer your            will cost.
questions and address your concerns.              Price: The overall cost of a tax relief
Be aware, however, that handling a tax         service depends entirely on the sever-
debt situation may take time. Patience         ity of your particular tax debt situation.
is required, especially for complex            The larger the amount owed, the more
cases.                                         you’ll pay to have the issue handled by
  Fees: Tax relief services may vary in        informed and experienced individuals.
their fees for negotiating your tax situ-      The average tax relief service costs be-
ation. In many cases, the fees may be as       tween $1,500 and $5,000. Be prepared
low as a few hundred dollars — but this        to ask questions during your initial
depends on your personal tax situation         consultation and provide as much in-
and the relief service’s policies. Many        formation about your unique situation
companies offer consultations at no cost       as you can. A well-informed tax relief
to you. This is a great way to get a bet-      professional is better able to provide
ter sense of what a company will offer         you with cost estimates and a clear
you and how much working with them             outline of potential outcomes.

     FAQ                                                                                                                                                                     DREAMSTIME‌
                                                                                            A new 1040-SR is based on the regular Form 1040.
     Q. If I use a tax relief service, is there a guarantee that my debt will be

                                                                                            NEW    TAX     FORM
     resolved?
        A. No. The IRS may not offer an installment agreement. There’s no guarantee
     that you’ll be off the hook for back taxes when dealing with a tax relief service.
     Q. Do I need to meet a certain threshold to hire a tax relief service?
        A. The qualifying amount differs from company to company, but typically a
     minimum of $10,000 in debt is required.

     Tax relief services we recommend
                                                                                            created just for seniors
                                                                                            RACHEL L. SHEEDY                                of the simpler 1040-SR tax form since most

                                                                                            A
     Best of the best: Anthem Tax Services                                                  Kiplinger’s Personal Finance‌                   seniors could not use the 1040-EZ due to
     „„ Our take: A reputable, high-quality tax relief service with decades of                            new Form 1040 tailored to tax-    their different sources of income,” said Da-
       experience handling cases. Consistent positive reviews from customers.                             payers 65 and older is making     vid Certner, AARP legislative counsel.
     „„ What we like: Staffed by experienced professionals. The company offers                            its debut. In mid-July, the IRS      A key feature of the 1040-SR is the ad-
       potential clients a free quote along with a money-back guarantee.                                  released a draft form of the      dition of a standard deduction chart, said
     „„ What we dislike: Pricing estimates are not necessarily reliable.                                  1040-SR, “U.S. Tax Return         Darren Hamilton, an official in the agency’s
                                                                                            for Seniors.”                                   forms and publications division who pre-
     Best bang for your buck: Community Tax Tax Relief                                        The form is designed to be easy for se-       sented information about the new form at
     „„ Our take: An affordable service staffed by capable professionals.                   niors to use and highlights retirement in-      the tax forum held in Maryland. The form
                                                                                            come streams and other tax benefits for         lists the standard deduction amounts that
     „„ What we like: Handles a wide range of tax-related issues. Free
                                                                                            older taxpayers. People 65 and older have       taxpayers age 65 and older qualify for,
       consultation available. Responsive service.                                          the option of using the final version of the    “so seniors don’t have to hunt for it,” said
     „„ What we dislike: You may be assigned a variety of specialists throughout            form to file their 2019 tax returns.            Hamilton. The chart makes it simpler for
       your case. No up-front pricing available.                                              The 1040-SR is based on the regular           seniors to take advantage of the higher
                                                                                            1040, and the IRS says it uses all the same     standard deduction for which they are
     Honorble mention: Larson Tax Relief                                                    schedules, instructions and attachments.        eligible. But seniors who still itemize de-
     „„ Our take: An emergency tax relief service for individuals and businesses            Older taxpayers who use tax software to file    ductions can also use the form.
       with significant tax debt.                                                           are unlikely to even notice a change.              The form has lines for specific retire-
     „„ What we like: Specializes in a few key areas, including businesses and                But taxpayers who still file by paper will    ment income streams, such as Social Se-
       wage garnishments. Excellent customer service. Staffed by licensed                   see a new form modified for aging eyes.         curity benefits and IRA distributions. But
                                                                                            The font is bigger to make the text easier      the IRS says you don’t have to be retired to
       professionals.
                                                                                            to read. The shading in boxes on the regu-      use the form; older workers can use it, too.
     „„ What we dislike: Minimum $20,000 tax debt requirement.                              lar 1040 has been removed to improve the           Find the draft 1040-SR at IRS.gov/
                                                                                            contrast and increase legibility.               DraftForms.
     Steph Coelho is a writer for BestReviews. BestReviews is a product review                The IRS presented an overview of the
     company with a singular mission: to help simplify your purchasing decisions            new form, which was created by the 2018         Rachel L. Sheedy is editor at Kiplinger’s
     and save you time and money. BestReviews never accepts free products from              Bipartisan Budget Act, at the IRS Nation-       Personal Finance magazine. Send your
     manufacturers and purchases every product it reviews with its own funds.               wide Tax Forum in National Harbor, Mary-        questions and comments to moneypower@
     Distributed by Tribune Content Agency, LLC.                                            land, in early July. The agency says it con-    kiplinger.com. And for more on this and
                                                                                            sulted AARP during the form’s develop-          similar money topics, visit Kiplinger.com.
                                                                                            ment. “AARP supported the development           Distributed by Tribune Content Agency, LLC.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
4   | JANUARY 2020                                                                                                                                                            TAX GUIDE

