COVID-19 Coronavirus Stimulus Check Scams

Coronavirus stimulus check scams have already started. This is shameful, but not entirely unexpected.

U.S. taxpayers will be receiving payments of up to $1,200 per adult and $500 per child, with reductions for special circumstances. To receive a payment, you must have a social security number. Nonresident aliens, people without a social security number, and adult dependents (ex. your college student who is claimed as a dependent on your tax return) are not eligible.

To receive the full $1,200 you must have income less than $75,000 per year (single) or $150,000 (married). Those with income of $75,000 to $98,000 (single) or $150,000 to $198,000 (married) will receive a reduced amount. Those receiving social security retirement or disability payments WILL get a stimulus check, as well as veterans and those who are unemployed

The $500 per child is only available for a child under the age of 17 who is claimed as a dependent on your income tax return.

Read moreCOVID-19 Coronavirus Stimulus Check Scams

Don’t Cash Out Your 401(k) in Divorce

It is common for divorcing spouses to cash out retirement funds at divorce time. And it seems to make sense at the time. There are expensive lawyers and all sorts of expenses to establish a new residence. Support payments may be delayed or non-existent. A retirement fund seems like great solution. It’s a pile of money that you weren’t going to use for a long time, and you have financial needs now.

But it should be the absolute last resort, because it’s so costly in both the short term and long term.

Retirement accounts like 401(k)s and IRAs create a tax deduction now (when money is contributed to it), and then taxes are paid when the funds are withdrawn at retirement time. The government wants us to keep the money in those accounts until we retire, so there are disincentives to withdraw the money early. If you take an early distribution from a retirement account, you’re going to pay income taxes on the money you withdraw, plus a 10% federal penalty for early withdrawal, plus any penalties your state may impose. I tell people to count on losing about 50% of the money they withdraw to taxes and penalties.

Read moreDon’t Cash Out Your 401(k) in Divorce

Analyzing Tax Returns in Divorces

Income tax returns are an important piece of financial information in a divorce or child support case. There is so much information that can be obtained from the tax returns, and if we have several years of data, we can make comparisons from year-to-year. In the video below, Tracy talks about the financial data she … Read more Analyzing Tax Returns in Divorces

Bank Deposits Method to Find Unreported Income

When the Internal Revenue Services suspects that a taxpayer has unreported income, the agents can use one of several methods to uncover that income. These methods can also be used to help calculate hidden income in a divorce or child support case. One such method used to determine unreported income is the bank deposits method, … Read more Bank Deposits Method to Find Unreported Income

Surviving an Income Tax Audit

Income tax audits are intimidating whether you are being audited personally or as a business owner. There is a right way and a wrong way to handle an audit by a state or federal taxing authority. It is easy to dig a hole for yourself, but awfully hard to get out of that hole.

Whether you attempt to handle an audit on your own, or opt to involve a professional who is experienced in these matters, there are some things you should know as you embark on your journey. I don’t ever suggest that a taxpayer submit to an audit alone. It is very helpful to have an experienced professional along for the ride. Not only can the accountant or attorney help you complete records requests, she or he can also act as a buffer between the taxpayer and the IRS.

The process of an audit is often one big negotiation. It is a give and take between both sides. Ultimately, both sides want the case closed, and the faster we can get to that point, the better. (Preferably with the least amount of pain for everyone involved.)

Read moreSurviving an Income Tax Audit

Getting Business Tax Returns During Divorce

When one or both spouses have an ownership interest in a business, it is critical to get both income tax returns and financial statements for the entity. It is impossible to fairly evaluate the business and the income from it without both of these.

Many times we meet resistance from the spouse during discovery. It is common to hear “we already gave you the financial statements, why do you need the tax returns too,” or vice versa. Both are important because they provide different information. Occasionally the two will have identical information, but the vast majority of the time there will be different numbers and different levels of detail. We want as much information as possible on the business, so both are critical.

Read moreGetting Business Tax Returns During Divorce

Taxes: Guilty Until Proven Innocent

Taxes: You’re guilty until you prove yourself innocent.

That’s the way it works with the Internal Revenue Service. You have to be able to prove the numbers on your income tax return. If you can’t, the IRS auditor will pick a number and it’s up to you to prove them wrong.

It sounds unfair, doesn’t it?

Of course it does, but that’s the way the law works in the U.S. In normal criminal cases, you’re presumed innocent until the government proves you guilty. In tax cases, it’s the other way around.

Taxpayers run into trouble when they don’t have documentation to support the numbers on their tax return. What if the IRS believes a business has unreported income? Maybe the company has bad documentation. The IRS may use bank records to prove their case, assuming that all of the deposits are revenue. They may make an assumption that additional revenue was not deposited and was concealed. They have all sorts of methods to calculate what they think these numbers are.

That’s where a forensic accountant comes in. She can help shoot holes in their theories and their methods. Things get complicated quickly, and you need an expert who is well-versed in the methods the IRS uses to calculate income.

I help attorneys evaluate the numbers in tax cases (either civil or criminal) and challenge the government’s numbers.

Read moreTaxes: Guilty Until Proven Innocent