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IT’S NEVER TOO EARLY TO START THINKING ABOUT TAX TIME! UPDATE ON TAX LAWS USING E-FILE HEALTHCARE INSURANCE TAX FORMS TAX BREAKS FOR SENIORS IDENTITY THEFT A SPECIAL SUPPLEMENT TO

January 25, 2015


2—Cleveland Daily Banner—Sunday, January 25, 2015

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This file PhoTo shows health care tax forms 8962, 1095-A, and 8965, in Washington. Being uninsured in America will cost you more in 2015. In 2015, all taxpayers have to report to the Internal Revenue Service for the first time whether or not they had health insurance the previous year. Most will check a box. It’s also when the IRS starts collecting fines from some uninsured people, and deciding if others qualify for exemptions.

New tax forms to fill out on health insurance coverage WASHINGTON (AP) — Be prepared for the tax man to get even more personal this year — with questions about your health insurance. For the first time, you’ll have to state whether you had health insurance, through an employer, one of the exchanges or purchased privately. And if you didn’t, you could face a penalty. Also, if you got advance payments of the premium tax credit under the Affordable Care Act, even for only part of the year, there’s a

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new form to file. You’ll have to file it even if you only got tax credits for part of the year. And tax filers accustomed to using a 1040EZ will no longer be able to do that if they got a tax credit. There’s more. If you had life changes — a new job with a higher salary, for example — from the time those tax credits were approved, you could end up having to pay some or all of the money back. Conversely, if See INSURANCE, Page 3


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INSURANCE from Page 2 you lost your job and faced a long period of unemployment, you might now be eligible for the credit. “I see deer-in-the-headlights looks,” said Dave Duval, TaxAudit.com’s vice president of consumer advocacy. “These are new items. ACA has been on the books since 2010. We’ve ignored it, not looked at it, not paid attention to it. It’s on the tax return that we’re going to be doing for 2014.” INSURANCE REQUIRED FOR MOST The law requires individuals to have what the government calls minimum essential coverage unless they qualify for one of more than 30 exemptions. For those without insurance — or an exemption — there’s a penalty stemming from the law’s premise that health care coverage is a shared responsibility among federal and state governments, insurers, employers and individuals. For 2014, the penalty is the greater of 1 percent of your household income above the threshold for filing taxes or what the Internal Revenue Service calls “your family’s flat dollar amount” — $95 per adult and $47.50 per child, with a family maximum of $285 in 2014. However, the average penalty for the 2014 tax year is expected to be higher — $301, according to Sacha Adam, health care team leader at Intuit, maker of TurboTax. Under the law, those fines will go up for people who remain uninsured in 2015, to about $590 on average. “Getting health insurance is a big decision for some folks,” Adam said. “When it comes to reporting your health insurance on your taxes, it’s going to be very straightforward.” A BOX TO CHECK ON FORM 1040 Reporting your health insurance coverage begins on line 61 of Form 1040. “For the vast majority of Americans, tax filing under the Affordable Care Act will be as simple as checking a box to show they had health coverage all year,” Treasury Secretary Jacob Lew said in a statement. The Department of Health and Human Services estimated that more than threequarters of taxpayers will need to do no more that. “If you have it and you have the ability to demonstrate you had it, that should be it and you’re not going to be subject to having the additional penalty assessed,” said Greg Rosica, a tax partner at Ernst & Young. People insured through the exchanges will get Form 1095a in the mail attesting to their coverage and how much of an advance premium tax credit they received. Employers are not required to provide proof of coverage for 2014. NEW FORMS TO FILE “A fraction of taxpayers will take different steps, like claiming an exemption if they could not afford insurance or ensuring they received the correct amount of financial assistance,” Lew said. “A smaller fraction of taxpayers will pay a fee if they made a choice to not obtain coverage they could afford.”

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In thIs FrIdAy, Photo, three of several commercially available tax guides to help prepare this year’s tax return are photographed in Washington. “There’s a lot to look for. It is kind of complicated. This is not easy stuff,” said Barbara Weltman, contributing editor to the tax guide “J.K. Lasser’s Your Income Tax 2015.” She said the good news is that most people use a paid preparer or software to do their taxes, and they’ll be walked through the questions that have to be answered for the health insurance section of the tax return. If you received a premium tax credit or might be entitled one, file Form 8962. That will determine whether you got too much of an advance credit payment and have to repay some of it, or if you didn’t apply and might be eligible for the premium tax credit on your return. For those who didn’t have health insurance, there’s yet another form — Form 8965 — which lists the possible exemptions and lets you claim the one that might apply. It’s also where you figure out your penalty if you didn’t have coverage for all or part of 2014. “There’s a lot to look for. It is kind of complicated,” said Barbara Weltman, contributing editor to the tax guide “J.K. Lasser’s Your Income Tax 2015.” The good news, she said, is most people use a paid preparer or software to do their taxes, and they’ll be walked through the questions that have to be answered for the health insurance section of the tax return. “In the tax preparation process, they’re not really exposed to forms until the very last moment,” Adam said. “At TurboTax, we’ll figure out what forms need to be provided.” WHERE TO GO FOR HELP The IRS has a page on its website devoted Act, Care Affordable the to http://www.irs.gov/Affordable-Care-Act . There, you can access videos featuring the IRS Commissioner, John Koskinen, as well See HELP, Page 4