                      THINGS     TO   KNOW
                       about the 2019 tax year

‌E
GREEN SHOOT MEDIA                            Standard deductions                             Other Credits                                    „„ Child and Dependent Care
            ach year, the Internal              Below is information on standard                There are a host of changes to credits     Credit: Deduct 20%-35% of up to
            Revenue Service updates,         deductions for the 2019 tax year,               affected by your life situation. Here are a   $3,000 of day care and similar costs for a
            or indexes, the annual           according to the IRS, which have risen          few of the most notable from the personal     child under 13, an incapacitated spouse or
            inflation adjustments for a      slightly over last year:                        finance website NerdWallet and the IRS:       parent, or another dependent so you can
            number of provisions for the        „„ The standard deduction for single            „„ Earned Income Tax Credit: This          work — and up to $6,000 of expenses for
            tax year, including tax rate     taxpayers is $12,200.                           credit can get you between $529 and           two or more dependents.
schedules, tax tables and cost-of-living        „„ For married couples filing jointly, the   $6,557 in 2019 depending on how many             „„ Adoption Credit: For 2019, this
adjustments for certain tax items.           standard deduction is $24,400.                  kids you have, your marital status and if     credit covers up to $14,080 in adoption
   Your return for 2019, which will be          „„ For married couples filing separately,    your adjusted gross income is less than       costs per child.
due on April 15, 2020, will feature the      the standard deduction is $12,200.              about $56,000.                                   „„ Student Loan Interest
same lower tax rates for 2018 which were        „„ For heads of households, the                                                            Deduction: Deduct up to $2,500 from
created by the Tax Cuts and Jobs Act of      standard deduction is $18,350.                                                                your taxable income if you paid interest
2017.                                           „„ People over age 65 or who are blind                                                     on your student loans.
   Another change, noted by the financial    get a bigger standard deduction.                                                                 „„ American Opportunity Tax
experts at Kiplinger, the personal                                                                                                         Credit: This lets you claim all of the
financial advice firm, is the method                                                                                                       first $2,000 you spent on tuition, books,
used to adjust tax brackets for inflation.                                                                                                                  equipment and school
Tax brackets were previously adjusted                                                                                                                            fees — but not
based on the Consumer Price Index,                                                                                                                                 living expenses or
the variation in prices paid by typical                                                                                                                                transportation
consumers for retail goods and other                                                                                                                                    — plus 25%
items. But some economists thought                                                                                                                                      of the next
the formula failed to account fully for                                                                                                                                 $2,000, for a
changes in spending as prices rise.                                                                                                                                     total of $2,500.
   Subsequently, the so-called “chained
index” has come into play for 2019
adjustments. Chained indexing
should result in lower
inflation adjustments and
could result in a higher tax
bracket. The bottom line:
If your income rises faster
than inflation, you pay more
taxes.
   Other changes include
the elimination of the
individual mandate
penalty for the
Affordable Care Act, a
higher medical expense
deduction threshold,
no alimony
deduction and
higher retirement
account and HSA
contribution
limits.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
TAX GUIDE                                                                                                                                                                 JANUARY 2020 |   5

             SUMMER ACTIVITIES
             could save
             you money

     ‌D
      GREEN SHOOT MEDIA
                     id you know that some of your summertime activities, pursuits
                     and investments can result in tax credits and deductions?
                        If you volunteered, worked a summer job or sent your kids to
                     day camp over the summer, the IRS allows certain deductions
                     and credits for all these common activities. Of course, if you
                     purchased a home or got married, these big life events also can
      trigger tax changes. Here’s a noncomprehensive list from the IRS:

