Celebrities Who Cheated on Their Taxes

If there is one thing that you should learn from celebrities, it is not to follow their example when it comes to finances. Below you can see some of the celebrities who cheated on their taxes and had to pay for the consequences in not so pleasant ways.

Wesley Snipes
Back in 2008, the IRS caught up with Wesley Snipes for not filing taxes at all from 1999 to 2001, and his consequence was spending three years in prison. Turns out, he thought it was a good idea to challenge how the IRS would collect taxes. They sure showed him, right?

Richard Hatch
Richard Hatch, the winner of Survivor, decided he was not going to report the million that he won as a prize. He was punished by the IRS with three years in prison and was sent back for another nine months because not filing taxes in 2009 was a violation of his probation.

Al Capone
This person may have gotten off easy since the government was not able to catch him in the act of doing alleged crimes. However, when he slipped by not filing taxes he was given a penalty of serving approximately half of his eleven year sentence for tax evasion.

Overall, it is probably best to learn from these celebrities mistakes. Not filing taxes can turn into jail time and other things can happen too. Unless you are trying to have your five minutes of fame for tax evasion, do not think of trying to pull a slick one over on Uncle Sam. Call our Seattle CPA firm at (425) 483-6600

IRS Audits Explained

Many taxpayers are under the assumption that an IRS audit means an agent from the IRS is going to show up at their door. However, there are different types of IRS audits. Today we are taking the time to go into details about them.
Correspondence Audits
If you made an error when filling out your tax return, you will usually get a correspondence audit. This type of audit can be handled entirely through the mail. If you feel as though everything was correct, you can disagree with the audit and this usually means the audit will be performed over the telephone.
Alternatively, you may need to provide additional documents to accompany your return. This also can be done through the mail.
Office Audit
Sometimes the IRS may need you to come into the office and do an in person interview. When this is required, we suggest that you ask your tax professional to accompany you on the visit.
Field Agent Audit
Individuals rarely have this type of audit. However, when it does happen the agent comes to your home and they search for what it is that they need to verify. It is a very intrusive audit; however, as mentioned it rarely happens.
Line-by-Line Audit
This audit is truly a pain, and it is done at random. When a line-by-line audit must be done, an agent goes through your return line by line to examine information to make sure that everything is 100% accurate.

Seattle CPA firm Huddleston Tax CPAs, we can answer your questions and assist you through an IRS audit. Give us a call at (425) 483-6600.

Things That Could Happen If You Don’t File Taxes

Getting in trouble for doing taxes is not something that only happens to the celebrities. If you don’t file your taxes some pretty terrible things could happen. Today, we are sharing with you exactly what could happen to you when you do not file your taxes to Uncle Sam.
Pay a Penalty
Not filing taxes costs you a lot of extra money. Not only do you have to pay a not filing penalty but if you do not pay your taxes before the April deadline, you will be hit with a penalty for not paying on time too. Usually, the minimum penalty that taxpayers are hit with is $135 but it can go higher.
Pay Interest
Interest can be from 4% to 6%. Additionally, the IRS does not have the power to waive the interest you are charged. Therefore, even though they do want to help you out as much as possible they cannot interfere at all once the interest charges start rolling in.
Mess Up Your Credit
Even if the only thing you have done bad on your credit history is not paying/filing taxes, it can damage your credit score. Once your credit score is damaged you could find your credit offers become fewer and existing credit lines may decrease.
Huddleston Tax CPAs, a Seattle CPA firm, can make sure you’re in under the deadline. If you are thinking about skipping out on taxes, don’t do it. We promise you it will never work well for you. You also want to keep in mind that even if you do get a filing extension from the IRS you are still required to have your tax liability paid by the April deadline. Give us a call at (425) 483-6600.

States Where Taxes Are Going Up

If your state never recovered from the recession and is on a tight budget, they may be increasing your taxes in the future to make up for their income. Today, we are revealing some states that have already announced that they are increasing their taxes.
For taxpayers who reside in the Constitution state, you can expect to have taxes increase on everything. The highest tax rate usually is 6.7%, however, now it has jumped to 6.9%.
Georgia is projected to bring in an additional one billion to help jump start putting the state’s finances back in order. Gas prices already increased an additional 6 cents at the beginning of July.
The Sunflower state has a goal of 400 million. They started feeling their budget slip from under them when Governor Sam Brownback decided to back one of the largest tax cuts in history. Residents can thank him for their new tax rate of 6.15%. This leap now has Georgia ranking in number eleven on the state tax list.
South Dakota
South Dakota decided that they would reward motorists by allowing them to drive faster since the tax increase surprised them. The old maximum speed has increased by 5 mph to 90 mph on some major interstates.