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Quiet year in terms of tax changes, but ACA provides twist WASHINGTON (AP) — President Barack Obama’s signature health care law will bring a new twist to tax-filing in 2015, a year in which much else will seem familiar when you’re working on your return. “It’s been a very quiet season or tax year” in terms of congressional action, says Bob Meighan, vice president of customer advocacy at TurboTax, the tax-preparation software company. Sure, there have been adjustments for inflation in the tax tables, standard deduction and value of each exemption. But what could have been a stunner — the expiration of a series of popular tax breaks — was forestalled by Congress in a last-minute move before it adjourned last month. Unlike last year, there will be no delay to the start of the tax season, despite the late congressional passage of the tax extenders. The Internal Revenue Service said it would begin accepting electronic returns and processing paper ones as scheduled on Jan. 20. “We have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems,” IRS Commissioner John Koskinen said in a statement. So gather up those W-2s, 1099s, receipts and other data needed to file; you have about three months. The deadline remains April 15, although extensions are possible. If you’re due a refund, however, you might be in for a wait. Noting that “people have gotten very used to being able to file their return and quickly getting a refund,” Koskinen said at a news conference in December that “this year we may not have the resources, the people to provide refunds as quickly as we have in the past.” He blamed budget cuts, and declined to predict how long refunds would take. In previous years, it was about 21 days for those who filed electronically. Last year, the IRS processed nearly 150 million individual tax returns, up about 1 percent from 2013. The average refund was $2,792. See TWIST, Page 5

AP Photo

TAx PrePArer richArd Sowell, left, works with Courtney Mayhew at H&R Block offices in Atlas District in Washington. The Internal Revenue Service said it would begin accepting electronic returns and processing paper ones as scheduled on Jan. 20.

HELP from page 3 as a number of new publications that provide information about health care and taxes. Because of the complexity of the requirements, Koskinen told Congress last fall that he expects an increase in calls to IRS tollfree help lines about ACA and taxes.

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TWIST from page 4 Electronic filing continues to gain popularity; only about 16 percent of last year’s returns were on paper. “Filing electronically is the most accurate way to file a tax return and the fastest way to get a refund,” the IRS said. The biggest change for tax filers this year concerns the Affordable Care Act and the requirement that everybody have health insurance. “The first year truly will be the hardest” in dealing with ACA, said Dave Duval, vice president for consumer advocacy at TaxAudit.com. If you got insurance through an employer, from the private marketplace, or through a federal or state exchange without a subsidy, you simply check a box on line 61 of Form 1040 affirming that you had full coverage. “You don’t send in documents for review,” said Greg Rosica, tax partner at Ernst & Young. But there are new forms to deal with, from the exchanges confirming your coverage and from the IRS. Form 8962 will help determine if you got the right advance payment of the premium

Cleveland Daily Banner—Sunday, January 25, 2015— 5 tax credit, or if it was too large because you underestimated income or had a life change, such as a new job with a higher salary. In that case, you might have to pay back some or all the advance payment. If you lost your job, you might be entitled to more in the form of an additional tax credit. “This year many people did not go back to update their information,” said Kathy Pickering, executive director of the Tax Institute at H&R Block. Form 8965 will help you figure out whether you qualify for an exemption to the mandatory health coverage and can avoid a penalty. Tax experts advise people who didn’t have coverage to look through the list of more than 30 coverage exemptions. Penalties and lower subsidies could lead to a larger tax bill — or a smaller refund. “We are working to ensure that whatever their experience, consumers can easily access clear information, since this is the first year they will see certain changes to their tax returns” because of the health care law, Treasury Secretary Jacob Lew said in a statement. Tax rates for 2014 remain the same as in 2013, ranging from 10 percent to 39.6 percent for the wealthiest taxpayers. But the value of a personal exemption

edged up slightly to $3,950 because of inflation, and the standard deduction is now worth $12,400 for married people filing jointly, $9,100 for heads of households and $6,200 for single taxpayers. The patch on the alternative minimum tax holds, also adjusted for inflation to prevent more middle-class people from being drawn in. The legislation passed by Congress in December extends a series of popular tax breaks that help a broad range of taxpayers, from schoolteachers to college students and their parents, residents of states without income taxes and people who made energyefficient improvements to their home. People who had debt forgiven on bad mortgages usually will not have to consider that as income. And required IRA distributions by seniors 70½ and older directly to a charity are tax-free. Some affluent taxpayers could be in for sticker shock because of a surcharge on investment income, said Meighan, of TurboTax. “It’s exacerbated by the market being at record levels. People who are buying and selling are likely to see very large gains,” he said. At the other end of the wealth spectrum, he said, “people who most need the money”