                                                                                                                                                                              ADOBE STOCK‌
 „„ Marriage: If you were married
   last summer, you might miss
                                           Itemizing
   tax-related notices from the IRS        „„ Because of the larger personal exemption          may qualify for a tax deduction. Taxpayers     „„ Withholding: Newlyweds, summertime
   if you don’t update your name             enacted as a result of the Tax Cuts and            must itemize deductions to deduct                workers, homeowners and every taxpayer
   change to the Social Security             Jobs Act of 2017, many people are forgoing         charitable contributions and have proof of all   in between should take some time to check
   Administration before April 15.           itemizing. But for certain filers, itemizing can   donations.                                       their tax withholding to make sure they
                                             result in several deductions, according to the                                                      are paying the right amount of tax as they
 „„ Summer camp rebates: You                 IRS. Here’s just a few for those who itemize:    „„ Volunteering: Driving a personal vehicle        earn it throughout the year. A withholding
   can’t claim overnight camps, but                                                             while donating services on a trip sponsored      calculator on irs.gov helps employees
   summer day camps could count            „„ Homebuyers: New homeowners buying                 by a qualified charity could qualify for a tax   estimate their income tax, credits,
   as day care under the Child and           after Dec. 15, 2017, can only deduct               break. Itemizers can deduct 14 cents per         adjustments and deductions and determine
   Dependent Care Credit.                    mortgage interest they pay on a total of           mile for charitable mileage driven in 2019.      whether they need to adjust their
                                             $750,000, or $375,000 if married filing                                                             withholding by submitting a new Form
 „„ Summer jobs: If you took on              separately, in qualifying debt for a first and   „„ Summer work: Although workers may               W-4, Employee’s Withholding Allowance
   part-time work or a summer                second home. For existing mortgages if the         not have earned enough money from a              Certificate. Taxpayers should remember
   job, your employer is required            loan originated on or before Dec. 15, 2017,        summer job to require filing a tax return,       that, if needed, they should submit their
   to issue you a W-2 — unless               taxpayers continue to deduct interest on a         they may still want to file when tax time        new W-4 to their employer, not the IRS.
   you worked as a freelancer                total of $1 million in qualifying debt secured     comes around. It is essential to file a return
   or part-time contractor; then             by first and second homes.                         to get a refund of any income tax withheld. „„ In addition to these tips, taxpayers
   you must report your own                                                                     There is no penalty for filing a late return     should visit irs.com for the full schedule
   earnings. Knowing your status           „„ Donations: Those long-unused items in             for those receiving refunds, however, by         of deductions and credits that may be
   — employee or contractor — can            good condition found during a summer               law, a return must be filed within three         available to them.
   help you at tax time.                     cleaning and donated to a qualified charity        years to get the refund.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
6   | JANUARY 2020                                                                                                                                      TAX GUIDE

    DEFER TOO MUCH
    TAXABLE INCOME?
    ‌I
    GREEN SHOOT MEDIA
           t sounds unlikely, but it’s possible you can defer too much taxable
           income.
              Deferring your individual or small business income tax is
           usually a good idea since it gives you more cash and room to
           breathe before paying. And because most will land in the same
           or a lower tax bracket in subsequent years, that income would
    generally be taxed at lower rates.
      There are many opportunities for both individuals and businesses
    to defer taxable income. Individuals can prepay expenses and
    arrange for installment sales or property of like-kind exchanges of
    real estate, according to the financial news website MarketWatch.
      Small business owners have more options, including prepaying
    deductive expenses at year’s end. Late-year invoices in this case

