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Mar 01 2018
Education Incentives

Posted in taxes

The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit (formerly called the Hope Credit) or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels.

If you don't qualify for the credit, you may be able to claim the "tuition & fees deduction" for qualified educational expenses. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. This deduction phases out at higher income levels.

You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not have to itemize your deductions on Schedule A Form 1040. However, this deduction is also phased out at higher income levels.

Last Updated by Admin on 2018-03-01 11:02:17 PM

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Feb 26 2018
March Tax Deadlines

Posted in taxes

March 1

Farmers and fishermen - File Form 1040 and pay any tax due. However, you have until April 15 to file if you paid your previous year estimated tax by January 15 of the current year.

March 2

Employers - Give your employees Forms 1095-B and 1095-C for health care coverage.

March 10

Employees who work for tips - If you received $20 or more in tips during February, report them to your employer. You can use Form 4070 Employee's Report of Tips to Employer.

March 15

Employers - Nonpayroll Withholding. If the monthly deposit rule applies, deposit the tax for payments in February.

Employers - Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in February.

S Corporations - File Form 1120S and pay any tax due. Provide each shareholder with a copy of Schedule K-1 (Form 1120S), Shareholder's Share of Income, Credits, Deductions, etc., or a substitute Schedule K-1. If you want an automatic 6-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe.

S Corporation election - File Form 2553, Election by a Small Business Corporation, to choose to be treated as an S Corporation beginning with current calendar year. If Form 2553 is filed late, S treatment will begin with next calendar year.

Partnerships - File a previous calendar year return (Form 1065). Provide each partner with a copy of Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc., or a substitute Schedule K-1. If you want an automatic 6-month extension to file the return and provide Schedule K-1 or a substitute Schedule K-1, file Form 7004. Then file Form 1065 by September 15.

Electing large partnerships - File a previous calendar year return (Form 1065-B). Provide each partner with a copy of Schedule K-1 (Form 1065-B), Partner's Share of Income (Loss) From an Electing Large Partnership. This due date is effective for the first March 15 following the close of the partnership's tax year. If you want an automatic 6-month extension of time to file the return, file Form 7004. Then file Form 1065-B by September 15.

March 31

Electronic filing of Forms 1097, 1098, 1099, 3921, 3922, 1094-B, 1095-B, 1094-C, 1095-C, and W-2G File Forms 1097, 1098, 1099, 3921, 3922, 1094-B, 1095-B, 1094-C, 1095-C, or W-2G with the IRS. This due date applies only if you file electronically (not by magnetic media). Otherwise, see February 28. The due date for giving the recipient these forms will still be January 31. For information about filing Forms 1097, 1098, 1099, 3921, 3922, or W-2G electronically, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498 and W-2G Magnetically or Electronically

Last Updated by Admin on 2018-02-26 06:47:43 PM

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Jan 10 2017
We have expanded our services!

Posted in general

We are very excited to introduce Diane Owl to our office.  She comes to Radke & Mohrhauser, LLC with over 20 years of experience in payroll processing, payroll reporting, general administrative duties and accounting/bookkeeping.  We are excited to be able to expand our payroll services to many clients that she has worked with in the past and many that will want to work with Radke & Mohrhauser, LLC in the future.  Please give our office a call to set up a time to meet with any of our professionals this tax season!

Last Updated by Admin on 2017-01-10 11:18:21 PM

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Oct 27 2016
2016 Year End Planning Newsletter

Posted in taxes

Click here to read our 2016 Year End Planning Newsletter

Last Updated by Admin on 2016-10-27 01:46:23 PM

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Aug 04 2016

Posted in general

Last Updated by Admin on 2016-08-04 03:07:56 PM

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Aug 04 2016
IRS Warns of Con Artists!

Posted in taxes

It has become evident over the past few months that con artists are trying to persuade taxpayers into paying taxes they do not owe!  If you receive a call from someone indicating they are with the IRS, please use caution.   If you have a tax issue, the IRS will usually contact you via US Mail prior to any personal contact or phone calls. 

The IRS is seeing a big increase this summer in automated phone calls from con artists pretending to work for the IRS calling innocent taxpayers and demanding overdue taxes.  

The criminals leave urgent callback requests on voicemail telling taxpayers to call back to settle their tax bills.  The bogus calls generally purport to be the last warning before the IRS takes legal action against unsuspecting taxpayers.  When the victims call back the con artists threaten a lawsuit, threaten to arrest or deport the taxpayer or revoke their drivers license if they dont agree to pay up.  These tactics are not normal tactics used by the IRS in their collection process of legitimate tax bills.

The scammers have increasingly been asking unsuspecting taxpayers to make payment via iTunes gift cards or similar cards.  The IRS points out that any request to settle a tax bill using a gift card is a clear sign of scam.


Last Updated by Brian Radke on 2016-08-04 03:07:57 PM

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Mar 04 2016
Minnesota Revenue Warns of Tax Fraud

Posted in taxes

Department of Revenue reminds taxpayers to be aware of scams; criminals may attempt refund fraud using stolen identities

With 44 days left in the income tax filing season, the Minnesota Department of Revenue is reminding taxpayers that criminals may attempt to commit income tax refund fraud using stolen identities. Fighting refund fraud is one of the department’s top priorities.

The Internal Revenue Service and the department have recently warned of an increase in email, text message, and over-the-phone phishing scams that trick taxpayers into giving criminals personal information that they may then use to file a fraudulent tax return. As more and more identities are stolen and used for unlawful purposes, the department has taken steps to protect Minnesota taxpayers, their refunds, and the state’s general fund from criminals. 

“We understand that many Minnesotans rely on their refunds and we are working as quickly as we can to review returns for accuracy and for potential refund fraud through identity theft,” said Commissioner of Revenue Cynthia Bauerly. “Unfortunately, criminals are now using stolen identity information to file tax returns under a victim’s name. We are committed to making sure the right refund goes to the right person.”