IRS offers answers to some tax questions ATLANTA — The Internal Revenue Service kickED off the upcoming 2015 tax filing season on Jan. 20, with reinstated deductions to help taxpayers. The agency also encouraged taxpayers and tax practitioners to take a fresh look at the many benefits of e-filing. “Tennessee experience another record breaking year with more than 2.5 million efiled returns, said IRS Spokesman Mark Green. “Everyone should try e-file! It’s safe, easy, fast and accurate. I strongly recommend that taxpayers try it,” Green said. In addition, Green offer highlights that taxpayers should watch for as they file tax returns for 2014: Q. — What is the due date for the 2014 federal tax returns? A. — Your tax return (or a request for an extension) must be filed no later than Wednesday, April 15, 2015 Q. — How many returns does the IRS expect to be filed this year? A. — Nationwide, the IRS expects to receive about 151 million 2014 individual tax returns. About 2.9 million from Tennessee Q. —When can people file their 2014 tax return? A. — IRS plans to open the 2015 filing season and begin processing individual income tax returns on Jan. 20th. We (the IRS) will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances. Q. — What happens if someone files a paper return before the 20th? A. — The IRS will not process paper tax returns before the anticipated Jan. 20 open-

ing date. Q. — Will the extenders legislation affect the starting date? A. — Taxpayers can file starting Jan. 20th, including those affected by Congress renewing a number of "extender" provisions (about 55) of the tax law that expired at the end of 2013. These provisions were renewed by Congress through the end of 2014. The final legislation was signed into law Dec 19, 2014. Some of the more popular renewed Tax Credits for Individuals are: o Residential Energy Tax Credit — for installing energy efficient windows, doors, water heaters, etc. in an existing home. Up to $500 lifetime credit. o Educator's deduction of $250 for out-ofpocket classroom expenses — With this provision, originally enacted in 2002, teachers could deduct up to $250 of out-of-pocket expenses for kindergarten through grade 12 educators with out-of-pocket classroom

expenses of up to $250 classroom materials. o Sales Tax Deduction — One of the largest permanent tax breaks is the state and local tax deduction, which allows filers who itemize to deduct the amount paid in state or local income tax. However, people who live in states with no income tax cannot take advantage of this deduction. This provision created a deduction for sales tax states by allowing an individual to deduct either the amount they paid in sales tax or income tax since 2004. (Primarily benefiting people living in areas without state and local income taxes.) o Charitable Donations from an IRA Under this provision created in 2006, retirees age 70.5 and older could donate up to $100,000 tax-free from their IRA each year to charity. Normally, the donation would be eligible for a charitable deduction, but this provision converts the deduction to a complete

are overlooking things like the earned income tax credit. About a quarter of those eligible are not claiming it, he said. The IRS says that more than half of taxpayers hire a tax preparer to do their returns, and the agency urges caution in choosing one. Check preparers’ credentials, and make sure they have an IRS preparer tax-identification number and file electronically, the agency says. “Never sign a blank return” and be wary of those who promise large refunds, it advises. What about dealing with the IRS itself? The agency has adopted a Taxpayer Bill of Rights covering 10 principles, from the right to get quality service from the IRS to the right to appeal IRS decisions, including penalties. The final principle covers the “right to a fair and just tax system.” National Taxpayer Advocate Nina Olson, whose agency helps taxpayers navigate dealings with the IRS, commended the agency for adopting the bill of rights. “If taxpayers believe they are treated, or can be treated, in an arbitrary and capricious manner, they will mistrust the tax system and be less likely to comply of their own volition,” she said in her semiannual report to Congress last summer. “By contrast, taxpayers will be more likely to comply if they have confidence in the fairness and integrity of the tax system.” — Online: IRS Publication 17, Tax Guide 2014 for Individuals: http://www.irs.gov/pub/irspdf/p17.pdf

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Taxes by the numbers The Associated Press

Key numbers to know when you’re filing your 2014 taxes, according to the Internal Revenue Service: PERSONAL EXEMPTION: —Each personal or dependent exemption is worth $3,950. —Phase-out begins at $254,200 for individuals, $279,650 for heads of household, $305,050 for married filing jointly. STANDARD DEDUCTION: —$12,400 for married couples filing a joint return, and qualifying widows and widowers. —$6,200 for singles and married individuals filing separate returns. —$9,100 for heads of household. Taxpayers who are 65 or older or who are blind may be eligible for a higher standard deduction. ALTERNATIVE MINIMUM TAX THRESHOLD: —$82,100 for married couples filing jointly. —$52,800 for singles and heads of household. INCOME TAX BRACKETS: —10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, 39.6 percent. EARNED INCOME TAX CREDIT: To qualify income must be no greater than: —$46,997 ($52,427 married filing jointly) with three or more qualifying children —$43,756 ($49,186 married filing jointly) with two qualifying children —$38,511 ($43,941 married filing jointly) with one qualifying child —$14,590 ($20,020 married filing jointly) with no qualifying children Maximum credit: —$6,143 with three or more qualifying children —$5,460 with two qualifying children —$3,305 with one qualifying child —$496 with no qualifying children CAPITAL GAINS: —0 percent if taxpayer is in the 10 percent or 15 percent income tax brackets. —15 percent top rate if taxed below the 39.6 percent rate. —20 percent if taxed at the 39.6 percent rate. ESTATE AND GIFT TAX —Exclusion of $5,340,000 for individual estates of people who died in 2014. —Gift tax exclusion of $14,000. Married couples can each give $14,000 to the same person before it becomes taxable. IRA CONTRIBUTIONS: —Traditional IRA contribution limit: $5,500. —Additional contribution if over 50 but under 70 ½ years old: $1,000. DEFERRED RETIREMENT ACCOUNTS —401(k), 403(b): $17,500. —Additional contribution if 50 or older: $5,500. STANDARD MILEAGE RATES: —Business use: 56 cents a mile. —Medical reasons or qualified move: 23.5 cents a mile. —Charitable purposes: 14 cents a mile.

