There are multiple situations where you need to find out what the IRS knows about you. It could be for the purpose of obtaining a loan, refinancing your house, or continuing your citizenship status. Possibly you are a few years behind on filing tax returns and need to know where to start. Or maybe you lost a return and simply need a copy for your personal records. Here are three items that will help you see what the IRS has on file for you:

• Tax return transcripts and account transcripts: A tax return transcript is a summary document that shows most line items and amounts from your original return. It also includes the forms and schedules filed with the return. A tax account transcript has basic high level information such as return type, filing status and adjusted gross income. It will also show if an amendment has been filed. Both types of transcripts are available for the current tax year and the prior three years (ten years for account transcripts), and are often acceptable proof of income for loans, mortgages and financial aid. Transcripts from the IRS are free and can be viewed online or mailed to your home within 5-10 days.
• Copies of tax returns: If a transcript is not sufficient, you can request an actual copy of the tax return as far back as six years. The current fee per copy is $50 and can take 75 days to receive. The fee is waived if you live in a federally declared disaster area.
• Freedom of Information Act (FOIA) document request: If you are looking for IRS records besides your returns, a FOIA request might be for you. Per the IRS, “the FOIA applies to records either created or obtained by an agency and under agency control at the time of the FOIA request.” In order to receive the documents, submit a detailed request and conduct the necessary fee calculation. According to the FOIA, the IRS must provide records unless they fall under a handful of exemptions or exclusions. Examples of exemptions are records that have classified information or are involved in an ongoing investigation. The fee and response time varies by the scope of the request. A FOIA request is a good place to start if you have past due tax returns that need to be filed or are at odds with the IRS regarding an audit decision.

No matter what your tax situation is, it’s good to know what your options are if the time comes that you need to get information from the IRS. Please call if you need help making a request.

If you have not already done so, now is the time to review your tax situation and make an estimated quarterly tax payment using Form 1040-ES. The third quarter due date is now here.

Due date: Monday, Sept. 17, 2018

SPECIAL NOTICE: With major tax law changes in place for 2018, forecasting your tax obligation is more important than ever. If you need a review of your situation consider doing so immediately to avoid any surprises at tax time.

Remember, you are required to withhold at least 90 percent of your current tax obligation or 100 percent of last year’s obligation.* A quick look at last year’s tax return and a projection of this year’s obligation can help determine if a payment is necessary. Here are some other things to consider:

Medical expenses are on the rise. According to the Milliman Medical Index, the average family of four on an employer-sponsored plan will spend $28,000 on healthcare in 2018 – a $1,000 increase from 2017. Below are some ways you can save tax dollars when paying those medical bills:

• Contribute to a Health Savings Account (HSA). If you have a high deductible health plan, you can open an HSA account to pay your medical bills. If your health insurance deductible is $1,350 ($2,700 for family) or more, you can make contributions to an HSA to reduce your taxable income. The HSA contribution limit is $3,450 for 2018 ($6,900 for family).
• Contribute to a Flexible Savings Account (FSA). Unlike an HSA, an FSA has to be set up by your employer. Like an HSA, you and your employer can make pre-tax payroll contributions to the account to cover qualified medical expenses. One benefit of an FSA is your total annual election amount is available to you on Jan. 1. On the flip side, if you don’t use your FSA dollars by year-end, you lose the funds.
• Deduct your self-employed health insurance premiums. If you are self-employed, you can deduct amounts paid for health insurance premiums for you and your family. To be eligible to make the deduction, your self-employed business needs to show a profit for the tax year. This is an above-the-line deduction, so it can reduce your taxable income even if you are claiming the standard deduction.
• Deduct medical expenses as an itemized deduction. For 2018 the IRS will allow you to include medical expenses that exceed 7.5 percent of your adjusted gross income (AGI) as an itemized deduction. For example, using the US Census Bureau’s average household income of $60,000, any medical expenses above $4,500 may be deducted. If you are not taking the standard deduction, these medical expenses can be used to reduce your income.
• Obtain qualified health coverage. As a reminder, the individual shared responsibility mandate is still in place for 2018. If you don’t have qualified health coverage for any month of the year, you could pay a hefty fee when you file your taxes.

