issues that require a professional. Don’t prepare your own tax returns if you have these issues in your financial life:
• A business of any kind—whether it’s as a sole proprietor, partnership, corporation, LLC, farm, ranch, multilevel marketing, network marketing, affiliate sales, pyramid schemes, and so on.
• Hobby income—whether you believe it’s a business or not.
• Disability income, workers compensation, or other insurance proceeds that you’re not certain are not taxable.
• Lump sum income from Social Security Disability or SSI (after several years) or pensions.
• You are (or a family member is) age 72 or over and have IRAs and/or pension accounts. They require mandatory distributions.
• Divorce, alimony, child support, family support, or disputes about dependents.
• Dependents who don’t live at home, who are out of the United States, who don’t have Social Security numbers, ITINs, ATINs, or other US-identifying numbers.
• Complicated investments including short sales, wash sales, stock splits, PFICs, flipped real estate, racehorses, and other things you may not understand all that well. If you don’t know what the initials stand for or what something means, don’t invest in it without consulting a tax pro first.
• Sales of any assets at all—especially real estate, business assets, collectibles, and eBay-type sales.
• Rental real estate of any kind, like roommates, bed and breakfast, short-term rentals (like AirBnB), studio rentals, time-share rentals, and so on.
• You are a first-time home-buyer.
• Complicated mortgage issues—you refinanced with balances higher than the original loan, loan modifications, balances over $1 million, multiple homes, private lenders, or your name is not on the loan or title.
• Scholarships, stipends, grants, prizes, winnings of any kind.
• Kiddie tax issues that you may not even realize you have.
• Gambling winnings and losses—casinos, clubs, bingo, lottery, and so on.
• Employee business expenses.
• Investment interest and other investment expenses.
• Complicated or high charitable contributions—especially for volunteer work, donations of high-value goods (art, vehicles, securities, more than $1,000 of clothing and household goods), and other things that require more substantiation, appraisals, or expertise.
• Military service—there are special benefits for both state and federal you don’t want to miss.
• Disasters, casualties, forced easements—whether personal or business, all have special benefits you can use to your advantage.
• Gifts that you made or received of $14,000 or more per person to/from any individual, including money you received from crowdfunding sources like GoFundMe, KickStarter, and so on.
• You have ownership or signature authority over any financial accounts overseas—whether for yourself, your (elderly) parents or clan, your children, an estate, trust, or business. You own a share of the family business. You have a vacation home outside the United States.
• You have any extra taxes, like the Net Investment Income Tax (NIIT), the extra Medicare tax on wages or self-employment income, household employee taxes, excise taxes, and so on.
• You might be entitled to tax credits for your child(ren), low income, education, energy, retirement, or a whole raft of other things you might not know are available to you from the IRS and/or your state.
• If you have any questions and really want to sit down and talk to a tax professional.
Tip #27:
All paid preparers must have a Professional Tax Identification Number (PTIN). There are more than 700,000 US tax professionals with PTINs. In 2015, the IRS launched their database of all PTIN’d tax professionals. You can look up your tax pro here: http://irs.treasury.gov/rpo/rpo.jsf. If the tax pro you are paying is not in the database, you can contact the IRS Office of Professional Responsibility (OPR) by sending an email to [email protected] and providing the name, address, business name, and any other specific information you have about this individual. The IRS will let you know if there is an error in the database or if this person is operating illegally. You can also contact the IRS OPR to get more information about a tax pro’s status if they are not in the database.
Tip #28:
Signature requirements. Sometimes tax professionals use TurboTax or some other consumer software to prepare your tax returns and don’t sign your tax return as the preparer. That tax professional is operating illegally. You can report that person to the IRS by filing a Form 14157. You can find more information on the IRS website here: https://www.irs.gov/Tax-Professionals/Make-a-Complaint-About-a-Tax-Return-Preparer. Incidentally, if you think this person has been squirreling away a lot of money or preparing fraudulent returns, consider turning them in to the IRS for a refund. Use Form 211: https://www.irs.gov/pub/irs-pdf/f211.pdf.
Tip #29:
Volunteer tax preparation services. This is the one category of tax professionals who will not be in the database, who do not need valid PTINs, and who will not sign your tax returns. If you meet certain income and/or age criteria you can get free in-person tax preparation and tax problem resolution from these sources. You may have heard about these programs. To find a VITA or TCE site in your area, please call 800-906-9887.
• VITA—Volunteer Income Tax Assistance centers help people who earn less than $53,000 (indexed for inflation), are elderly, have disabilities, have trouble with English, or are military families. Volunteers can prepare and efile returns and help with fundamental returns, including a variety of credits like the Earned Income Credit, Child Tax Credits, and Retirement Credit.
• TCE—Tax Counseling for the Elderly centers will help seniors with all the same things as VITA does. In addition, TCE provides counseling on a number of issues related to retirement, Social Security, and other government-related issues—and can help seniors avoid scams. TCE centers are often run by AARP (American Association of Retired Persons) at their Tax-Aide locations. You can find them all over the country: http://www.aarp.org/money/taxes/aarp_taxaide/. For more information, call 888-687-227.
• AFTC—The Armed Forces Tax Council provides tax assistance specifically for members of the military and their families. They have on-base coordinators, worldwide, for the Marine Corps, Air Force, Army, Navy, and Coast Guard. Both the IRS and the states offer quite a number of special deferrals, allowances, and benefits for active-duty service people and their families. So, if possible, use the AFTC advisors to help you. To get more information, ask
