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November 2019

This Tax Season, Watch Out for Gift Card Fraudsters

Every tax season, fraudsters and scammers work their way into taking advantage of unsuspecting taxpayers who are worried about staying compliant with the IRS. That’s why the Internal Revenue Service is always sharing safety tips and information that we can use to protect ourselves from scams.

Nonetheless, fraudsters keep finding ways to trick us into paying fake tax bills, so we need to make sure we remain alert to any suspicious phone call, letter, or email we might receive.

The most recent tax fraud consists of fraudsters and scammers contacting taxpayers and pretending to be IRS agents. Imposters call demanding gift cards as payment for fake tax bills, tricking taxpayers into buying gift cards from different stores and giving sharing the cards’ access numbers.

This type of tax scam has become so popular, that the IRS is taking measures to prevent more people from falling victims to this modus operandi.

The IRS is also warning taxpayers about a different version of the scam that gift card fraudsters are using. This consists of imposters calling taxpayers and telling them they are being victims of identity fraud theft.

In order to convince their victims, fraudsters tell them that the stolen identity is being used to open fake, suspicious bank accounts. As a result, victims feel a sense of urgency and worry about any potential damage to their data, which is why they end up buying gift cards that fraudsters eventually use.

One of the most effective ways to know if we are being targeted by a fraudster is because they will be demanding immediate payment and specify the method of such payment. Needless to say, the payment method of choice this season seems to be through stores’ gift cards.

Another way to identify potential scams is by getting information about how exactly IRS agents contact taxpayers. If the callers are threatening to send local police, immigration officers, or any other law-enforcement to our location, we are surely dealing with a fraudster. The IRS cannot have us arrested for having unpaid tax bills, neither can they claim they will revoke our driver’s license, business license, or our immigration status.

Even when this and other types of scams are more frequent during the end of the year and tax season, the IRS urges taxpayers to stay alert throughout the year. They also urge taxpayers who might think a fraudster has targeted them to report such calls by phone, to 800-366-4484, or by contacting the Treasury Inspector General for Tax Administration. You can also alert the Federal Trade Commission through their online complaint assistant, adding “IRS Telephone Scam” in the notes.

How Not to Hire a Business Tax Advisor for Our Company

One of the most important responsibilities no business owner can ignore is complying with the corresponding tax duties we are required. In order to make sure our company remains compliant with IRS laws and regulations, we need to hire a business tax advisor that helps us with these duties. However, many business owners tend to make the mistake of either hiring the cheapest advisor they find or hiring one only during tax season. These are some of the most common mistakes we can make when we hire a business tax advisor for our company, and unfortunately, not the only ones.

Don’t Hire the Cheapest Option You Find

They say that we get what we pay for, and when we look to hire a business tax advisor, this is very close to reality. Hiring the cheapest option we can find might seem quite appealing, especially when we have a tight budget. This doesn’t mean that a “good” tax advisor will necessarily be the best one, either. However, choosing a tax preparer solely based on the price can be a poor decision for our company. Instead, we should look for credentials, qualifications, experience, and of course, the reputation of a tax advisor.

Don’t Hire an Advisor Only for Tax Season

A very common mistake we see business owners make repeatedly is that they hire a business tax advisor only for tax season. In the case of many corporations, this means hiring a temporary advisor three or four times a year, and only for periods shorter than a week. Nevertheless, we should make sure we find a long-term advisor, as they will become a valuable asset to our company. Their experience with our company and their guidance throughout the year will help us make smarter tax-related decisions all year round.

Don’t Hire Someone Who Lacks Credentials

We cannot stress this enough, but it is important to pay attention to the word “professional” when we are looking to hire a business tax advisor for our company. Nowadays, this word has pretty much become meaningless, as anybody can call themselves professionals of their field. This means that we have to find someone with the proper credentials, with the right qualifications, knowledge, and expertise in the field. Besides, finding positive reviews and recommendations from our business partners can also be included in what we are looking for.

Don’t Hire an Advisor Who Ignores the Big Picture

As we mentioned above, hiring a business tax advisor for our company can become a very valuable asset. Therefore, we should look for a professional who is willing to collaborate with us in the long run. This includes looking at the big picture, developing strategies that will give us both short-term and long-term results. If our current advisor only works on fixing immediate problems but doesn’t provide long-lasting solutions, we might want to look for someone else.