Huddleston Tax CPAs, a Bellevue CPA firm, can help you even if your state did not make our list, it does not mean that you are in the clear yet. It may be wise to find out if your state is in a bad place financially so you can prepare yourself for an increased tax rate.

What to Expect During an IRS Audit

If you receive a notice stating that the IRS is auditing you, do not panic. Many people have been audited in the past and they have survived it successfully so you can too. Today, we are covering what to expect during an IRS audit.

Refer the Auditor to Huddleston Tax CPAs

If you have an accountant or paid tax professionals such as Seattle CPA firm Huddleston Tax CPAs to file your return, you should direct the auditor to them. More than likely, you are paying them to fight your case in the event that an audit occurs so now is the time for you to put that money to use. Never give the auditor any other information besides your accountant/ tax professional information.

What Flagged You

You can be audited for a number of reasons such as a low profit margin, high traveling and business deductions and more. However, the good news is they are required to tell you why your return has been audited so you know what to do next year.

Closing Thoughts

During the audit your tax professional/accountant Huddleston Tax CPAs will be handling everything for you the majority of the time. However, if you have to deal with the audits by yourself just respond promptly to the notice, answer all questions honestly, and give them copies of the documents requested. Lastly, being audited is not always a bad thing, especially if you have done nothing wrong on your return. The key is to make sure that you are honest and keep originals of all of your documents. Give us a call at (425) 483-6600 for more help.

How to Avoid Paying More in Business Taxes than You Have to

As a business owner, you want to pay the least amount of taxes possible. Therefore, today we are discussing how to avoid paying more in business taxes than you have to.

Plan the Timing of Income and Business Expenses

If you are self-employed, you can control when you are paid and when you spend money. You can use the cash accounting method and claim income the year you get it even if you completed the work the prior year. Also, keep in mind that you can start stocking up on inventory and supplies at the end of the year for the upcoming year. Lastly, if you are expecting to be in a higher tax bracket in the next tax year you may want to consider saving all business purchases for the start of the New Year.

Make Charitable Contributions

When you are in a higher tax bracket, consider making large contributions to a charitable organization. Think about it, when you are in the 33% tax bracket you can save $33 in taxes off a $100 contribution. Keep in mind though, before donating to an organization you will want to make sure that they qualify under the IRS guidelines.

Closing Thoughts

Just because you are a business owner, it does not mean that you automatically should expect to have to pay a ton in taxes. If you follow Huddleston Tax CPAs suggestions that we have provided to you today, you will find that your tax bill will be lower even when you are in the highest tax bracket. Call us at (425) 483-6600 or visit our Seattle CPA site.

Tips for Using Your IRA as a Last Minute Tax Deduction

If you have an IRA, you have a way to make a last minute tax deduction. Today, we are sharing a few tips that will allow you to use your IRA as a last minute tax deduction.

Max out Your Contributions

With a traditional IRA, you can make as many tax-deductible contributions as you like within your limits. If you want to save money on taxes in the end, you should max out your ROTH IRA because it will be taxed when contributing yet when you withdraw you do not have any taxes.

Contribute for the Prior Year in the New Year

After you receive your taxes owed amount you may find it to be too expensive. Keep in mind that you can contribute to your IRA up until tax day for the prior year. We think that it is best to contribute to your future than to give your hard-earned money to Uncle Sam.

Save For Retirement Early

Once you have gotten everything out of the way for the current tax year, why not go ahead and start preparing for the New Year? You can set up automated contributions for retirement during the year.

1. Max out your 401 (k) account through that has employer matching
2. Try to reach your maximum limit on your ROTH IRA
3. Put more money into a 401 (k)

Closing Thoughts

When you automate your contribution payments in the beginning of the year you can make sure that you have tax breaks available at the end of the tax year. Huddleston Tax CPAs can help you use your IRA as a last minute tax deduction. Call us at (425) 483-6600 or visit our Bellevue CPA site.