The department continues to receive and process returns, and issues thousands of refunds every day. Each tax return is different and the department reviews all returns to verify the information to make sure that the right refund goes to the right person. As more and more identities are stolen and used for unlawful purposes, the department needs to take steps to protect Minnesota taxpayers and their refunds – and the state’s general fund – from criminals. In this environment of identity theft and fraud, there is no longer any such thing as a simple return. Protecting taxpayer refunds from thieves means that some returns could take longer to process than in prior years.

Taxpayers should know that neither the department nor the IRS will ever ask them to provide, update, or verify personal information through unsolicited emails or phone calls; nor will they threaten to send law enforcement to a taxpayer’s house if a debt is not paid immediately, as scammers often claim. You can learn more about scams, steps to prevent identity theft, and the department’s fraud prevention efforts on our website.

Get the latest news and updates from the Minnesota Department of Revenue by following the department on Facebook and Twitter or by signing up for our email subscription list.


Last Updated by Brian Radke on 2016-03-04 09:01:57 AM

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Feb 12 2016

Posted in taxes

Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund.

There are five easy ways to get a good jump on your taxes long before the April 15 deadline rolls around:

  1. Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don't forget to save a copy for your files.
  2. Get the right forms. They're available around the clock on in the Forms and Publications section.
  3. Take your time. Don't forget to leave room for a coffee break when filling out your tax return. Rushing can mean making a mistake — and that can be expensive!
  4. Double-check your math and Social Security number. These are among the most common errors on tax returns. Taking care on these reduces your chances of hearing from the IRS.
  5. Get the fastest refund. When you file early, you get your refund faster. Using e-filing with direct deposit gets you a refund in half the time as paper filing.

Last Updated by Admin on 2016-02-12 01:22:57 PM

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Dec 18 2014
Top 7 Last Minute Tax Planning Ideas for 2014!

Posted in taxes

The tax year 2014 is coming to close very fast.  There are still some things you can do to reduce your taxes between now and the end of the year.  Here is a quick list of items to consider for helping to reduce your taxes.  If you want to know how any of these items can affect your taxes, we are happy to do a tax projection for you so that you can plan your cash flow requirements or what your expected refund may be!

1.  Make an  HSA contribution.  You may be able to deduct up to $3,300 for individual coverage and $6,550 for family coverage (those age 55 or older also get an additional $1,000 catch-up amount).

2.  Harvest your Capital Losses:  If you have investments in your non-qualified accounts that are in loss positions, it may be a good time to sell the investment to recognize the loss.  These losses may be used to offset capital gains from other investments.  If you wish to remain in a certain investment, you may decide to sell the stock to recognize the loss in 2014, then re-purchase the stock 31 days later to avoid the "wash sale rules".  Please contact your financial adviser to discuss any investment decisions.  

3.  Accelerate deductible contributions:  You may want to use your credit card to make a charitable contribution in 2014.  If you use your credit card to make the contribution before December 31, 2014, you will get a deduction in 2014 even though you do not pay your credit card bill until 2015!

4.  Non-Cash contributions:  Clean out your closets to donate new or kindly used clothing or household goods.  You need to make sure the goods are in good condition and you need to keep accurate records of what items were donated along with values of each item. 

5.  Increase your withholding:  In order to avoid underpayment penalties, you can increase your withholding prior to year end.  In addition to avoiding underpayment penalties, you can also reduce your balance due on April 15, 2015 as well as possibly increasing your state tax deduction on your 2014 Federal return for Minnesota withholding taxes.

6.  Required Minimum Distributions:  If you are over age 70 1/2 and are required to take a RMD, make sure you do so prior to December 31, 2014 to avoid excise taxes.    Penalties for not taking your RMD, when required, can be up to 50% of the required RMD.  Please remember that if you turned 70 1/2 in 2014, you can defer your first RMD until 2015.  However, in 2015, you will be required to take both your 2014 and 2015 RMD in one year!

7 Gifts:  You can make gifts to any individual up to $14,000 for 2014 without incurring any gift taxes.    Gifting to individuals is not tax-deducible and should be considered for estate and gift tax purposes only.  Please refer to your estate planning attorney or contact our office if you have questions regarding gifting.

Please contact our office if  you want to discuss any of these last minute tax planning ideas of if you want a tax projection prepared so that you can determine your cash flow needs or anticipated refund!

Last Updated by Admin on 2014-12-18 09:14:37 AM

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Sept 29 2014
Capital Gains and Losses for 2014

Posted in taxes

With the market's recent ups and downs, take a good look at your investment portfolio.  You may have options to minimize taxes int eh coming months as December 31 approaches.  However, don't let the tax impact alone dictate investment moves.  Your decision to buy or sell should always be based on sound economic reasoning too.

Note the 0% rate on long-term capital gains. If your income without regard to your long-term gains is in the 10% or 15% tax bracket, profits on the sales of assets owned over a year are tax-free until the gains push you into the 25% bracket. That bracket starts at $73,800 of taxable income for couples...$36,900 for singles. If part of your gain
is taxed at 0% and the rest is taxed at 15%, claiming more itemized deductions or making a deductible IRA payin gives you two tax breaks: The income tax savings from the deduction. And more of your gain will end up being taxed at the 0% rate.

But the 0% rate isn’t all gravy. Even though the gains subject to the rate are not taxed, taking additional tax-free gains will boost your adjusted gross income. The extra AGI can cause more of your Social Security benefits to be taxed. In addition, your state income tax bill may jump, since many states tax gains as ordinary income.

Consider selling laggards in your portfolio. Capital losses offset your gains, plus up to $3,000 of other income. Any excess losses are carried over to next year.

Watch out for the wash-sale rule: If you buy the same security within 30 days before or after the sale, the loss isn’t deductible. Instead, the disallowed loss is added to the basis of the new shares. This rule can come into play if you sell a mutual fund at a loss within 30 days of the date a dividend is reinvested, or if you have your IRA purchase shares that you recently sold at a loss out of your taxable account.

Be wary of buying a mutual fund late in the year in a taxable account. If the fund pays a 2014 dividend after you buy it, you owe tax on the payout this year. But you aren’t any better off financially because the fund’s share price decreases
by a corresponding amount. In effect, you’re prepaying tax to IRS. To avoid this trap, buy the shares after the dividend record date. Ask the fund if it will pay a dividend

Last Updated by Admin on 2014-09-29 07:04:37 AM

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Sept 15 2014
Back-to-School Reminder for Parents and Students: Check Out College Tax Credits for 2014 and Years Ahead

Posted in taxes

With another school year now in full swing, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.