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Higher standard deduction, other breaks for older taxpayers WASHINGTON (AP) — You’ve downsized to an apartment, the kids are long gone, and you’re no longer eligible for some of the deductions and exemptions that had helped you lower your tax bill. But for those 65 years or older, there are other tax breaks that might benefit you come tax time. For one, not all your Social Security benefits are subject to federal taxes. How much depends on your other income and filing status. “No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules,” the Social Security Administration says on its website. To determine what percent of your benefits might be taxable, add half your benefits to your other income, including nontaxable interest. If your combined income is between $25,000 and $34,000 and your filing status is single, up to 50 percent of your benefits might be taxable, according to the IRS. For married couples filing jointly, the 50 percent taxable figure applies if your combined income is between $32,000 and $44,000. Combined income lower than the threshold? Social Security benefits aren’t taxable. If the combined income is above these income ranges, up to 85 percent is subject to income taxes. Be sure to check your state tax laws. In many states, you won’t have to pay state tax on all or some of your Social Security benefits. People 65 and over also should consider whether it’s more beneficial for them to claim the standard deduction or to itemize. AP Photo The standard deduction is higher for JAckie PerlmAn, principal tax research analyst of the seniors — $7,750 if your filing status is single, $14,800 if you’re married filing Tax Institute at H&R Block, poses for a photograph at H&R jointly and you and your spouse are Block offices in Kansas City, Mo. There is also a small tax both at least 65. That compares to credit for low-income seniors, which Perlman says is not wide$6,200 for single filers under 65 and ly used. “It might be helpful for someone who neither con$12,400 for married taxpayers under 65 tributed to the Social Security system nor never married.” who are filing jointly. “Seniors very often have already paid up their mortgage and they very often Even if you don’t have mortgage interest to don’t itemize anymore,” said Jackie Perlman, prindeduct, you can still deduct any property taxes you cipal tax research analyst at the Tax Institute at paid. State income taxes also are deductible, or H&R Block. alternatively, you can choose to deduct state sales But it’s important to do the math — or let your taxes, an attractive option if you live in a state that tax preparer or tax software do it for you — to see doesn’t have an income tax. whether it still makes sense to itemize even with the higher standard deduction. See OLDER, Page 7


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Temporary tax breaks good for 2014, future up to Congress WASHINGTON (AP) — Many taxpayers can rest easier knowing that Congress extended a series of tax breaks for individuals and businesses before adjourning last month. But the effects will be short-lived. The extension only lasted until the end of 2014. The new Congress that took office Jan. 6 will have to decide once again whether to renew them. Going forward, the tax breaks may not be around. “Don’t rely on them,” said Mark Luscombe, principal tax analyst for Wolters Kluwer Tax & Accounting US. For the 2014 tax year, Kathy Pickering, executive director of the Tax Institute at H&R Block, estimates that 1 in 6 taxpayers will be affected by the extenders. They include college students and their parents; homeowners; residents of states without income tax, and more. Those who qualify could see larger refunds, or a smaller tax bill. For individuals, the tax extenders are linked to expenses you’re likely to have, tax break or not, said Bob Meighan, vice president for consumer advocacy at TurboTax. Live in a state that doesn’t have an income tax? If you itemize, the congressional extension means you can take a deduction for sales tax. Are you and your child struggling with the high cost of college? The tax extenders bill passed by Congress includes the $4,000 above-the line deduction for tuition and fees.

Above-the-line deductions reduce adjusted gross income, which is used to calculate eligibility for many tax breaks, including the tuition and fees deduction. (This, however, is only one of many tax breaks for higher education. Among the others: the lifetime learning credit or the American Opportunity Credit. “Though income levels differ for each of these three benefits and people should see which one works best, the trend in recent years has heavily been toward the credits,” said Internal Revenue Service spokesman Eric Smith. The extenders also include an above-theline deduction for schoolteachers in kindergarten through high school who spend their own money on books and supplies for the classroom. They can deduct up to $250 for this expense. There’s help, too, for homeowners — and those who fell behind on mortgages. Was your house underwater and some of your mortgage debt was forgiven? As a result of the congressional action, that forgiven debt will often not be counted as taxable income. Were you required by your lender to purchase mortgage insurance? One of the extenders will allow you to deduct the cost of those premiums. The credit of up to $500 for making environmentally friendly improvements to your home also was renewed for 2014. Among the things covered: energy-efficient heating or air conditioning, new windows and

OLDER from page 6 For seniors, medical expenses have to exceed 7.5 percent of adjusted gross income to be deductible. That threshold applies even if only one spouse has reached 65 and you file jointly. For those under 65, medical expenses are deductible only if they exceed 10 percent of your adjusted gross income. And medical bills can be hefty for seniors. Covered medical expenses include the portion of doctor, dentist and hospital bills and the cost of prescription drugs not covered by insurance, as well as premiums for Medicare or other insurance coverage. Prescription eyeglasses are deductible, as are the cost of false teeth, hearing aids and wheelchairs. So is the cost of transportation to medical appointments. Charitable donations also are deductible. However, seniors who are at least 70½ had another option for charitable donations. At that age, you’re required to take a minimum distribution for your individual retirement accounts. If you rolled that distribution over directly to a charity — instead of taking the money and then donating it — the distribution is not counted as income and therefore is not taxable. “The difference is you’re lowering not only your taxable income but also your adjusted

gross income,” Perlman said. And that can affect such things as whether Social Security benefits are taxable and whether you can deduct your medical expenses. But there’s no double-dipping. If you itemize, you can’t also deduct a charitable donation that was made through a direct rollover from an IRA. There is also a small tax credit for lowincome seniors, which Perlman says is not widely used. “It might be helpful for someone who neither contributed to the Social Security system nor ever married.” The IRS offers free tax help for people 60 and older, working through non-profit groups like AARP Foundation.