These Are the Tax Brackets that Will Apply for 2020

This year is coming to an end, and taking advantage of the time we have before tax season begins is one of the smartest decisions we can take. One of the most common questions we get is regarding the tax brackets, since many taxpayers may be confused about which one applies to them. Now, understanding the tax brackets set by the IRS can be a bit tricky, especially if we are filing our income tax report on our own. That’s why we decided to share with you the tax brackets that will apply for 2020. This way, you will be able to find which one you’re at, and what part of your income qualifies to a given tax rate depending on your filing status.

Tax Brackets for Filing Single


Bracket Tax Amount plus Percentage Amount Over
$0 to $9,875 $0 plus 10% $0
$9,875 to $40,125 $987.50 plus 12% $9,875
$40,125 to $85,525 $4,617.50 plus 22% $40,125
$85,525 to $163,300 $14,605.50 plus 24% $85,525
$207,350 to $518,400 $47,367.50 plus 35% $207,350
Above $518,400 $156,235 plus 37% $518,400


Tax Brackets for Filing as Head of Household


Bracket Tax Amount plus Percentage Amount Over
$0 to $14,100 $0 plus 10% $0
$14,100 to $53,700 $1,410 plus 12% $14,100
$53,700 to $85,500 $6,162 plus 22% $53,700
$85,500 to $163,300 $13,158 plus 24% $85,500
$163,300 to $207,350 $31,830 plus 32% $163,300
$207,350 to $518,400 $45,926 plus 35% $207,350
Above $518,400 $154,793.50 plus 37% $518,400


Tax Brackets for Married Filing Jointly


Bracket Tax Amount plus Percentage Amount Over
$0 to $19,750 $0 plus 10% $0
$19,750 to $80,250 $1,975 plus 12% $19,750
$80,250 to $171,050 $9,235 plus 22% $80,250
$171,050 to $326,600 $29,211 plus 24% $171,050
$326,600 to $414,700 $66,543 plus 32% $326,600
$414,700 to $622,050 $94,735 plus 35% $414,700
Above $622,050 $167,307.50 plus 37% $622,050


Tax Brackets for Married Filing Separately


Bracket Tax Amount plus Percentage Amount Over
$0 to $9,875 $0 plus 10% $0
$9,875 to $40,125 $987.50 plus 12% $9,875
$40,125 to $85,525 $4,617.50 plus 22% $40,125
$85,525 to $163,300 $14,605.50 plus 24% $85,525
$163,300 to $207,350 $33,271.50 plus 32% $163,300
$207,350 to $311,025 $47,367.50 plus 35% $207,350
Above $311,025 $83,653.75 plus 37% $311,025


What You Need to Know About Claiming Tips on Your Tax Return

For many workers, tips are an important part of their income, as many companies and businesses rely on them in order to cover the wages for their staff. If we count on tips as part of our income, we need to report them to the IRS, as we need to cover our corresponding taxes for Social Security and Medicare based on tip income we receive. In order to help you take care of this process, we have put together a short list of steps and tips you need to follow when claiming tips on your tax return. These include keeping a monthly record, documenting shared tips, checking for tax withholding balances, and filing a form for unreported income.

Keep a Monthly Record on Your Tip Income

One of the most important aspects you need to keep in mind when claiming tips on your tax return is that the IRS requires you to report your total tip earnings to your employer on the 10th of every month. Most employers have a specific process to follow for reporting tip income, but if yours doesn’t, you can do it by filing Form 4070. This way, your employer will be able to cover income withholding from your tip income. Remember that if you fail to report this income, you can be subject to a penalty equal to 50% of the Social Security and Medicare taxes you are not paying.

Document How Much Tip You Share with Other Employees

In many places, it is common for employees to share or pool tips with other employees, and we must remember to document this when claiming tips on your tax return. This is because it can help you reduce the amount of tip income you need to report. Since every company might work with different processes of tipping structures, we need to keep a very detailed record of how much we got and how much we shared. For example, if we received a total of $200 in tips, but need to share $50 with another staff member, we should only report $150 as tip income.

Check Your Tax Withholding on Your W-2 Form

When it comes to claiming tips on your tax return, we must pay a lot of attention to tax withholding. In most cases, your employer will be in charge of taking your tax withholding share and reporting it to the IRS. However, you might not have earned enough in tips and wages to cover your withholding. If this were the case, you will be able to find the balance you owe in your W-2 Form. If it shows a significant balance, you might be subject to several tax penalties after submitting your returns.

Include Unreported Tip Income on Form 4137

If there were some months on which we didn’t receive more than $20 in tips, or if we received non-cash tips, we need to fill out Form 4137. This form will allow us to include any unreported tip income and wages we didn’t have the chance to report during the year. Also, the form comes with instructions that will help you calculate the amount of Social Security and Medicare tax you must cover on your unreported tip income reports.

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