                                                                                                                                                                ADOBE STOCK‌
    will go unpaid until the next year. The Tax Cuts and Jobs Act also
    provides generous first-year depreciation allowances. And you can make
    deductible contributions to retirement plans, among other opportunities.
      However, think twice about deferments as you could wind up with too much
    deferral, especially if put off beyond 2020. How?
      Tax rates for 2020 will likely remain the same as 2019, but individual cuts
    could be in jeopardy after next year. Scheduled to remain in place through 2025,
    those rate cuts could be jettisoned if another political party takes over — and
    probably would be if they win the White House, according to MarketWatch,
    especially for wealthier individuals.
      Now’s the time to sit down with your CPA or tax adviser to consider your
    potential liability should those rates rise after 2020, especially for business     2019 TAX RATES
    income.
      One area to keep a close eye on is qualified business income, or QBI. The         Tax Bracket                 Single    Married Filing     Head of
    TCJA created a new 20% personal deduction for QBI from such entities as sole        		 Jointly                                              household
    proprietorships or partnerships, among others, known as pass-through entities.      10% tax bracket          Up to $9,700 Up to $19,400    Up to $13,850
    But the deduction can’t go beyond 20% of personal taxable income, as figured        Beginning of 12% bracket    $9,701       $19,401          $13,851
    prior to taking a QBI deduction or before net capital gains.                        Beginning of 22% bracket   $39,476       $79,851          $52,851
      This is where too much deferral comes in: Taking those first-year depreciations
    or deductibles could potentially lower your QBI deduction. Unlike most              Beginning of 24% bracket   $84,201      $168,401         $84,201
    deferrable tax income, QBI deductions are permanent. But because of political       Beginning of 32% bracket  $160,726      $321,451         $160,701
    uncertainty, those moves may reduce QBI deductions should the presidency or         Beginning of 35% bracket  $204,101      $408,201         $204,101
    Congress change hands.                                                              Beginning of 37% bracket  $510,301      $612,351         $510,201
      This is just another example of how your CPA or tax professional can save
    you money year-round by helping you keep abreast of potential pitfalls in your
    tax strategy that might mean higher tax rates down the line.
      Stay tuned and keep your eyes on Washington — and your taxes.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
TAX GUIDE                                                                                                                                                               JANUARY 2020 |   7

                                                                                                                                                                             ADOBE STOCK‌

Self-employment creates tax challenges
‌D
GREEN SHOOT MEDIA                              form Schedule SE, either with annual or        „„ part of a partnership of a business or     home-office deduction that also includes
               o you own a small business,     quarterly payments.                          trade;                                          property taxes, insurance and utilities,
               perform a service for a liv-      Self-employed persons often say they         „„ in what the IRS calls “other business”     among other expenses. Other deductions
               ing, or work as a freelancer    are “double taxed,” by which they mean       in some capacity, or part-time;                 include a 20% deduction for pass-through
               or contractor in an industry    they take on the burden of paying for          „„ made $400 or more in net earnings          entities, which excludes some of your in-
               such as ride-sharing ser-       Social Security, Medicare and Medicaid       from self-employment, or $108.28 or more        come from taxes, and health care premi-
               vice? If so, you’re one of 24   taxes normally paid partially by employ-     for church employee income; or                  ums.
million Americans who are self-employed.       ers. Traditionally, employers pay 6.2%         „„ spouses in joint ventures.                   Business expenses such as cellphone and
   While the self-employed enjoy cer-          of the Social Security tax, with the em-                                                     internet service, office supplies, software
tain freedoms many other workers do            ployee paying the remaining 6.2%, plus       Self-employment tax deductions                  and computers are also deductible, as are
not — such as working remotely, setting        1.45% for Medicaid. With an employer            The self-employed are also unique in their   advertising expenses, websites and busi-
their own hours and being their own boss       payment, the entire tax 12.4% falls on the   available deductions, the largest of which      ness travel.
— they also must deal with the tax chal-       self-employed.                               is the ability to subtract half of the self-      These deductions help ease the burden
lenges for income that comes to them             But who is classified as self-employed?    employment tax. The Tax Cuts and Jobs           on the self-employed but the best advice
without taxes and deductions withheld.         The IRS uses the following criteria. You     Act of 2017 also did away with some cuts        to lessen the blow is to pay taxes quarterly.
The self-employment tax accounts for So-       are self-employed if you are:                and deductions for the self-employed, but       Otherwise, annual penalties for some self-
cial Security and Medicaid deductions and        „„ An independent contractor or sole       several still remain.                           employed individuals can be levied come
is paid for by individuals using the 1040      proprietor of a business;                       For home workers, the IRS allows a           April 15.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
8   | JANUARY 2020                                                                                                                                                             TAX GUIDE

                             Your guide to surviving an
                                                                         AUDIT