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insulation. Credits directly reduce the amount of taxes owed. Deductions reduce the income on which taxes are computed. If you’re 70½ or older and required to take a minimum distribution from your retirement accounts, the extenders allowed you to do this tax-free, by rolling it over directly to a charity. But you would have had to do that before Dec. 31 to avoid having the distribution counted as income and taxed as such. In some previous years, when the tax breaks were extended late in the year, Congress included a special provision that

allowed distributions made in January to qualify, the IRS said. There was no such rule this year. Increasingly, these extenders have only been enacted for a single year. Luscombe says that’s because some in Congress believe they should be discussed as part of “fundamental tax reform.” And that could mean a push for lower individual rates in exchange for giving up some credits and deductions. “Politically, that might be difficult for people who are fond of their tax breaks,” he said.


8—Cleveland Daily Banner—Sunday, January 25, 2015 Q&A from page 4 exclusion, which allows retirees to make their required IRA withdrawals without triggering a tax a Social Security benefits for retirees with income other than Social Security. o Tuition and Fees Deduction - This deduction, in place since 2001, allows filers with incomes less than $65,000 a year ($130,000 if filing jointly) to deduct up to $4,000 of tuition and fees paid for higher education. This provision was for filers who did not claim one of the other educational credits, and it phased out entirely for filers with incomes over $80,000 ($160,000 if filing jointly). Benefiting parents and students. Claim on Form 8917. o Mortgage Debt Forgiveness - Normally, forgiven debt counts as taxable income. In response to the housing crisis, homeowners could exclude up to $2 million of canceled debt ($1 million if married filing separately) on their principal residence. The forgiveness must be directly related to a decline in the home’s value or the taxpayer’s financial condition. This provision was passed as temporary stimulus measure in 2007. o Mortgage Insurance Premiums — itemized deduction. o Parity for Commuter Transit Benefit — Before this provision expired, commuters could spend up to $245 a month of tax-free income for either transit or parking. After the expiration, the amount for transit has dropped to $130 a month, while the amount for parking rose with inflation to $250 a month, meaning that those who drive to work are now subsidized more than those who use public transit. The transit benefit originated in 1993 and became equal to the parking benefit in 2009. Q. — How will the Affordable Care Act affect an individual’s 2014 tax return? A. — “I strongly encourage taxpayers to visit our website and order/view publications 5187 and 5185 for more information on ACA,” said Green. http://www.irs.gov/ Af fordable-Care-Act/Individuals-andFamilies/Health-Care-Law-and-Your-TaxReturn, www.irs.gov/pub/irs-pdf/p5187 .pdf, www.irs.gov/pub/irs-pdf/p5185.pdf The vast majority of Americans are already covered and don’t need to do anything more than check a box on their tax return. Check box 61 on the Form 1040, Line 38 on Form 1040A, or Line 11 on Form 1040EZ. Individuals who didn’t maintain their healthcare coverage throughout the year must either have exemptions from coverage or make individual shared responsibility payments with their federal income tax returns. Only people who got coverage through the Health Insurance Marketplace may be eligible for the premium tax credit. Individuals who purchased coverage through the Marketplace and opted to have advance credit payments sent directly to their insurance company must reconcile those payments with the amount of the credit they are actually allowed on their tax return. Coverage Exemptions and payment amounts will be calculated using the Form 8965 instructions.

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Q. — How will people know what to put on their tax return? A. — For most people it will mean just checking a box on their tax return to indicate that they had coverage for the entire year. Others should visit IRS.gov/aca for more information about exemptions and payments. Exemptions will be claimed using Form 8965, Health Coverage Exemptions. Individuals who bought health insurance through the Marketplace should receive Form 1095-A, Health Insurance Marketplace Statement, by the end of January. Most people are already familiar with using similar tax information documents such as their W2 or Form 1099 to prepare their tax return. Individuals claiming the premium tax credit will use the information on Form 1095-A to complete Form 8962, Premium Tax Credit, to claim the credit on a Federal Tax Return or to reconcile advance credit payments. Q. — What can people do now if they don’t have insurance? A. — Individuals can purchase coverage directly from insurance companies or brokers, or through the Marketplace. The Department of Health and Human Services administers the requirements for the Marketplace and the health plans that are offered. Although the Marketplace open enrollment period for 2015 ends in February 2015, under certain circumstances eligible individuals may qualify for a Special Enrollment Period and will still be able to buy health coverage for 2015 through the Marketplace. The open enrollment period for coverage in 2015 will run from November 15, 2014 through February 15, 2015. Visit the Department of Health and Human Services website at HealthCare.gov to learn more about coverage options, financial assistance and to enroll in coverage. Information on health care related tax provisions, including the individual shared responsibility provision, is on IRS.gov/aca. Q. — Where can I get assistance? A. — The IRS Web site at www.irs.gov. Information on IRS.gov: o Highlights of the latest tax law changes, tax tips, news releases and frequently asked questions. o Links to information about: — Popular Tax Credits and Deductions — IRS Free File, the free electronic tax filing service provided by IRS partners in the tax software preparation industry. — “Where’s My Refund?” which helps taxpayers track the status of their refunds. — Commonly used forms and tax instructions and — Information for those facing difficult times financially. — Volunteer Income Tax Assistance (VITA) provides free tax return assistance to low or moderate income taxpayers. Tax Counseling for the Elderly (TCE) provides assistance to elderly taxpayers. VITA and TCE sites open in late January or early February. Check community newspapers, or call the IRS at 1-800-829-1040 for VITA or TCE site locations. You may also call AARP—the largest TCE participant — at 1-888-227-7669 for the nearest AARP Tax-Aide site.