In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.

For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.

Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.

Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.

Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:.

The credit is only available for 4 tax years per eligible student. 
The credit is available only if the student has not completed the first 4 years of postsecondary education before 2014.

Here are some more key features of the credit:
Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.

The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.

Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
Income limits are lower than under the American opportunity tax credit. For 2014, the full credit can be claimed by taxpayers whose MAGI is $54,000 or less. For married couples filing a joint return, the limit is $108,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $128,000 or more and singles, heads of household and some widows and widowers whose MAGI is $64,000 or more.
You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.

There are a variety of other education-related tax benefits that can help many taxpayers. They include:
Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
Student loan interest deduction of up to $2,500 per year.
Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.

The general comparison table in Publication 970 can be a useful guide to taxpayers in determining eligibility for these benefits. Details can also be found in the Tax Benefits for Education Information Center on

Last Updated by Admin on 2014-09-15 09:05:09 AM

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Sept 11 2014
What to do if You Get a Notice from the IRS

Posted in taxes

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:

  1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.  

  2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.

  3. Read it carefully and follow the instructions about what you need to do.

  4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.

    If you agree, you don’t need to reply unless a payment is due.

    If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.
  5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.

  6. Keep copies of any notices you get from the IRS.

  7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

For more on this topic visit Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on or call 800-TAX-FORM (800-829-3676) to get it by mail.

Last Updated by Admin on 2014-09-11 09:06:37 AM

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Jan 28 2014
Who Should File a 2013 Tax Return?

Posted in taxes

Do you need to file a federal tax return this year? Perhaps. The amount of your income, filing status, age and other factors determine if you must file.

Even if you don’t have to file a tax return, there are times when you should. Here are five good reasons why you should file a return, even if you’re not required to do so:

1. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

2. Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use the EITC Assistant tool on to find out if you qualify. If you do, file a tax return and claim it.

3. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return.

4. American Opportunity Credit.  Are you a student or do you support a student? If so, you may be eligible for this credit. Students in their first four years of higher education may qualify for as much as $2,500. Even those who owe no tax may get up to $1,000 of the credit refunded per eligible student. You must file Form 8863, Education Credits, with your tax return to claim this credit.

5. Health Coverage Tax Credit.  Did you receive Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation? If so, you may qualify for the Health Coverage Tax Credit. The HCTC helps make health insurance more affordable for you and your family. This credit pays 72.5 percent of qualified health insurance premiums. Visit for more on this credit.

To sum it all up, check to see if you would benefit from filing a federal tax return. You may qualify for a tax refund even if you don’t have to file. And remember, if you do qualify for a refund, you must file a return to claim it.

Last Updated by Brian Radke on 2014-01-28 06:06:49 AM

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Jan 24 2014
Do you have a Tax Question? We are here all year for you!

Posted in taxes

Many clients see their CPA's at tax time, when the main focus is on completing and filing their tax returns. As a result, they may not take the opportunity to ask questions about long-term tax planning or about other important financial concerns. The good news is that we are available to you all year. We have full-time, year-round staff of experts with extensive expertise in a broad range of financial areas. We're ready when you are to take some time reviewing your financial situation, helping you understand your options and make the best decisions. We're also here in an emergency to help address unexpected financial concerns. So, give us a call to discuss your important financial issues whenever they arise.

Last Updated by Brian Radke on 2014-01-24 07:44:51 AM

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Jan 23 2014
Does your tax return contain a RED FLAG for audit?

Posted in taxes

We are often asked what types of things cause IRS audits. Although this list is not all-inclusive, it does point out some key areas that the IRS has targeted for examination.  They see many of these items as "low hanging fruit" so the chances of audit may increase with each of these items on your return.  Therefore, we recommend that taxpayers keep very organized and accurate records so that in case of an audit we can  assist you in defending your legitimate expenses.

1. RED FLAG #1:  Claiming 100% business use on a vehicle.    The IRS knows it is extremely rare for an individual to use a vehicle 100% of the time for business use, especially when there are no other vehicles available  for personal use.

2.  RED FLAG #2:  Deducting Meals and Entertainment on Schedule C:  Taxpayers that claim large  deductions for meals and entertainment are likely to set off alarms for the IRS.  They are looking for unsubstantiated meals and entertainment as well as personal meals and entertainment that are claimed as business expenses.

3.  RED FLAG #3:  Hobby Losses:   The IRS is looking for taxpayers with W-2 income and large Schedule C losses.  The idea is that people claim business losses for "hobbies" when a significant amount of their income is from wages/salary on Form W-2.  Activities that raise the flag even higher are activities that have a "personal enjoyment" factor associated with them such as dog breeding, horse breeding, car racing, etc.

4.  RED FLAG #4:  Deducting Rental Losses:  The IRS is looking at taxpayers that claim to be real estate professionals to deduct large losses related to rental properties.  If you have a W-2 and you deduct large rental losses, you may be under more IRS scrutiny.  

5.  RED FLAG #5:  Running a small business:   Owners of cash-intensive small firms such as taxis, hair salons, car washes, or other similar businesses are a tempting IRS audit target.  The IRS knows that businesses that receive mainly cash are less likely to report all their income.

6:  RED FLAG #6:  Reporting higher than average deductions.  The IRS may review your return if you report deductions that are disproportionately large compared to your reported income.  However, if you have the proper documentation, you should not be afraid to claim the write-offs.

Please contact our office to set up your tax appointment soon!

Happy Tax Season!

Radke & Mohrhauser, LLC

Last Updated by Brian Radke on 2014-01-23 02:01:10 PM

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Jan 20 2014

Posted in taxes

Identity theft remains a top priority for the Internal Revenue Service in 2014. Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS. This year, the IRS continues to take new steps and strong actions to protect taxpayers and help victims of identity theft and refund fraud.