                      ‌T
                      GREEN SHOOT MEDIA                                    „„ They’ll owe you money.                        resulting in penalties and more taxes and fees
                                     he idea of being audited strikes      „„ There’s no problem.                           the longer you delay.
                                     fear and loathing in the hearts                                                          Be direct. Take a page from the advice
                                     of taxpayers. But before you        IRS audit do’s and don’ts                          attorneys give witnesses — answer only the
                                     begin to hyperventilate, take         The IRS conducts three types of audits           questions you’re asked. Protect your interests
                                     solace in the fact that only        that can generally review your taxes for the       by being direct, but refrain from providing too
                                     0.6% of all individual income       previous three years, although longer under        much information if it’s not specifically sought.
                      tax returns were recently audited, according       special circumstances. These include a
                      to the IRS.                                        correspondence audit, conducted in writing;        Need help?
                         But that low figure is not a license to fudge   an office audit, in which you’ll meet with an        If you’ve used a tax professional to prepare
                      numbers or take deductions and credits for         auditor at an IRS office; and a field audit,       your taxes, they should be present for any
                      which you do not qualify. These actions raise      during which an auditor could come to your         audit or can represent you without your
                      red flags that can trigger an audit. And you       home or business.                                  presence. Tax-filing software companies often
                      can almost expect the IRS to contact you if it       Don’t be fooled. The IRS will not call you       offer audit defense as part of packages and will
                      finds discrepancies in your returns.               to initiate an audit. You’ll receive notice in     offer assistance in the event of an audit.
                         While stressful, most taxpayers who receive     writing. If you do receive a call, you’re likely     In the end, it pays to be prepared and to
                      notice of an audit can survive the process.        being targeted by a scam. The same goes for        know your rights. Keep all of your records
                      Unless you’ve done something wildly out of         email, texts and threats of jail time.             and documentation in order and educate
                      bounds, according to tax experts, an audit will      Don’t ignore it. An audit isn’t going to         yourself on the process. You have a right to
                      result in one of three outcomes:                   disappear because you slide that notice            professional treatment, representation and an
                         „„ You’ll owe money.                            into a desk drawer. In fact, it may get worse,     appeal in case the audit doesn’t go your way.
TAX SEASON YOUR GUIDE TO 2020 - Money saving activities Calls from the IRS are often a scam - townnews.com
TAX GUIDE                                                                                                                                                           JANUARY 2020 |   9

MISS A
YEAR?
Here’s how you
can file back taxes

‌I
GREEN SHOOT MEDIA
       t seems like it might be an intentional act — and it
       often is — but failing to file a tax return happens in
       other circumstances, too.
          Intentional or not, the obligation never goes
       away and interest and penalties pile up as time
       goes by.
  For most people, paying taxes is not exactly cause for
rejoicing but it is a responsibility. For the record, the IRS
requires you to file in each year that your income is greater
than your standard deduction, plus one exemption if you
are not the dependent of another taxpayer. If you are filing
back taxes, you must use the forms and deductions for
those years to avoid overpaying or underpaying.
  If you are among those who did not file, catching up
might not be hard as it seems. The tax-filing software                                                                                                                   ADOBE STOCK‌
company TurboTax offered these tips for filing back
taxes.                                                          Determine deductions                                     Complete tax forms
                                                               As with any tax filing, you can reduce your bill by          One reason for using the original forms is that tax law
Collect income information                                   claiming deductions as you normally would. Just be sure to changes annually, so those specific forms contain the
   If you’ve neglected to file for multiple years, gathering have documentation if you plan to itemize. If not, claim the applicable instructions for the tax year you are filing. If
information about your income might be difficult. standard deduction, as well as deductions for any eligible you use the wrong forms, you may underpay or overpay.
Nevertheless, if you are missing a W-2 or 1099, your dependents in the year or years you did not file.
employer may be able to provide copies. You can also                                                                      Mail or e-file your return
request a substitute from the IRS by filing Form 4852, which Obtain the proper forms                                        When your back taxes are complete, you can either
is available for download at irs.gov.                          When you’ve gathered your information and documents, mail or e-file your forms and supporting documents
   You must also report the sale of capital assets, such as you must file using forms for the year or years you missed. according to instructions, just as you normally would.
stocks, but you can put the brakes on penalties and interest Fortunately, the IRS maintains forms for previous years, Once you’re done, your pocketbook may be lighter but
by estimating your income and making a payment until you either on their website at irs.gov or by mail. Forms are also you’ll stop accruing penalties and interest that can make
receive a W-2 or 1099.                                       available on some tax-prep software sites.                   a bad situation worse.
10   | JANUARY 2020                                                                                                                                                      TAX GUIDE

                                                                                                                                   WHAT THE
                                                                                                                                   IRS WON’T DO
                                                                                                                                   „„ Call to demand immediate payment
                                                                                                                                     using a specific payment method such
                                                                                                                                     as a prepaid debit card, gift card or
                                                                                                                                     wire transfer. Generally, the IRS will
                                                                                                                                     first mail a bill to any taxpayer who
                                                                                                                                     owes taxes.
                                                                                                                                   „„ Demand that you pay taxes without
                                                                                                                                     the opportunity to question or appeal
                                                                                                                                     the amount they say you owe. You
                                                                                                                                     should also be advised of your rights

                                                                                                                                                                                FREEPIK.COM
                                                                                                                                     as a taxpayer.

