Quick Guide: RapidTax CPA Review

Posted by Tax Advisor on April 26th, 2016
Last modified: April 26, 2016

Afraid to stray from your accountant but also tired of paying the fancy price tag?

I have some pretty fond memories of road-tripping to my parents’ accountant on a beautiful Spring afternoon. I’d wait on the black leather couch with nothing but a bag of pretzels and a Game Boy to keep me busy while they crunched numbers. By the time we were out of there, my parents were balls of frustration and I had lost my sunny Saturday.

RapidTax is here to save the day (and hopefully a few sunny afternoons of your own)! While many have now taken the modern road, preparing their own tax returns online, some of us have stayed in the accountant safety net. Change is hard, and we hear what you’re saying. That’s why we’re now offering you accountant services online with the RapidTax CPA Review service!

Why switch things up? Let’s take a look at the most common concerns when it comes to making the switch.

Is this really just as good as going to an accountant in person?

After doing some research, we’ve found that this is the dilemma holding people back the most from hopping aboard the online tax movement. Yes, it is just as good, if not better. In fact, one of the best parts is not having to go in person at all. Here are some other highlights to choosing an online CPA review with RapidTax: Read the rest of this entry »

Who Determines Which Parent Claims a Dependent Child?

Posted by Tax Advisor on April 1st, 2016
Last modified: April 1, 2016

Claiming a dependent on your taxes can shave off a good amount of your tax liability.

Sometimes, the real issue lies in the rule that only one exemption can be claimed per dependent. This is an IRS rule, and one situation where absolutely no exceptions apply. So if there are two parents who are not filing jointly, and one child, you can see how this has all the makings of an impromptu game of tug-o-war.

So who wins? This question is asked to countless accountants, lawyers and tax professionals each day. The answer is simple. Accepting the answer is the tough part.

The custodial parent can claim the child as a dependent. The non-custodial parent cannot.

Who determines which parent can claim the child dependent exemption?

Contrary to popular belief, a court order will not determine which parent can claim a dependent child. You can wait on hold with the IRS as long as you want. The answer will always come down to federal law; not a state or county court order.

Custodial Parent VS. Non-Custodial Parent

Assuming your child probably refers to you as mom or dad, ‘custodial parent’ is typically not a term thrown around in most households. Generally speaking, the parent with whom the child lives for the majority of nights during the tax year is the custodial parent. The non-custodial parent is the other parent. If the child lived with each parent for the same amount of nights per year, then the custodial parent is the one with the higher Adjusted Gross Income. Read the rest of this entry »

My Ex Claimed My Child as a Dependent; Now What?

Posted by Tax Advisor on March 30th, 2016
Last modified: March 30, 2016

You can’t divide a dependent exemption in half.

So, your ex claimed your child as a dependent on their tax return, when you were the only parent eligible to do this. Was it out of revenge? Maybe it was just miscommunication? Perhaps they believed they were actually allowed to? It happens. Regardless of the reason they did it, now you need to fix it and prevent this from happening in the future. RapidTax is here to help.

What will happen if I e-file my tax return?

You are the custodial parent of your child. Are you sure? To avoid confusion with the tax jargon I just threw your way, a custodial parent (for tax purposes, anyways) is the parent who the child lives with for the majority of nights per year. If both parents spent an equal amount of time with the child, then the parent with the highest adjusted gross income is the custodial parent (by default), according to the IRS. Keep in mind that determining who the custodial parent is does not depend on a state or county court ruling. For tax purposes, the IRS only considers federal law.

If both you and your ex e-file your tax returns and claim your child as a dependent, the one of you who filed second will be rejected by the IRS. This is inevitable. Even if you are the custodial parent, the IRS e-file system is a machine and you will still need to prove this.

What steps do I need to take to prove that I am the eligible parent?

The first thing to understand is that each tax situation is unique, and the best thing to do is contact the IRS directly for specific instructions on how to proceed. However, if you want a general idea of the steps you’ll need to take, keep reading.

Step #1: Double check that you meet all of the eligibility requirements set up by the IRS. This is important because if you do not meet even one of the following and your ex does, it could work against you. These requirements are: Read the rest of this entry »

What to do with a 1095-A, 1095-B and 1095-C

Posted by Tax Advisor on March 22nd, 2016
Last modified: March 22, 2016

An apple a day keeps the doctor away…just not from your paychecks.

There are new tax forms that you should keep your eyes peeled for this year. These are the 1095-A, 1095-B and 1095-C. No need to panic. These forms are mainly for your reference and can be stowed away with the rest of your tax documents until you’re ready to file a tax return for the year. So why are they making a debut in a mailbox near you? Let’s take a look at what they are and how to handle them.

What is each form?

A 1095-A is your Health Insurance Marketplace statement. This provides you with the annual information about your health coverage if you or someone in your family was enrolled in coverage through the Health Insurance Marketplace.