VITA program helps with forms The IRS Volunteer Income Tax Assistance Grant Program means there are “People Helping People” file their 2014 income tax returns for households with incomes of $55,000 or less. This marks the ninth consecutive year the city of Cleveland, Kmart and Bradley Baptist Association have joined with the Internal Revenue Service to provide the free tax preparation service. IRS Certified VITA Volunteers at South Cleveland Community Center, 1334 Church St. N.E., will file tax returns free of charge. The service will be available 10 a.m. to 2 p.m. every Saturday and 11 a.m. to 5 p.m. each Tuesday and Thursday from Jan. 31 through April 15. Walk-ins are welcome or call South Cleveland Community Center at 423-5593322 for an appointment. Please call Kmart and Bradley Baptist Association for dates and times. Taxpayers must bring W2, 1099-misc and

1099-R or other forms showing income earned in 2014. If possible, provide a copy of the 2013 return. Social Security cards for the heads of households and dependents, and a driver’s license or photo ID for taxpayers are required before volunteers can prepare tax returns. IRS volunteers cannot prepare complicated returns or business returns. Self-employment is acceptable if business expenses are no more than $10,000, with no carryover losses or inventory. The heart of the program, volunteer tax preparers, receives 100 hours of classroom training and earns IRS certification. The volunteers save local taxpayers thousands of dollars each year by filing more than 1,200 returns at no cost. You may call the Bradley Baptist Association at 476-5493 for an appointment to have assistance filling out your forms. Kmart has not yet released its dates for assistance on form.

Debunking common tax-filing myths (NewsUSA) — If you’re like most Americans, you don’t have all of the answers when it comes to tax filing. That’s why it’s important to do as much research as possible to get up to speed on the latest adjustments and myths surrounding the tax code. To help, here are six tax myths that the National Association of Enrolled Agents — a group of federally licensed tax practitioners who specialize in taxes —encounters frequently. Myth: I’m filing an extension, so I don’t need to pay anything before the deadline. Fact: Tax extensions only extend the time you have left to file, not the time you have to pay any taxes owed. If you owe money and file an extension, you have until April 15 to pay, regardless of the extended deadline date. Otherwise, interest and penalties begin to stack up. Myth: I had a really big loss in the stock market this year, so I won’t owe any income taxes. Fact: Deduction of capital losses against ordinary income is limited to $3,000 per year. Also, whether you reinvest or receive dividends, they are technically, still income and are taxed as such. Myth: They paid me in cash, so I don’t have to report it.

Fact: If it’s income, you must report it. You always report income, regardless of whether it’s cash, tips, bonuses or dividends. Myth: I’m too young to have to pay taxes. Fact: Even dependents working part-time while in high school must file a tax return if they earn more than $6,200 in 2014, if they want to receive their refund or if their unearned income is more than $1,000. Myth: Income earned in a foreign country is not taxable. Fact: The operative word is “income,” which means it’s taxable. The IRS requires taxpayers to report all earned income, even if it’s earned abroad. Myth: Tax preparers only fill out forms that you can do yourself. Fact: Licensed preparers know the intricate (and constantly changing) tax laws, regulations and codes, and how they can be applied for your benefit and save you money. Enrolled agents, America’s tax experts, receive annual continuing education so they are knowledgeable of tax laws and how they can apply to you. Enrolled agents not only specialize in tax preparation and tax planning, they can also represent you before the IRS. “Find an EA” directory at www.naea.org.

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Cleveland Daily Banner—Sunday, January 25, 2015— 9

IRS taking steps to try to protect against identity theft WASHINGTON (AP) — Rejected. A notice from the Internal Revenue Service saying your return won’t be accepted might be your first clue that your identity has been stolen. “The IRS recognizes the first return submitted under a Social Security number, and usually the identity theft is identified when the second return is filed” under that same number, said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting, US. Another clue might be an IRS notice saying you have unreported income. That could happen if someone steals your Social Security number and gives it to an employer to avoid being taxed on earned wages. You get the tax bill instead. Identity theft could lead to long delays in getting your refund or bigger tax bills for unreported income. “Tax refund fraud associated with identity theft (IDT) continues to be an evolving threat, one that imposes a serious financial and emotional toll on honest taxpayers and threatens the integrity of the tax administration system,” the Government Accountability Office said in a report in August. More than 236,000 tax returns processed last year were deemed fraudulent because of identity theft, and nearly $1.2 billion in refunds from those fraudulent returns were blocked, according to the Treasury Inspector General for Tax Administration. The number of identity-theft returns is down significantly from 2012, and the IG said in a report last fall that new filters the IRS put in place to identify the crime may be responsible. “The IRS is investing in that area,” said Bob Meighan, vice president of consumer advocacy for TurboTax. “People have to have confidence that the returns that they file are protected and secure,” he said. The IRS is providing identity-theft victims with a personal identification number to prove who they are when filing tax returns. In 2014, more than 1.2 million of these identity-protection PINs were issued by the agency, up from 770,000 the previous year. The agency also has more than doubled the number of workers assigned to identity-theft cases since 2011, to about 3,000 in 2014, according to the GAO. Beginning this year, the number of refunds direct-deposited to a single account is limited to three, another attempt to reduce identity theft. “The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer,” the IRS