Stopping refund fraud related to identity theft is a top priority for the tax agency. The IRS is focused on preventing, detecting and resolving identity theft cases as soon as possible. The IRS has more than 3,000 employees working on identity theft cases. We have trained more than 35,000 employees who work with taxpayers to recognize and provide assistance when identity theft occurs.

Taxpayers can encounter identity theft involving their tax returns in several ways. One instance is where identity thieves try filing fraudulent refund claims using another person’s identifying information, which has been stolen. Innocent taxpayers are victimized because their refunds are delayed.

Here are some tips to protect you from becoming a victim, and steps to take if you think someone may have filed a tax return using your name:

Tips to protect you from becoming a victim of identity theft

  • Don’t carry your Social Security card or any documents that include your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 (Monday - Friday, 7 a.m. - 7 p.m. local time; Alaska and Hawaii follow Pacific time).

If you believe you’re a victim of identity theft

Be alert to possible identity theft if you receive a notice from the IRS or learn from your tax professional that:

  • More than one tax return for you was filed;
  • You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return;
  • IRS records indicate you received more wages than you actually earned or
  • Your state or federal benefits were reduced or cancelled because the agency received information reporting an income change.

If you receive a notice from the IRS and you suspect your identity has been used fraudulently, respond immediately by calling the number on the notice.

If you did not receive an IRS notice but believe you’ve been the victim of identity theft, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 right away so we can take steps to secure your tax account and match your SSN or ITIN.

Also, fill out the IRS Identity Theft Affidavit, Form 14039. Please write legibly and follow the directions on the back of the form that relate to your specific circumstances.

In addition, we recommend you take additional steps with agencies outside the IRS:

  • Report incidents of identity theft to the Federal Trade Commission at or the FTC Identity Theft hotline at 877-438-4338 or TTY 866-653-4261.
  • File a report with the local police.
  • Contact the fraud departments of the three major credit bureaus:
    • Equifax –, 800-525-6285
    • Experian –, 888-397-3742
    • TransUnion –, 800-680-7289
  • Close any accounts that have been tampered with or opened fraudulently.

More information is available at

Help if you have reported an identity theft case to the IRS and are waiting for your federal tax refund

The IRS is working to speed up and further streamline identity theft case resolution to help innocent taxpayers.

The IRS more than doubled the level of employees dedicated to working identity theft cases between 2011 and 2012.  As the IRS enters the 2014 filing season, we now have more than 3,000 employees working identity theft issues.

These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. Cases of resolving identity can be complicated by the thieves themselves contacting the IRS. Due to the complexity of the situation, this is a time-consuming process. Taxpayers are likely to see their refunds delayed for an extended period of time while we take the necessary actions to resolve the matter. A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period.

If you have an open identity theft case that is being worked by the IRS, you need to continue to file your tax returns during this period.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution to their case, you may contact the IRS Identity Protection Specialized Unit, toll-free, at 800-908-4490. If you are unable to get your issue resolved and are experiencing financial difficulties, contact the Taxpayer Advocate Service toll-free at 877-777-4778.

More Information

It is a top priority for the IRS to help victims and reduce the time it takes to resolve cases. In addition, the IRS continues to aggressively expand its efforts to protect and prevent refund fraud involving identity theft before it occurs as well as work with federal, state and local officials to pursue the perpetrators of this fraud.

FS-2014-2, January 2014

Last Updated by Brian Radke on 2014-01-20 12:46:15 PM

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Feb 04 2013
IRS Will Start Accepting Some Business and Nonprofit Tax Returns Monday

Posted in taxes

The Internal Revenue Service plans to begin accepting corporate, partnership and tax-exempt returns starting at 9:00 am Eastern Time on Monday, but with some important exceptions.

In an email to tax professionals on Friday, the IRS said that effective 9:00 am Eastern Time on Monday, February 4, it will begin accepting many of the tax year 2012 calendar and fiscal-year Corporate (Form 1120 series), Partnership (Forms 1065/1065-B), and Tax Exempt Organization (Form 990 series) income tax returns with the exception of filers claiming depreciation deductions and various energy and business tax credits. The IRS said it plans to accept the remaining tax returns in late February or early March.

?In general, this means any business attaching Form 3800 (General Business Credits), Form 4562 (Depreciation and Amortization) or any of the other forms listed below, should wait to file their 2012 tax return at the later date,? said the IRS. ?A specific date will be announced in the near future.?

The forms on hold include:

? Form 3800: General Business Credit  
? Form 4136: Credit for Federal Tax Paid on Fuel 
? Form 4562: Depreciation and Amortization (Including Information on Listed Property) 
? Form 5471: Information Return of U.S. Persons With Respect to Certain Foreign Corporations
? Form 5735: American Samoa Economic Development Credit
? Form 5884: Work Opportunity Credit
? Form 6478: Credit for Alcohol Used as Fuel
? Form 6765: Credit for Increasing Research Activities
? Form 8820: Orphan Drug Credit
? Form 8834: Qualified Plug-in Electric and Electric Vehicle Credit
? Form 8844: Empowerment Zone and Renewal Community Employment Credit
? Form 8845: Indian Employment Credit
? Form 8864: Biodiesel and Renewable Diesel Fuels Credit
? Form 8874: New Markets Credits
? Form 8900: Qualified Railroad Track Maintenance Credit
? Form 8903: Domestic Production Activities Deduction
? Form 8908: Energy Efficient Home Credit
? Form 8909: Energy Efficient Appliance Credit
? Form 8910: Alternative Motor Vehicle Credit
? Form 8911: Alternative Fuel Vehicle Refueling Property Credit
? Form 8912: Credit to Holders of Tax Credit Bonds
? Form 8923: Mine Rescue Team Training Credit
? Form 8932: Credit for Employer Differential Wage Payments
? Form 8936: Qualified Plug-in Electric Drive Motor Vehicle Credit 

Filing of two other business forms is affected by the delay, but only for electronic filers, the IRS added. Businesses using Form 720 and filling out lines 13 and 14 cannot file yet electronically, but they can file on paper. Other Forms 720 are being accepted electronically. In addition, Form 8849 Schedule 3, Claim for Refund of Excise Taxes, is not currently being accepted electronically, but it can be filed on paper.