 GET A CALL OR EMAIL FROM THE IRS?
                                                                                                                                   „„ Threaten to bring in local police,
                                                                                                                                     immigration officers or other law
                                                                                                                                     enforcement to have you arrested
                                                                                                                                     for not paying. The IRS also cannot

 IT’S MOST LIKELY A SCAM
                                                                                                                                     revoke your driver’s license, business
                                                                                                                                     licenses or immigration status.
                                                                                                                                     Threats like these are common tactics
                                                                                                                                     scam artists use to trick victims into
                                                                                                                                     buying into their schemes.

                                                                                                                                   If you receive any of these threats,

     ‌T
                                                                                                                                   here’s what you should do:
     GREEN SHOOT MEDIA                          have a delinquent return or employ-   involving Social Security numbers and
                                                                                                                                   „„ Contact the U.S. Treasury Inspector
                   hey arrive in your email     ment tax payment, or tour a business  threats from a fictional government
                                                                                                                                      General for Tax Administration to
                   inbox and via the U.S.       as part of an audit or investigation, the
                                                                                      agency.
                                                                                                                                      report a phone scam. Use their “IRS
                   mail, by robocalls or        IRS won’t call or visit. And when they   In the first instance, scammers claim
                                                                                                                                      Impersonation Scam Reporting” web
                   texts on your phone;         do, they’ll issue official notices through
                                                                                      they will suspend or cancel the victim’s
                                                                                                                                      page. You can also call 800-366-4484.
                   sometimes scammers           the mail beforehand.                  Social Security number, a common
                                                                                                                                   „„ Report phone scams to the Federal
                   even show up in person.        But scammers prey on taxpayers’     fear tactic in which con artists men-
                                                                                                                                      Trade Commission. Use the “FTC
     These are the routes in which tax          fears and insecurities, and some will fall
                                                                                      tion overdue taxes and use these false
                                                                                                                                      Complaint Assistant” on ftc.gov.
     scams find their way to you. And           for the scheme. Scam artists work year-
                                                                                      threats to fleece people.
                                                                                                                                      Please add “IRS Telephone Scam” in
     while most know better, many don’t.        round, according to the IRS, flooding    The second new scam involves the
                                                                                                                                      the notes.
       First, know the rules: The IRS doesn’t   email inboxes with phishing scams and scammer sending a letter threatening
                                                                                                                                   „„ You also should report an unsolicited
     conduct official business using email,     robocalls that seem authentic enough  a lien or levy. The letter is from a fake
                                                                                                                                      email claiming to be from the IRS,
     nor will representatives call you (in      that some lose money.                 agency called the “Bureau of Tax En-
                                                                                                                                      or an IRS-related component like
     most cases). The IRS initiates most                                              forcement, which doesn’t exist accord-
                                                                                                                                      the Electronic Federal Tax Payment
     contacts through regular mail delivered    New scams uncovered                   ing to the IRS. But it also references the      System. Contact the IRS at phishing@
     by the United States Postal Service.         Recently, the IRS warned taxpayers IRS, which may cause the recipient into          irs.gov.
       Unless you have an overdue tax bill,     involving two new twists on tax scams believing the letter is authentic.
Special Section Tab                                                                                      Friday, December 13, 2019 |   11
                                                                                                                                                    TurboTax software
                               WHICH VERSION OF                                                                                                       we recommend

      TURBOTAX
                                                                                                                                             Best of the best:
                                                                                                                                             Intuit TurboTax Deluxe
                                                                                                                                             + State 2019 Tax Soft-
                                                                                                                                             ware PC/Mac Disc
                                                                                                                                             „„ Our take: Well-
                                                                                                                                               rounded software

         SOFTWARE IS RIGHT FOR YOU?
                                                                                                                                               for those with de-
                                                                                                                                               ductions, those who
                                                                                                                                               own a home, and