AP Photo

NAtioNAl tAxPAyer AdvocAte Nina Olson poses with tax code books at the Internal Revenue Service in Washington. Olson calls identity theft “an invasive crime that can have a traumatic emotional impact.” She has called on the IRS to designate a single point of contact who can provide “sensitive, holistic assistance” to an identity theft victim. said. National Taxpayer Advocate Nina Olson wants the agency to do more. She has called identity theft “an invasive crime that can have a traumatic emotional impact.” She said early last year that she has called on the IRS to designate a single point of contact, someone who can provide “sensitive, holistic assistance” to an identity-theft victim. Kathy Pickering, executive director of the Tax Institute at H&R Block, says prevention is the best defense. Don’t give out your Social Security number or your date of birth, she says. The IRS also advises people to protect their personal computers and Internet accounts, check their credit reports and avoid giving out personal information over the phone, especially if you didn’t initiate the call. And beware of phishing attempts — online or

over the phone — that seek access to your personal information. “The IRS does not initiate contact with taxpayers by email to request personal or financial information,” the agency said. “This includes any type of electronic communication, such as text messages and social media channels.” If you get a notice from the IRS that leads you to believe you are an identity-theft victim, the IRS says you should respond immediately. The first step, the agency says, is to complete an Identity Theft Affadavit, Form 14039. It’s available at www.irs.gov , and should be filled out and mailed or faxed according to the instructions provided. If the issue remains unresolved, taxpayers should contact the Identity Protection Specialized Unit at 1-800-908-4490. —Online: IRS Identity Theft Page: http://

www.irs.gov/uac/Taxpayer-Guide-to-IdentityTheft

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10—Cleveland Daily Banner—Sunday, January 25, 2015

Top five reasons to e-file Are you still using the old school method of doing your taxes? Do you still mail paper forms to the Internal Revenue Service? Nearly 126 million taxpayers used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too, according to the IRS. o Accurate and easy. IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms. o Convenient options. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file through IRS Free File, the free tax preparation and e-file program available only on IRS.gov. You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older. o Safe and secure. IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began. o Faster refunds. In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days. o Payment flexibility. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card. Visit IRS.gov/payments for more information.

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Most taxpayers eligible to use Free File WASHINGTON – The Internal Revenue Service and the Free File Alliance have launched of Free File, which makes brandname tax software products and electronic filing available to most taxpayers for free. Free File software can help taxpayers with tax preparation, including the health care law that will affect almost everyone. People can use Free File software. Free File is available only at IRS.gov/FreeFile, thanks to a partnership between the IRS and the Free File Alliance, a consortium of 14 leading tax software companies that make their branded products available for free. Since 2003, more than 43 million people have used Free File, saving $1.3 billion based on a conservative $30-fee estimate. “You don’t have to be an expert on taxes or the new health care law. Free File software can help walk you through the rules and help you get it right,” said John A. Koskinen, IRS commissioner. “For 12 years, this partnership between the IRS and the Free File Alliance has helped taxpayers save both money and time. The real winner in this partnership has been the nation’s taxpayers.” Tim Hugo, executive director of the Free File Alliance, said, “We are proud to once again offer the industry’s most innovative and secure tax software at no cost to 70 percent of American taxpayers. Tax time can be stressful, but Free File makes step-by-step help accessible to everyone making $60,000 or less. IRS.gov/FreeFile is the one place where taxpayers can choose from a variety of industry-leading tax software options in order to prepare and e-file their federal tax returns at absolutely no cost.”

If you earned $60,000 or less last year, you are eligible to choose from among 14 software products. If you earned more, you are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. This more basic Free File option is best for people comfortable preparing their own tax return. More than 70 percent of all taxpayers — 100 million people — are eligible for the software products. Each of the 14 companies has its own special offers, generally based on age, income or state residency. Taxpayers can review each company offer or they can use a “Help Me” tool that will find the software for which they are eligible. Free File offers easy-to-use products that ask questions and you supply the answers. The software will find the right forms, find the right tax credits and deductions and even do the math for you. Some companies also offer free state tax return preparation as well. Free File also can help taxpayers with the new health care requirements. Almost everyone will need to do something new when filing a tax return this year. For each month in 2014, you and everyone on your return must: o Report health care coverage, or o Claim an exemption from coverage or o Make a shared responsibility payment with your tax return. Most people will simply have to check a box to report health care coverage for the entire year. If you or anyone on your return purchased coverage from the Health Insurance Marketplace, you may be allowed to take the Premium Tax Credit. If you opted for any advance payments of

Need help filling out your tax return? Don't call the IRS WASHINGTON (AP) — Filing a federal tax return is about to get more complicated for millions of families because of President Barack Obama's health law. But they shouldn't expect much help from the Internal Revenue Service. Got a question for the IRS? Good luck reaching someone by phone. The tax agency says only half of the 100 million people expected to call this year will be able to reach a person. Callers who do get through may have to wait on hold for 30 minutes or more to talk to someone who will answer only the simplest questions. “Taxpayers who need help are not getting it, and tax compliance is likely to suffer over the longer term if these problems are not quickly and decisively addressed,” said a report Wednesday by agency watchdog Nina E. Olson. IRS Commissioner John Koskinen says budget cuts are forcing the agency to reduce

taxpayer services and other functions. The number of audits will decline, technology upgrades will be delayed and the agency might be forced to shut down and furlough workers for two days later this year, Koskinen said.