A 1095-B is your Health Coverage statement. This shows you the yearly information about your health care coverage if you, your spouse or your dependents were enrolled in coverage through an insurance provider or self-insured employer.

A 1095-C is your Employer-Provided Health Insurance Offer & Coverage statement. This form will provide you with the yearly coverage offered to you through your employer.

Which form will I get?

You’ll receive a 1095-A if you, your spouse or your dependent(s) were enrolled in health coverage for the year through the Marketplace.

A 1095-B will be coming your way if you and/or your family members received insurance through a health insurance provider. Health insurance providers consist of insurance companies, certain self-insured employers and government agencies that run Medicaid, Medicare or the Children’s Health Insurance Program (CHIP). Read the rest of this entry »

2015 IRS Late Tax Penalties

Posted by Tax Advisor on March 18th, 2016
Last modified: March 18, 2016

Failure to file or failure to pay; is there a lesser of two evils?

There are two IRS tax penalties that you put yourself in jeopardy of paying when you don’t file your tax return on time.

  1. Failure-to-File Tax Penalty. This applies to you if you did not file your tax return by the tax filing deadline and owed tax to the IRS.
  2. Failure-to-Pay Tax Penalty. This applies to you if you filed your tax return but did not pay your entire tax liability due by the tax filing deadline.

If you are expecting a refund, you will never be held liable for a penalty fee.

How do I calculate my failure-to-file tax penalty?

The late filing penalty is 5% of the additional taxes owed amount for every month or fraction of a month that your return is late. This is capped at 25%. Let’s take a look at an example.

Let’s say you owe the IRS $950. One September morning, you wake up and it hits you. You forgot to file your 2015 tax return! You can assume that you will owe the IRS an additional $240. Here’s the math:

$950 tax liability x 5% = $47.50 per month late Read the rest of this entry »

7 Filing Tips to Get Your Tax Refund ASAP

Posted by Tax Advisor on March 9th, 2016
Last modified: March 9, 2016

Waiting for your tax refund can really test your patience.

Unfortunately, we can’t speed up the actual processing time of your tax return once the IRS gets hold of it. However, there are actions we can take to ensure a smoother journey through the IRS database. Let’s take a look at seven steps you can take when filing your tax return this year.

E-File your tax return.

Oh, how far technology has come. You can e-file your tax return worry-free until the April deadline. After that date, you can still e-file until the October deadline. However, if you can’t get it filed before mid-April and you’re not sure if you’re getting a refund, you’ll want to file an extension. Either way, the IRS processing time is quickest with e-filing. Compared to mailing in your return, you could be speeding up your refund by almost a month!

Choose direct deposit to receive your refund.

Many businesses offer a direct deposit option to their employees, so it only makes sense that the IRS would offer the same. After all, it’s your money. This is preferred by many taxpayers, based on convenience. On top of that, waiting on direct deposit will eat up less of your time than waiting on a check in the mail.

Make sure you’re the only one claiming your dependent(s).

This can be easier said than done in some cases. However, if you know someone who could also claim your dependent on their tax return, do your best to verify that they won’t be. Why? A person can only be claimed once per year. If a dependent is claimed by more than one person, then the second tax return to claim them will be rejected by the IRS. If the second person to claim the same dependent appeals to the IRS, the IRS may pull the first return for review, to make sure that taxpayer was allowed to claim the dependent. In either case, this will ultimately delay your tax refund. Read the rest of this entry »

10 Reasons You Should File a 2015 Tax Extension

Posted by Tax Advisor on March 7th, 2016
Last modified: March 7, 2016

Searching for a reason to file a 2015 tax extension?

It’s never a good idea to do anything out of pure laziness. However, if you can justify your logic for filing a 2015 tax extension, then by all means, DO. Here are ten good reasons why you should file a tax extension this year.

1. It does not require IRS approval.

As long as you apply for a tax extension, you’ll get one. It’s not like filing an actual tax return where you need to wait for the IRS to review and approve it. In fact, there is no process at all. Just submit the form to the IRS, and your extension will be on record.

2. You will skip the April 18th deadline rush.

Have you ever tried calling the IRS or your accountant in April? How long were you placed on hold? If you file an extension, you have an extra 6 months to figure out your tax situation.

3. It will NOT trigger an IRS audit.

Some taxpayers shy away from filing a tax extension because they assume it will increase their chance of being audited. The majority of audits happen because of tax returns that are against the typical patterns. When something out of the ordinary is picked up on a tax return by the IRS, they note that something may be wrong and take a further look. Many taxpayers think of an extension to be paired with doing something wrong. In all actuality, tax returns filed in October show a higher rate of being approved since they are filed accurately and completely.