3 Ways to Invest Tax Free

The tax rules in 2015 will feature new laws. However, there are still ways that you can invest tax-free. Today, we will provide you with a few of the ways to help you start preparing for tax time now.

Invest in a 401 (k) with Price Matching by Your Employer

Your 401 (k) is a great way to invest your money. You benefit by receiving a lower AGI. While being smart with your money your employer will match between 3-4% of what you invest.

Invest in a Traditional IRA

You can invest a maximum of $5,500 per year into your Traditional IRA account. This account type is a tax-deferred account like the 401 (k). However, you can only make a certain amount of money to qualify for the deduction. Single filers who also have a retirement plan from their employer are only allowed to make between $61,000 and $71,000.

Visit our Shoreline Blog to Read “Three Mistakes You Don’t Want to Make with Your ROTH IRA”

Contribute the Maximum Amount to Your 401 (k)

After you have maxed out your Traditional IRA, go back and max out your employee matching 401 (k) account. This means that you can invest as much as $18,000. We recommend contributing the maximum amount here after your traditional IRA since the balance is higher and it allows you to get rid of any excess money.

Closing Thought

For more help, get in touch with Seattle CPA firm Huddleston Tax CPAs.  Investing smartly can help you save money when tax season rolls around. If you haven’t already set up the accounts discussed above, make sure you start them soon. Give us a call at (425) 483-6600.

How to Use Your Tax Refund Wisely

If you are expecting a tax refund, make sure you use it wisely so it benefits you throughout the year. In an effort to make the year easier for you financially, we are sharing how you can use your tax refund wisely.

Emergency Savings

We recommend putting half of your tax refund into an emergency savings account. You never know what could happen spur of the moment; therefore, it is best to have at least six months’ worth of living expenses put away in your savings. After starting it, you should contribute a small amount from your checks each week into the account too.

Pay Off High Interest Debt

Your credit is very important in today’s society. Therefore, the next thing you should do is pay off all of your high interest debt. Once the debt has been paid, keep it as low as possible to avoid finding yourself with a huge amount to pay again in another year.

Purchase Something You Need

If you need some car work done, go ahead and get it done. If you need basic essentials, purchase them. Your tax refund can help you with your immediate needs to; therefore, you have the potential to make more money because you have nothing hindering you from doing so.

Closing Thoughts

Before your tax refund arrives, you need to already know where the money is going. However, we never recommend spending your refund before it comes since you may be delayed in receiving it or find out that the refund amount is less than what was estimate.

Huddleston Tax CPAs blog is a Seattle CPA firm. Give us a call at (425) 483-6600 for more information about our services!

What to Do If You Miss the Tax Deadline

april-15-tax-deadlineWhenever possible it is recommended that you file and pay your taxes by the deadline. However, if you are unable to meet the deadline, there are some things to do and today we are sharing what they are.

Request a Deadline Extension

As soon as you know, you are going to miss the tax deadline file for an extension. This will allow you to file your taxes by October 15th. Therefore, if you do not owe any money, you are just delaying your refund. However, if you do owe money you still need to pay the money due by April 15th, despite the fact that you will be filing late.

What to Expect if You Miss the Deadline

In the event that you are unable to file for an extension and miss the deadline, you will be looking at penalties and interest.

1. Failing to file is 5% per month with up to 25% maximum
2. Failing to pay is 0.5% per month with a maximum of 25%
3. If you fail to file and pay, the failure to pay penalty reduces the failure to file penalty

What Happens if You Underpay

When you request an extension to file, you are putting yourself at risk of underpaying if you owe the IRS money. Depending on how much you underpaid you could be looking at a fine or criminal charges.

Call Huddleston Tax CPAs

If you missed the tax deadline, get in touch with us. We’re a Seattle CPA tax firm staffed by experienced CPAs. Our course of action is to file an extension from the date you were contacted by the IRS. We will submit a response letter on your behalf acting as your personal attorney. From there, we prepare and file your delinquent return to help minimize penalties. Of course, best case scenario is to start preparing for tax season early. When you wait until the last minute, you are putting yourself at risk of finding yourself in trouble with the IRS.