‌S
                                                                                                                                               single individuals.
SIAN BABISH | BestReviews‌                       „„ Expert help: TurboTax employs          information or if something sounds                „„ What we like:
           tudents, homeowners and            a interview process to obtain all the        incorrect. Once you finalize your filing,           User-friendly to do
           entrepreneurs all share one        information it needs for your filing. If you the software performs a cursory audit               personal taxes. Guides users through 2019
           thing in common: They have         feel you need more guidance that requires    to make sure all your boxes are ticked.             tax law changes.
           to file their taxes. To make       a detailed explanation, you can access a     If you need to submit additional data,            „„ What we dislike: Not all forms for 2019
           the job easy, many turn            live TurboTax agent. This connects you       TurboTax prompts you and returns to                 changes are available.
           to Intuit’s user-friendly          to tax professionals who can help you        the screen where it goes.
TurboTax software.                            pinpoint the right information.                 „„ Free trial: When you use the
   TurboTax utilizes a combination of            „„ Easy e-filing: With TurboTax,          online version of TurboTax, you can               Best bang
question-and-answer sections and fill-        you can e-file instead of dealing with       try it out for free. Perhaps the best             for your buck:
in-the-blanks. Provided you’re accurate       the headache of paperwork. Not only is       part of using the online version is that
                                                                                                                                             Intuit TurboTax Home
and honest with your information, filing      it hassle-free, it often results in a much   through the interview process, TurboTax
                                                                                                                                             & Business + State
is simple. Since TurboTax covers both         faster refund. Keep in mind there is an      determines which software is best for
                                                                                                                                             2019 Tax Software
state and federal filings, it’s essentially   additional fee for some e-filings.           your tax situation. If you like it enough
one-stop software.                               „„ Affordable filing: It’s often much     to complete your filing, TurboTax simply          PC/Mac Disc
   With tax upon us, we’ve put together       less expensive to file with TurboTax than    deducts the fees from your refund.                „„ Our take: Popular
this TurboTax software buying guide           to go through an accountant or tax-             „„ Price: Basic TurboTax software                for small business
to help you find the best one for your        preparation service. It also means you       for simple filings costs $25 to $50, but            owners, side hus-
needs. We’re including our top pick, the      know the status of your filing, instead of   if you’re a homeowner, have diverse                 tlers, freelancers
Intuit TurboTax Deluxe + State 2019 Tax       waiting for preparation and filing to go     income sources or deductions, expect                and self-employed
Software PC/Mac Disc, which guides            through.                                     to spend closer to $100. Business owners            tax filing.
homeowners through deductions.                                                             can purchase TurboTax software with               „„ What we like:
                                              Features                                     advanced capabilities starting at $100              Best option if you have a side business, and
Considerations when choosing                    „„ Using the software: TurboTax is and above.                                                  includes one state e-file. Automatic tax form
TurboTax software                             step-oriented, so it’s easy to pace yourself
                                                                                                                                               updates.
                                              during filing. To progress through to the Sian Babish is a writer for BestReviews.
                                                                                                                                             „„ What we dislike: Slight learning curve if
   „„ User-friendly: Let’s face it:           end, you need to satisfy each screen’s BestReviews is a product review company
filing taxes can be complicated and           questions with appropriate information. with a singular mission: to help simplify                it’s the first year filing your extra income.
intimidating. TurboTax uncomplicates          TurboTax organizes like information your purchasing decisions and save you
the process by explaining tax lingo in        to help you get through sections more time and money. BestReviews never ac-
plain language. The software seamlessly       quickly, instead of flipping through cepts free products from manufacturers                    Honorable
guides you through sections in a              paperwork the whole time.                    and purchases every product it reviews            mention:
frustration-free way. You can even save         „„ Final submission: Don’t worry: with its own funds. Distributed by Tribune
                                                                                                                                             Intuit TurboTax Busi-
your progress and return to it later.         TurboTax catches if you’re missing any Content Agency, LLC.
                                                                                                                                             ness 2019 Tax Soft-
                                                                                                                                             ware PC Disc
                                                         FAQ                                                                                 „„ Our take: Es-

                                                        Q
                                                                                                                                               sential for small
                                                                   Are there any additional filing fees when I use TurboTax?                   business owners
                                                                   A. Yes. You can spend up to $40 per state return, though it varies          with five or fewer
                                                                   and is sometimes bundled with the software for a better price.              employees who
                                                                   E-filing returns (state or federal) cost approximately $20 to               need an all-in-one
                                                                   $25 apiece.                                                                 tax software.