4. You lost your W-2 or 1099.

When you misplace your income statements, it can be a hassle to get another copy. If you can’t get one from your employer, then you’ll need to request a transcript from the IRS. This is an easy process, but it can take up to 10 days to reach your mailbox. And if the transcript is incomplete due to IRS delays, you’ll need to contact your employers directly for a new copy of any W-2s or 1099s you’re missing.

Read the rest of this entry »

When is the Last Day to E-File a 2015 Tax Return?

Posted by Tax Advisor on March 3rd, 2016
Last modified: March 7, 2016

Get all your ducks in a row this tax season.

April is great. Spring has sprung. The snow has melted. And you’ve just remembered….you still need to file your 2015 tax return!

The tax filing deadline is April 18th, 2016.

This is not a typo. You get 3 extra days this year to e-file your tax return with the IRS. Why is that, you ask? If the typical April 15th deadline just so happens to fall on a weekend (including Friday), the IRS will push it back to the following Monday. Hence, April 18th.

Expecting a refund?

If an excess amount of federal taxes were withheld from your paychecks this year, then you can expect a refund from the IRS. The deadline still applies to you and you still need to file a tax return. However, if you don’t e-file by April 18th, you won’t face any penalties from the IRS. In fact, you can claim your 2015 tax refund until 2019 thanks to the three-year statute of limitations!

If you’re not ready, file an extension.

Even if you can’t file your actual tax return by April 18th and you have a tax liability, you can file your 2015 tax extension with RapidTax for free. This will give you until October 17th, 2016 to e-file your tax return, penalty-free.

When filing an extension, you will need to estimate your tax liability and pay a small amount towards it. Even $5 will do (it’s all about showing initiative here).

Oh, the penalties you’ll face for not filing (and paying) on time.

Miss curfew? Get a lecture from mom. Late to a meeting? Get reprimanded by your boss. Miss the tax filing deadline? Get penalty fees tacked onto your tax bill by the IRS. Below is a breakdown of what the IRS will charge you if you don’t file your taxes by April 18th (or October 17th with an extension). Read the rest of this entry »

The 5 Ws of a 1099-K

Posted by Tax Advisor on March 1st, 2016
Last modified: March 1, 2016

Don’t let your 1099-K stand in the way of business.

If you’re an Uber driver, run an Etsy shop, or rent out your home to AirBNB frequenters, then you might notice a new tax form that has found it’s way into your mailbox in recent years.

It’s nothing to stress over. This is generally a straightforward form to review, and easy to report on your tax return.

What is a 1099-K?

Form 1099-K, otherwise known as Payment Card and Third Party Network Transactions, is one of the more recently introduced tax forms. It was created by the IRS in order to report income received from online electronic payments (e.g. credit cards, PayPal, debit cards, etc.) through third party processors. Prior to this form, many independent contractors who used online payment methods were left confused on how to report those sales on their tax returns.

Who gets a 1099-K?

Wondering if you’re one of the lucky ones who will get a 1099-K this year? The qualifications are somewhat more specific compared to other forms such as the W-2. With a 1099-K, it is based on sales volume.

Retailers who accept online credit card payments will receive a 1099-K from any business that processed their payments. However, the 1099-K is only mandatory if online processing meets the following stipulations:

  1. Sales volume is over $600 per year via credit card companies.
  2. Sales volume is over $20,000 and more than 200 individual transactions were made via third party processors.

Read the rest of this entry »

A Complete Guide to Tax Refund Advance Loans

Posted by Tax Advisor on February 11th, 2016
Last modified: February 29, 2016

Tired of waiting? Get $750 of your tax refund in 1-2 days!

The 2016 tax season is well underway. Did all of your friends and family e-file their 2015 tax return on the very first day of the season? Are they getting their tax refunds now while you’re still gathering your W2s? If you start right now, you can receive your refund…in 21 days (the earliest).

Want to receive some of your refund a little sooner? You’re in luck! With our new refund advance loan, you could be spending $750 of your tax refund in 1-2 business days after IRS acceptance. What’s the catch? There really isn’t one. To ease your mind a bit more, I thought I’d provide the most frequently asked questions about our new loan option.

What is a tax refund advance loan*?

The tax refund advance is a new product offered through our banking partner when you prepare and e-file your 2015 tax return with Rapidtax. It is a $750 loan secured by your federal tax refund that you will receive 1-2 business days after the IRS accepts your tax return. This option is free to use and completely interest free!

How does it work?

If you’ve worked with us before, the process of submitting your tax information is the same. You will create an account and enter your tax information as you normally would with our easy-to-use website. When you reach the checkout process, you will choose whether you would like to pay using a credit card or with Fee-From-Refund. If your federal tax refund is over $1,000 after all authorized fees, then you can apply for the refund advance loan option. You will see this option on the payment method page of your account and can choose to receive your loan and remaining refund via direct deposit or check. Read the rest of this entry »