The 12 Days Of Tax Tips [Part 1]

December 13, 2017

As the year comes to a close, we have collected twelve IRS lists with tax tips for year-end planning, safekeeping, reporting, and giving.

Part 1 Table of Contents:

Twelve worst tax scams for 2017
Eleven tips on distributions from Individuals Retirement Arrangements (IRAs)
Ten fundamental rights of a taxpayer
Nine questions to consider when determining if it is a business or hobby
Eight steps to keep online data safe
Seven steps to follow when an IRS letter arrives

Twelve worst tax scams for 2017

Hiding money offshore
Frivolous tax arguments
Abusive micro-captive insurance tax shelters
Erroneously claiming tax credits
Falsely inflating deductions or expenses
Improper claims for business credits
Fake Charities
Tax Return Preparer advertising inflated tax refunds
Dishonest return preparers
Identity theft
Aggressive and threatening IRS impersonators
Fake emails or websites stealing personal information

Eleven tips on distributions from Individuals Retirement Arrangements (IRAs)

Qualified Charitable Distributions are generally nontaxable IRA distributions
Qualified Charitable Distributions will count towards required minimum distributions
Distribution must be made from the trustee to the qualified organization
Distribution must be made to a qualified organization
Donor must be at least 70.5 years in age when distribution was made
Qualified organizations must send an adequate written donor acknowledgment
Donor acknowledgments must be received by the due date of the tax return
Maximum exclusion allowed is $100,000
Joint filing returns can each have an exclusion of $100,000
Distribution amounts over $100,000 will be included in income as normal
Deductions cannot be claimed if the distribution is not included in your income

Ten fundamental rights of a taxpayer

Right to be informed
Right to quality service
Right to pay no more than the correct amount of tax
Right to challenge the IRS’s position and be heard
Right to appeal an IRS decision in an independent forum
Right to finality
Right to privacy
Right to confidentiality
Right to retain representation
Right to a fair and just tax system

Nine questions to consider when determining if it is a business or hobby

Is the activity carried on in a businesslike manner?
Is the intention to be profitable?
Is the activity the only income source to live on?
Are losses due to startup costs and/or unforeseeable circumstances?
Has methods of operations been changed to improve profitability?
Do you have the knowledge needed to carry on the activity as a successful business?
Has there been successful profits in the past?
Is the activity making a significant amount of profit in some years?
Are future profits expected from the appreciation of assets used in the activity?

Eight steps to keep online data safe

Shop familiar online retailers
Avoid unprotected Wi-Fi
Avoid phishing emails
Use security software to scan, remove, and protect against malware
Use strong passwords
Use multi-factor authentication
Use account alerts
Encrypt sensitive data

Seven steps to follow when an IRS letter arrives

Determine the question or issue
Determine if there is a tax return issue and compare to originally filed return
Determine if a payment is due
Determine if a written response is required
Determine if a call is necessary, typically it is not
Determine the response date
Determine where to store the letter for safe keeping

Blue & Co.’s Tax Department is happy to assist with any topic listed above. Please contact Amber Kocher, CPA at akocher@blueandco.com for any tax-exempt questions or concerns.