                                                        Q
                                                                                                                                             „„ What we like: Can be used by LLCs, S or
                                                                   I’m recently divorced/widowed and my filing is totally                      C corporations, and comes with live phone
                                                                   different this year. Will TurboTax guide me through the                     support.
                                                                   changes?
                                         BESTREVIEWS‌                                                                                        „„ What we dislike: Some glitches with
                                                                   A. Yes, and this is where the question-and-answer platform
                                                                                                                                               installation if you’re not using Windows 10.
Install TurboTax before you plan on filing taxes — it              excels the most — when it comes to changes in your financial
gives you peace of mind to work out any technical                  situation or history. Make sure you have your previous year’s
difficulties and get used to its dashboard.                        filing on hand for comparison.
W-4
12   | JANUARY 2020                                                                                                                             TAX GUIDE

                       THE NEW                                                                        : WHAT FOR?
                                                ‌T
                                               TERRY SAVAGE                                           holding, resulting in payments and possible
                                               Tribune Content Agency‌                                penalties or a refund.
                                                                  he federal government wants           But steps 2-4 add more precision to the pro-
                                                                  to make sure you pay your           cess. In step 2, you can add information about
                                                                  taxes in full and on time. So it    other income if you have multiple jobs or if your
                                                                  has designed a new W-4 form         spouse has a job. In fact, there’s a handy online
                                                                  to “help” you (and your em-         tool to help you estimate how much should be
                                                                  ployer) through the process.        withheld if you find yourself in this position.
                                               It should not come as a surprise that the new          You can find it at irs.gov/W4App. Or you can
                                               form is complicated and invasive, and it even          do it yourself, with the worksheet that is part
                                               requires an online app or long worksheet to            of the form.
                                               complete it properly.                                    In step 3, you can claim credit for a dependent
                                                  No longer will you simply list the number of        child under age 17 as of Dec. 31. They’re worth
                                               “allowances” (dependents) so your employer             $2,000 each, if your income is under $200,000
                                               can determine the appropriate withholding.             ($400,000 married, filing jointly). That’s also
                                               Now a complicated formula will determine how           where you can claim foreign tax credits and edu-
                                               much should be withheld for taxes — not only           cation tax credits.
                                               on your salaried income, but on your side jobs,          Then step 4 lets you add in other adjustments,
                                               or even your spouse’s self-employment income.          such as retirement income, stock dividends and
                                                  You may not want your boss knowing that you         interest — if there has been no withholding at
                                               freelance on the side and earn an extra $15,000        the source. In this section, you can also ask for
                                               a year, or that your spouse has an income from         “extra” withholding if you want a refund when
                                               his or her small business or earns dividends           you file next year. And the worksheet and app
                                               from a trust fund. But now there’s a place on          also have a place to calculate your deductions
                                               the new W-4 form to list all that income — and         for qualifying home mortgage interest, chari-
                                               have the taxes for that income taken out of your       table contributions, state and local taxes (up to
                                               paycheck.                                              $10,000), and medical expenses in excess of 10%
                                                  The 2020 W-4 will be given to all new em-           of your income.
                                               ployees, and those whose tax status has changed          By now you’ve figured out that the formerly
                                               in the past year. If you didn’t get divorced, have a   simple task of filling out your W-4 form can be
                                               child or change jobs, you won’t be required — but      as complicated as actually filing your tax return!
                                               will be encouraged — to fill out the new form.         But you can still do it the old-fashioned way. Let
                                                  Alice Jacobsohn of the American Payroll As-         your employer follow IRS form instructions
                                               sociation, which is helping employers explain          and withhold from your salary — and keep the
                                               the new format, concedes that the new longer           rest of your income private. Then file quarterly
                                               form can be intimidating. And, when pressed,           estimates, paying taxes on your other income
                                               she notes that you’re not actually required to         throughout the year.
                                               input all that information — only to make sure           You’ll be safe as long as you pay in at least
                                               you pay your taxes on time and in full. Encour-        100% of your income tax liability from last year,
                                               aging use of the new W-4 is not an easy task —         or at least 90% of the current year’s estimated
                                               even if it will make collections simpler for the       taxes (assuming your income is under $150,000).
                                               government.                                            Then, only the IRS will know your total family
                                                  The new form comes with its own long set            income. And you might not get a refund.
                                               of instructions. In step 1, you state your name,         That’s the price of privacy over convenience.
                                               address, Social Security number and filing sta-        And that’s The Savage Truth.
                                               tus (single, married, head of household). If you
                                               then skip to step 5 and just sign the form, your       Terry Savage is a registered investment adviser
                                               employer must rely on your withholding status          and the author of four best-selling books, includ-
                                 FREEPIK.COM

                                               (single, married, head of household) and can’t         ing “The Savage Truth on Money.” Terry responds
                                               otherwise reduce or increase your withholding.         to questions on her blog at TerrySavage.com.
                                               That means you might not have accurate with-           Distributed by Tribune Content Agency, LLC.
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