the Premium Tax Credit to help with your monthly insurance premium payments, you must file a tax return, even if you were not required to file. You must reconcile your advance payments with the amount you were due. Learn more at IRS.gov/aca. Free File will be available through October 2015. Taxpayers have the option to prepare their return at any time and schedule a tax payment as late as the April 15 deadline. Taxpayers who cannot meet the April 15 tax filing deadline can also use Free File to file a six-month extension. Here are some common tax-related documents you will need to complete your tax return. Remember, you must also have documentation of any credit or deduction you are claiming as well. o A copy of last year's tax return; o Valid Social Security numbers for yourself, spouse and children; o All income statements, i.e. W-2 forms, from all employers; o Interest/dividend statements, i.e. 1099 forms; o Form 1099-G showing any state refunds; o Unemployment compensation amount, if any; o Form 1095-A if you purchased coverage from a Health Insurance Marketplace; o Proof of health care insurance coverage for you and everyone on your return.

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Cleveland Daily Banner—Sunday, January 25, 2015— 11

Taxpayer Bill of Rights Every taxpayer has a set of fundamental rights. You should be aware of these rights when you interact with the Internal Revenue Service. These right are listed in the IRS Publication 1. The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 broad categories. That makes them easier to find and to understand. You can find a list of your rights and the IRS’s obligations to protect them in Publication 1, Your Rights as a Taxpayer. It includes the following: o The Right to Be Informed. Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes. o The Right to Quality Service. Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communica-

tions from the IRS and to speak to a supervisor about inadequate service. o The Right to Pay No More than the Correct Amount of Tax. Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly. o The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position. o The Right to Appeal an IRS Decision in an Independent Forum. Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court. o The Right to Finality. Taxpayers have the right to know the maximum amount of time they have to challenge

the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit. o The Right to Privacy. Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections, and will provide, where applicable, a collection due process hearing. o The Right to Confidential-ity. Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information. o The Right to Retain Representation. Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they

Wal-Mart launches cash pickup option for tax refunds NEW YORK (AP) — Wal-Mart is launching a service allowing customers to pick up their tax refunds in cash at all stores nationwide. It’s the discounter’s latest move to offer more financial services, which is seen as a path to bringing more shoppers to its stores. The world’s largest retailer, based in Bentonville, Arkansas, says the process will take the same time as if customers were to file their returns electronically and then get direct deposit, which could take just a week, says Daniel Eckert, senior vice president of services for Wal-Mart’s U.S. division. The service could help people without bank accounts get their refunds more quickly and avoid high check-cashing fees. Wal-Mart also says it could prove convenient for others. “We know tax refunds can be one of the largest financial payouts of the year for many of our customers and the last thing they want is to wait for a refund check to arrive and then spend money on unnecessary fees,” Eckert said. Eckert also acknowledged Wal-Mart’s business could get a boost by providing an extra “jingle” to their wallets at a time of sluggish sales and customer traffic declines. The offering marks the latest example of how Wal-Mart is expanding its financial services. Last April Wal-Mart introduced a new money transfer service that it says will cut fees for its low-income customers by up to 40 percent compared with similar services elsewhere.

Last fall, Wal-Mart teamed up with Green Dot Corp., a company known for reloadable prepaid cards, to bring mobile checking accounts to its shoppers. Also, last fall, Wal-Mart teamed up with an online health insurance comparison site and agency that lets shoppers compare the cost of health care coverage options at its stores. As part of this new cash refund service, Wal-Mart is aligning with a Green Dot business called Tax Products Group, and Republic Bank & Trust Co., two providers of tax-related financial products. These companies have more than 25,000 tax-preparation locations, both in Wal-Mart stores and elsewhere, for the service. Wal-Mart already offered tax-preparation services at its stores and shoppers could cash refund checks at the stores. Wal-Mart doesn’t charge a fee for the cash pickup. Tax preparers can charge a maximum of $7 for the service at the time of filing. Wal-Mart stores charge a flat $3 to cash paper checks under $1,000 and $6 up to $7,500, but the new service is faster than waiting for a paper check from the IRS. The service is not available for people who electronically file their own taxes. It works like this: When customers use any one of these tax preparation locations, they can choose the option called “Walmart Direct2Cash.” They will then receive a confirmation code for their federal and or states tax returns through an email from TPG or Republic Bank as soon as their refund is ready to be picked up. Customers will then go to the Walmart

cannot afford representation. o The Right to a Fair and Just Tax System. Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels. The IRS is trying to increase the number of Americans who know and understand their rights under the tax law. To expand awareness, the IRS is making Publication 1 available in multiple languages on IRS.gov. This important publication is available in English, Chinese, Korean, Russian, Spanish and Vietnamese. The IRS will include Publication 1 when sending notices to taxpayers on a range of issues, such as an audit or collection matter. All IRS facilities will publicly display the rights for taxpayers and employees to see. The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service. TAS is an independent office inside the IRS that represents the interests of U.S. taxpayers.

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12—Cleveland Daily Banner—Sunday, January 25, 2015

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