On January 7, the IRS said it was ready to accept business tax returns with a year ending prior to Dec. 31, 2012 (see IRS Begins Accepting Business Tax Returns). The IRS began accepting individual tax returns on January 30, but with a similar list of forms excluded (see IRS Opens Tax Filing Season for Individuals and IRS Promises Better Service as it Kicks off Tax Season).

Last Updated by Brian Radke on 2013-02-04 06:43:30 AM

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Jan 29 2013
Education Credit Returns on Hold Until Mid-February

Posted in taxes

The IRS said today that processing of tax returns claiming education credits will begin by the middle of February.

Taxpayers using Form 8863, Education Credits, can begin filing their tax returns after the IRS updates its processing systems. Form 8863 is used to claim two higher education credits: the American Opportunity Tax Credit and the Lifetime Learning Credit.

The delayed start will have no impact on taxpayers claiming other education-related tax benefits such as the tuition and fees deduction and the student loan interest deduction, the service added. People otherwise able to file and claiming these benefits can start filing January 30.

The IRS added that it discovered during testing that programming modifications are needed to accurately process Form 8863. Filers who are otherwise able to file but use the Form 8863 will be able to file by mid-February, and no action needs to be taken by the taxpayer or their tax professional.

Typically through the mid-February period, about 3 million tax returns include Form 8863, less than a quarter of those filed during the year.

The IRS said it ?remains on track? to open the tax season on January 30 for most taxpayers, including those claiming the student loan interest deduction on the Form 1040 series or the higher education tuition or fees on Form 8917, Tuition and Fees Deduction.

Last Updated by Brian Radke on 2013-01-29 05:58:01 AM

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Jan 28 2013
Senate Bill Would Expand Tax Credit for Hiring Veterans

Posted in taxes

Senate Finance Committee chairman Max Baucus, D-Mont., and Sen. Jon Tester, D-Mont., have introduced legislation that would expand an existing tax credit for hiring veterans to encourage further hiring while making it easier for business claim.

The Veteran Employment Transition Act of 2013 aims to combat unemployment among veterans by allowing employers to claim a $2,400 tax credit when hiring any recently discharged veteran and streamlining the certification process for both veterans and businesses.

?After defending our nation on the battlefield, all too many veterans are facing a new battle when they come home ? the battle to find good paying jobs,? Baucus said in a statement.  ?This bill will be a big boost for veterans of Iraq and Afghanistan, making it easier for business owners in Montana and across the country to fill job openings with hard-working vets.  Our veterans are intelligent, qualified and proven leaders, and this is our chance to fight for them on the home front.?

The national unemployment rate among post-9/11 veterans was 10.8 percent in December ? far higher than the overall rate of 7.8 percent.  In some states, such as Baucus?s home state of Montana, which has the second-highest population of veterans per capita of any state, the post-9/11 vet unemployment rate was as high as 17.5 percent.

The legislation Baucus introduced Friday, improves the existing Work Opportunity Tax Credit for employers by allowing them to claim a $2,400 credit when they hire any veteran discharged within the last five years.  The bill also makes the process for employers to qualify for the tax credit even simple. Veterans would only have to show their discharge papers to demonstrate they were discharged no more than five years before being hired.  Under the current rules, employers have to verify a set of criteria with their individual states? employment agencies before they can claim the credit.

Baucus authored the original credit for hiring unemployed vets in early 2009, along with as its 2011 expansion and its extension earlier this year.  When the original tax credit was enacted, Baucus promised to continue working to cut red tape and make the process simpler, which the bill aims to do.

The bill would also help veterans earn certifications and licenses when they return home for skills they learned while serving in the military. The legislation calls for better coordination between the six different veteran unemployment programs in the Departments of Veterans? Affairs and Labor, and it compels executive agencies to award contracts to small businesses owned by disabled veterans. Baucus?s fellow Montana Senator, Jon Tester, who is a member of the Veterans? Affairs Committee, is co-sponsoring the bill.

Last Updated by Brian Radke on 2013-01-28 11:04:50 AM

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Jan 25 2013
IRS Provides Guidance on Mortgage Modifications

Posted in taxes

The Internal Revenue Service is offering guidance on mortgage principal reductions in the federal government?s program for mortgage modifications for borrowers who have fallen behind on their payments.

The guidance in Revenue Procedure 2013-16 aims to help borrowers, mortgage loan holders and loan servicers who are participating in the Principal Reduction Alternative offered through the Treasury Department?s and Department of Housing and Urban Development?s Home Affordable Modification Program, also known as HAMP-PRA.

To help financially distressed homeowners lower their monthly mortgage payments, the Treasury Department and HUD established HAMP, which is described at Under HAMP-PRA, the principal of the borrower?s mortgage may be reduced by a predetermined amount called the PRA Forbearance Amount if the borrower satisfies certain conditions during a trial period. The principal reduction occurs over three years.

Under the program, if the loan is in good standing on the first, second and third annual anniversaries of the effective date of the trial period, the loan servicer reduces the unpaid principal balance of the loan by one-third of the initial PRA Forbearance Amount on each anniversary date.

This means that if the borrower continues to make timely payments on the loan for three years, the entire PRA Forbearance Amount is forgiven. To encourage mortgage loan holders to participate in HAMP?PRA, the HAMP program administrator will make an incentive payment to the loan holder, known as a PRA investor incentive payment, for each of the three years in which the loan principal balance is reduced.

The guidance issued Thursday by the IRS provides that PRA investor incentive payments made by the HAMP program administrator to mortgage loan holders are treated as payments on the mortgage loans by the United States government on behalf of the borrowers. These payments are generally not taxable to the borrowers under the general welfare doctrine.

If the principal amount of a mortgage loan is reduced by an amount that exceeds the total amount of the PRA investor incentive payments made to the mortgage loan holder, the borrower may be required to include the excess amount in gross income as income from the discharge of indebtedness. However, many borrowers will qualify for an exclusion from gross income.

For example, a borrower may be eligible to exclude the discharge of indebtedness income from gross income if (1) the discharge of indebtedness occurs (in other words, the loan is modified) before Jan. 1, 2014, and the mortgage loan is qualified principal residence indebtedness, or (2) the discharge of indebtedness occurs when the borrower is insolvent. For additional exclusions that may apply, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals).