If you would like to discuss how these options may work for you, please call.

The time to organize your tax records is now. Waiting until the end of the year or, even worse, waiting until you are audited can lead to headaches. Here are some tips to get on top of your tax records.

Storage Hints

Organize your records by tax year. If you have not already done so, create a folder for the current year’s files. Here are some filing suggestions.

• Tax return and support. Create a file with copies of your signed tax return(s) for the year. Include any support documents provided with your filed tax return.
• Files in tax return order. Create your annual files to match the flow of your 1040 tax return. Here are some suggestions.
  • Income. Copies of W-2s, 1099s, Social Security statements, interest income, K-1s, and investment activity go in this file.
  • Charitable Donations. Create a separate file for cash donations and one for non-cash donations. Include a copy of your charitable mileage log in this file.
  • Medical and Dental. Create a file for all your medical related expenses. Include a copy of your medical related mileage log in this file.
  • Other itemized deduction file. In this file include all other proof of itemized deductions. This includes property tax statements, mortgage interest, and state income tax documentation.
  • Business activity. Have a file for each hobby and business activity. Include a copy of your business mileage log in this file.
  • Education. Create a file for all documents related to educational expenses. Include in it copies of invoices, tuition and fees. Include invoices for music lessons, instruments and any materials required to purchase for your student.
  • Other. Put all your miscellaneous receipts into this file. This includes receipts you are unsure about like receipts for daycare, Form 1095s and any other tax related items.
• Statement file. Sort all your statements by vendor, then by month. Create a separate file for these statements. This can include bank statements, credit card statements, and investment account statements. Consider creating a digital back up copy of these statements and store them on a CD or USB drive.

The Digital Alternative

If more of your records are in digital format, consider creating a tax folder for each year on your computer and then place your digital records into sub-folders using the same sort as noted above. Create password protection for each folder.

Rotation idea

Finally, at the end of each tax year place a note on the tax return to confirm the date your tax return was sent into the federal and/or state government. Note on the outside of this file when you can toss the support documentation. Go back to old tax years and shred the old documents that are no longer needed. Do not take this action unless you know the length of time you will need to save these records.

Better late than never, right?  With just days to go before year-end, Congress has passed the “Protecting Americans from Tax Hikes Act of 2015” (PATH).

At Willis & Jurasek we are focused on your future; we hope that the following partial outline will assist you with finalizing your year-end tax planning.  As always, if you have any questions please contact us.

PATH extended or made permanent many of the tax incentives that Congress has been extending late in the year (retroactive to the beginning of the year) since roughly 2010.  We have compiled this list for a taste of what was passed.

• The Section 179 expense limitations have been permanently extended.  This means those who spend up to $2,000,000 on capitalized personal property can take a current year expense of up to $500,000.
• The 15 year recovery period for qualified leasehold improvements, qualified restaurant property and qualified retail improvements is made permanent.
• The 50% bonus depreciation for qualified purchases has been temporarily extended.  For new property placed in service during 2015-2017, you may expense up to 50% of the cost.  This phases down to 40% in 2018 and 30% in 2019 & expiring in 2020.
• The credit for Research & Experimentation has been permanently extended.  Additionally, eligible small businesses may claim the credit against AMT and certain employer’s FICA tax liability.
• The Work Opportunity Tax Credits (WOTC) for employers hiring qualified veterans and employees from targeted groups is extended to 2019.
• The reduced built-in gain recognition period for S Corporations is made permanent at 5 years.
• The ability for IRA transfers directly to charity in lieu of taking required minimum distributions is made permanent.
• The tuition deduction is extended until December 31, 2016.
• The $250 teacher supply deduction is made permanent.
• The enhanced earned income tax credit is made permanent.