Tips for Handling Correspondence with the IRS

Tips for Handling Correspondence with the IRS

Getting a letter or notice from the IRS can be upsetting, confusing, and unnecessary. The IRS sends taxpayers notices to request payment for taxes, to notify them of a change to their account, or to request additional information. Attention to the following details will reduce the likelihood that you will become pen pals with the IRS.

·     Never send a payment to the IRS without designating what it is for. Otherwise the IRS may apply it in any manner they want. Every payment should include your name, your taxpayer identification number, the type of tax you are paying, and the period the tax payment is for.

·     Make sure the name and social security number on your tax return agree with the Social Security Administration’s records. If you change your surname, notify the Social Security Administration and request a new social security card.

·     Don’t claim a tax exemption for your child unless you are entitled to do so. Special rules apply to divorced parents. If both parents claim the child as a dependent, both returns will be subject to further IRS review.

·     Respond promptly to any notice you receive from the IRS, even if you think the notice is incorrect. If the IRS doesn’t hear from you within the time specified on their notice, you may lose the right to protest any changes made to your return.

·     Send a change of address form (Form 8822) to the IRS when your address changes. If you fail to provide the IRS with your current mailing address, you may not receive a refund check or a notice if there are problems or adjustments to your return. And even if the IRS can’t find you, penalties and interest will continue to accumulate on any tax due.

For assistance with any tax concern you have, give our office a call.

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com

November 15, 2013










Year-End Tax Cutting Suggestions for Individuals
It’s not too late to consider tax moves that could reduce your 2013 taxes and get you in a better
tax position for 2014.
• Be aware of higher tax rates. In 2013 the top tax rate has been increased to 39.6%
for top bracket taxpayers (with taxable income over $400,000 for singles, $450,000 for married
taxpayers). In addition, singles with income greater than $200,000 (or $250,000 for married
taxpayers) will be subject to the new 3.8% surtax on net investment income. If you believe that you
will be close to this limitation, consider making moves that will defer income into 2014.
• Take advantage of tax-deferred accounts. All of the new tax rates and phase-outs
are based upon adjusted gross income or taxable income. The most efficient way to reduce both of
those items is to maximize contributions to tax-deferred retirement plans. If your employer offers
such a plan, make maximum use of it (such as a deferred compensation plan). If not, see if you are
eligible for your own deductible IRA.
• Consider a health savings account (HSA). Investing in an HSA gives you a current-
year tax deduction, while providing a savings account to use to pay out-of-pocket medical expenses
currently or in the future. An HSA is not a “use it or lose it” plan. Any funds in the plan can be
used in future years. And be aware that you can fully fund your HSA up to April 15th of the
following year.
• Make charitable gifts from your IRA. Seniors age 70½ and older can make
charitable contributions directly from their IRA. While this won’t be deductible, it can apply
against your annual required minimum distribution (RMD), thereby lowering your adjusted gross
income.
For guidance with your year-end tax planning, contact our office.
Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Leaving Your Job? Weigh the Options of a Rollover

If you’re quitting your job for another position or retiring completely, you probably have a zillion things on your mind. But don’t forget about the assets in your 401(k) plan or other qualified plan at work. There are several options to consider.

·     Leave the money where it is. But remember that you won’t be connected any longer with the employer providing the plan.

·     Cash in the funds at a hefty tax price. Generally, the payout will be taxed at ordinary income rates, now reaching as high as 39.6%. Plus, you’ll be assessed a 10% tax penalty if you’re under age 59½, unless a special exception applies.

·     Roll over the funds to a traditional IRA (or another qualified plan if one is available at a new job). The rollover is exempt from income tax if it is completed within 60 days of the distribution.

The rollover-to-an-IRA option is often preferable since it preserves your nest egg without any tax erosion while offering a wide array of investment choices. But this tax-saving technique is not without its perils.

Notably, if you don’t meet the 60-day deadline, the payout is treated as a taxable distribution. Also, if you receive the funds, the plan administrator will withhold tax at a 20% rate, even if you intend to roll over within 60 days. Thus, you can’t recoup this amount until you file your tax return for the year of the transfer. To avoid withholding, arrange a “trustee-to-trustee transfer” to the IRA where your hands never touch the money. Finally, if you roll over funds to a Roth IRA instead of a traditional IRA, you must pay tax like any other Roth conversion.

Review your options and choose what’s right for you. Contact us if you would like help investigating the alternatives.

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com