Borrowers receiving aid under the HAMP?PRA program may report any discharge of indebtedness income?whether it is included in, or excluded from, gross income?either in the year of the permanent modification of the mortgage loan or ratably over the three years in which the mortgage loan principal is reduced on the servicer?s books. Borrowers who exclude the discharge of indebtedness income must report both the amount of the income and any resulting reduction in basis or tax attributes on Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment).

The guidance issued Thursday explains that mortgage loan holders are required to file a Form 1099-C with respect to a borrower who realizes discharge of indebtedness income of $600 or more for the year in which the permanent modification of the mortgage loan occurs. This rule applies regardless of when the borrower chooses to report the income (that is, in the year of the permanent modification or one-third each year as the mortgage loan principal is reduced) and regardless of whether the borrower excludes some or all of the amount from gross income.

Penalty relief is provided for mortgage loan holders that fail to file and furnish the required Forms 1099-C on a timely basis, as long as certain requirements described in the guidance are satisfied

Last Updated by Brian Radke on 2013-01-25 06:06:40 AM

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Jan 24 2013
IRS Offers Advice for Coping with Delayed Tax Season

Posted in taxes

The Internal Revenue Service provided advice to taxpayers Wednesday on dealing with the late opening of tax season on January 30 that could also prove helpful to tax preparers

For the first time this tax season, the "Where's My Refund?" tool will provide personalized refund timelines for taxpayers.

The IRS noted that it would begin processing most individual income tax returns on Jan. 30 after updating its forms and completing the programming and testing of its processing systems. The IRS contended that it had anticipated many of the tax law changes made by Congress under the American Taxpayer Relief Act, but the final law requires some changes before the IRS can begin accepting tax returns.

The IRS reiterated that it will not process paper or electronic tax returns before the Jan. 30 opening date, so there is no advantage to filing on paper before then (see IRS Delays Tax Season until End of January). Using e-file is the best way to file an accurate tax return, the IRS insisted, and using e-file with direct deposit is the fastest way to get a refund.

Many major software providers are accepting tax returns in advance of the Jan. 30 processing date, the IRS noted. These software providers will hold onto the returns and then electronically submit them after the IRS systems open. The IRS advised taxpayers who use commercial software to check with their provider for specific instructions about when they will accept your return. Software companies and tax professionals then send the returns to the IRS, but the timing of the refunds is determined by IRS processing, which starts Jan. 30.

After the IRS starts processing returns, it expects to process refunds within the usual timeframes. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013. Even though the IRS issues most refunds in less than 21 days, some tax returns will require additional review and take longer. To help protect against refund fraud, the IRS has put in place stronger security filters this filing season.

After taxpayers file a return, they can track the status of the refund with the ?Where?s My Refund?? tool, which is available on the Web site. This year, instead of an estimated date, the Where?s My Refund? tool will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.

"Where's My Refund?" will be available for use after the IRS starts processing tax returns on Jan. 30. The IRS also provided several tips for using "Where's My Refund?" after it becomes available on Jan. 30:

? Initial information will generally be available within 24 hours after the IRS receives the taxpayer?s e-filed return or four weeks after mailing a paper return.

? The system updates every 24 hours, usually overnight. There?s no need to check more than once a day.

? ?Where?s My Refund?? provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the IRS unless the web tool says to do so.

? To use the ?Where?s My Refund?? tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their social security number, filing status and the exact dollar amount of the refund they are expecting.

For the latest information about the Jan. 30 tax season opening, tax law changes and tax refunds, visit

Last Updated by Brian Radke on 2013-01-24 05:52:27 AM

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Jan 23 2013
IRS Steps Up Enforcement and Audits of High-Income Taxpayers

Posted in taxes

The Internal Revenue Service reported that audits of individuals topped 1 million in fiscal year 2012 for the sixth year in a row, a coverage rate of 1.03 percent of all tax returns filed, while audits in the upper income ranges remained substantially higher than other categories.

The IRS noted that it increased its examinations across all categories of business returns by more than 12 percent in fiscal 2012, with the largest increases coming in audits of flow-through entities, which include partnerships and Subchapter S corporations. Coverage rates exceeded 20 percent for the largest corporations.

The IRS also collected more than $50 billion in enforcement revenue in fiscal 2012, the third year in a row topping that figure. ?The 2012 numbers were lower than 2010 and 2011, which were unusual years with enforcement dollars helped by large numbers of offshore tax cases coming in,? the IRS noted.

More than 38,000 disclosures of offshore accounts have been made to date through the IRS?s offshore voluntary disclosure programs, the IRS noted. In addition, the economic slowdown contributed to lower enforcement figures, as most enforcement dollars collected resulted from audits of returns for years during the slowdown.

Another factor behind the fiscal 2012 numbers reflected changes in agency staffing and budget resources, the IRS noted. After a nearly flat budget in fiscal 2011, the IRS?s fiscal 2012 budget was cut $305 million. The reduction affected the level of staffing available to deliver service and enforcement programs. Overall full-time staffing has declined by more than 8% over the last two years, and staffing for key enforcement occupations fell nearly 6 percent in the past year.

Also in fiscal year 2012, the IRS continued to confront the challenge of refund fraud caused by identity theft. The IRS more than doubled the number of staff dedicated to preventing refund fraud and assisting taxpayers victimized by identity theft, with more than 3,000 employees working in this area. As a result of these increased efforts, the IRS in fiscal 2012 was able to prevent the issuance of more than 3 million fraudulent refunds worth more than $20 billion, an increase from approximately 1.8 million refunds worth about $14 billion the previous year.

On the service side, the IRS said it saw continued strong growth in electronic filing by individuals, as the e-filing rate in fiscal 2012 exceeded 80 percent for the first time. Taxpayer interest in online interactions continued to increase as well, with Web page visits on up nearly 17 percent to 372 million.

Last Updated by Brian Radke on 2013-01-23 01:15:18 PM

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Jan 22 2013
Penalty Relief for Farmers and Fishermen

Posted in taxes

The IRS will issue guidance soon to provide relief from the estimated tax penalty for farmers and fishermen unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns. 

The delay stems from this month?s enactment of the American Taxpayer Relief Act, which affected several tax forms often filed by farmers and fishermen, including Form 4562, Depreciation and Amortization (Including Information on Listed Property).

These forms will require extensive programming and testing of IRS systems, the service said.

Farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax year 2012 if at least two thirds of the taxpayer?s total gross income was from farming or fishing in either 2011 or 2012.

Those requesting this penalty waiver must attach Form 2210-F to their return, submitted electronically or on paper. The taxpayer?s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked and the rest of the form should be left blank

Last Updated by Brian Radke on 2013-01-22 05:31:45 AM

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Jan 18 2013
Short Term Debt Limit Increase likely?

Posted in economy

(Reuters) - House Republicans signaled on Thursday they might support a short-term extension of U.S. borrowing authority next month so they can move on to budget battles that could offer them more political leverage.

The move, described as under consideration by House of Representatives Budget Committee Chairman Paul Ryan, appears to be aimed at getting President Barack Obama and his Democrats to start negotiating with them on spending cuts without Republicans being blamed for a debt default and any resulting chaos in financial markets.

"We're discussing the possible virtue of a short-term debt limit extension, so that we have a better chance of getting the Senate and White House involved in discussions in March," said Ryan.

The option, if successful, would put off a fight with Obama over a long-term debt ceiling increase until Republicans and the White House have negotiated their way through two other fiscal deadlines later in the spring.

It follows Obama's refusal to drawn into a negotiation over the debt ceiling. Republicans had hoped to use it as a lever to extract spending cuts from the White House.

Ryan, the party's failed candidate for vice president last year and a likely presidential contender in 2016, spoke to reporters during a retreat of Republican House members in Williamsburg.

The Republican approach - which has not been finalized - would effectively rearrange three looming deadlines in the long war between the parties over deficit reduction.

Last Updated by Brian Radke on 2013-01-18 09:48:40 AM

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Jan 17 2013
Smaller Payday Trims Workers Splurges as U.S. Tax Breaks Expire

Posted in economy

Phoenix high school teacher Kenny Williams said he's cutting back on his family splurge fund for movie and sports outings after the reinstated U.S. payroll tax lowered his first paycheck of the year by $30.

The 46-year-old single dad of two was shopping at the 99 Cent Only store in Phoenix last week to save money on groceries and partly offset the $60-a-month cut he expects in his take- home pay. Dinners out also will go, he said.

Consumer Comfort Falls as U.S. Payroll Tax Takes Hold Scott Eells/Bloomberg Americans will have to rely on increases in salaries to counter some of the lost income at the same time the job market shows little sign of further progress and the debate in Washington turns to federal spending cuts and the debt. I don't normally shop here for food, but I am now, Williams said, as he struggled to find healthful items in an aisle he said was filled with high-fructose corn syrup. You have to make up for it somehow. When you already are on a tight budget, something has to be done.

By tomorrow, most Americans will have experienced the hit to their checks firsthand after Congress let a two-year-old payroll tax break expire while averting bigger automatic cuts that were to take effect this month. The 2 percentage point increase in taxes will take $125 billion from consumers pockets this year, estimates Michael Feroli, chief U.S. economist for JPMorgan Chase & Co., which in October lowered its forecast for first-quarter economic growth to 1 percent from 1.5 percent.

The increase in tax, to 6.2 percent of wages, will be used to pay for Social Security. It was reduced to a 4.2 percent rate in 2011 and 2012 to help ease the effects of the recession.

The bump will range from about $4.50 a week for a single person earning at the poverty level to $46.64 a week for someone making the maximum $113,700 subject to the tax in 2013. Any additional earnings beyond that amount won't be affected.

Little Decisions

While the reductions are small relative to paychecks, workers eventually will cut back, said Meir Statman, the Glenn Klimeck Professor of Finance at the Leavey School of Business at Santa Clara University in California.

It will be in the little decisions people make, small amounts, said Statman, who wrote a 2011 book that studied how emotions and other factors influence investor behavior. Things like whether you eat at McDonald's are most likely. People still have to pay for housing and food and they aren't going to give up their phones.

The Bloomberg Consumer Comfort Index posted its biggest one-week drop since August in the seven days ended Jan. 6, falling to minus 34.4 from minus 31.8 the prior period.

Automatic Data Processing Inc. (ADP), which handles paychecks for about one out of every six workers in the U.S., said about 75 percent of its clients pay employees either every two weeks or twice a month. Most of the rest pay weekly and a very small number pay monthly, said Michael Schneider, a spokesman for Roseland, New Jersey-based ADP.

I'm thinking I need to stop eating out as much, said Ana Smith, 24. She works for a consulting firm in Philadelphia and doesn't get paid until this week. It'll affect my ability to shop.

Paycheck Surprise

Smith was one of several diners in the food court at the Shops at Liberty Place, a retail complex in Philadelphia populated by many office workers who as of last week said they weren't aware their paychecks were about to shrink.

Most of the 134 million Americans who are on corporate payrolls will likely change their spending habits in similar ways to Williams and Smith, and that can add up to hundreds of millions of dollars across the economy, said Jerry Davis, a professor of sociology at the University of Michigan Ross School of Business in Ann Arbor, Michigan.

Most Americans don't bother to save much, so many people are living paycheck to paycheck and so small changes will quickly change behavior such as skipping meals or movies, said Davis, who is also the Wilbur K. Pierpont Collegiate Professor of Management.

Paycheck to Paycheck

About 3.7 percent of an average American's income is spent on recreation including things such as sporting events, movies and trips to the museum, according to November 2012 data from the U.S. Bureau of Economic Analysis. Another 5 percent goes toward food bought on the go, such as dining out, the data show.

A single person who makes $11,702, considered the poverty line in the U.S., will have $234 less in take-home pay a year. A family of two adults and two children at the poverty limit earns $22,811, subject to $456 more a year in taxes.

Even if the change seems small, Leslie Martinez said she worries the increased tax will affect her ability to pay bills on time or afford activities such as a movie night with her kids. The 32-year-old mother of two makes $17,000 a year working at a central Phoenix dry cleaner.

By the time she gets paid, there is already as little as $40 left, and the costs for her 12-year-old daughter to play soccer have been adding up recently. The changes will probably cut about $6.54 from her pay each week.

When you live paycheck to paycheck, every penny counts, Martinez said. When I get my paycheck, it's already spent.

Cheaper Beer

Brandon Croud, a mortgage underwriter for the Federal Housing Administration, doesn't see the higher tax rate making a big dent in his lifestyle. He said his Jan. 4 paycheck was about $30 less than usual.

I don't plan to change anything because it's not that much money, said Croud, 30, who was drinking a Captain Morgan rum and Coke and munching on potato skins and onion rings at the 24 Seconds Bar & Grill in Berkley, Michigan, on a Friday evening. If it were like $100 a paycheck, then I might switch to a cheaper beer or something.

For the family earning the median U.S. income of $64,293, the return to the higher tax withholding rate translates into $1,286 for the year. Taxpayers with a salary of $113,700 or more face an annual increase of about $2,425.

Working for Free

Higher-earning consumers may not alter behavior right away, said Statman, the Santa Clara University professor. The initial loss of income will probably first show up in higher reliance on a charge card, he said.

Many of those people aren't going to look at their paychecks and be shocked because they are doing well enough and these aren't huge numbers, Statman said. But eventually what will likely happen is it will begin to constrain people.

Williams, the Phoenix schoolteacher, said the reduction in pay makes it feel as though he's working a couple hours each week for free.

You work the same amount of hours and are taking home less money, Williams said. I don't like it. We've all given more than our fair share.

To contact the reporters on this story: Jeff Green in Southfield, Michigan at; Amanda J. Crawford in Phoenix at

To contact the editor responsible for this story: Peter Elstrom at

Last Updated by Brian Radke on 2013-01-18 10:33:16 AM

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Jan 15 2013
Is the Economy Recovering?

Posted in economy

Monday, January 14, 2013 - 18:17
Bernanke Gives No Sign That Ready To Ease Off Aggressive Pol
By Brai Odion-Esene 

(MNI) - Federal Reserve Chairman Ben Bernanke Monday gave no indication that he is ready to ease off the pedal in his aggressive policy support for the recovery, again pointing to a jobs market that has yet to show any substantive improvement. 

"We are still in a relatively fragile recovery," Bernanke noted during a discussion at the University of Michigan's Ford School of Public Policy.

"I want to be clear that, while we've made some progress, that there's still quite a ways to go before where we'd be satisfied," he said.

The labor market, for one, "is still not where we'd like it to be," the chairman added.

Still, Bernanke said he believed conditions in the U.S. economy "are moving in the right direction," and that he is "cautiously optimistic" about the next couple of years.

Asked to comment on the progress being made by the Fed's latest bond buying program -- $45 billion a month in longer term Treasuries, $40 billion a month in mortgage securities -- Bernanke noted that "so far, we think we are getting some effect," but it is still early days.

Bernanke said the central bank has found asset purchases to be an effective tool, but will continue to assess "how effective" it is.

"It's possible that as you move through time and a situation changes, that the impact of these tools could vary," he said.

Going forward, Bernanke said the Fed will monitor the impact of the current asset purchase program on financial market conditions and how that translates to a boost to the labor market situation.

He noted that there has been some "modest" improvement in the latter, describing the drop in the unemployment rate to 7.8% as "fairly significant."

"But we would like to see a stronger labor market," Bernanke continued.

Arguing that the unemployment rate remains "quite high," and is coming down very slowly, Bernanke said an aggressive response by the Fed is warranted as there are still too many long-term unemployed Americans whose skills and talents are being wasted.

Bernanke dismissed the fears of some that the Fed's actions will spark significant inflation.

"Personally, I don't see much evidence of that," he said. "Inflation expectations remain quite well-anchored."

More importantly, Bernanke said the Fed has all the tools required to withdraw its monetary policy stimulus before inflation becomes a problem.

Still, price stability is one half of the Fed's dual mandate, and Bernanke assured that the central bank will pay close attention to keep inflation well-contained. 

With regard to the wider economy, Bernanke said the current growth pace is moderate, although there are some optimistic signs emerging.

The housing sector, for example, is one positive factor "that's going to help us have, I hope, a better year in 2013 and 2014," he said.

Elsewhere, state and local governments are in better condition compared a few years ago, Bernanke said, meaning they will not be a drag on the economy this time around.

Finally consumers are more optimistic, he noted.

"As long as the fiscal policy thing isn't getting too messed up, the consumer seems to be a little bit more upbeat," Bernanke said.

He said that even with the fiscal cliff agreement, U.S. fiscal policy remains "fairly restrictive," and noted estimates that federal fiscal policy will subtract around one to 1 1/2 percent from real GDP growth this year. `

While there is still more work to be done, Bernanke said the deal to avert the fiscal cliff reached by lawmakers at the beginning of the year eliminated "a good bit" of the restrictive components in the combination of expiring tax reliefs and sharp spending cuts that would have had adverse effects on the economy.

However, the country is not out of the woods yet, the Fed chairman warned, pointing to other approaching critical "fiscal watersheds" that lawmakers must address; namely the finding of the government, the postponed sequester and the approaching deadline date for the debt limit.

It is "very, very important" that Congress raise the debt ceiling he said, or else the nation's credit rating will again be at risk of a downgrade.

Last Updated by Brian Radke on 2013-01-15 06:51:46 AM

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Jan 12 2013
Are you ready to file your tax return yet?

Posted in tax organizers

We recently sent out tax organizers to our clients.  Once you have your W-2's, 1099's, and other tax information, log on to your tax portal and complete the tax organizer.  Once you are completed, send it to your preparer and we can then complete your return and expedite your refunds!  Contact our office for any assistance.

Last Updated by Admin on 2013-01-12 08:06:27 AM

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Dec 04 2012
Welcome to Our Blog!

Posted in general

This is the home of our new blog. Check back often for updates!

Last Updated by Admin on 2012-12-04 02:30:44 PM

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