Author: Eric Buechler

The Minnesota Department of Revenue doesn’t make cold calls for tax payments. BUT someone masquerading as a DOR tax collector apparently is dialing numbers in the state.

The tax agency is warning that a phone scammer is calling people and demanding payment of money supposedly owed to the state. The caller also threatens to send police to the person’s home if he/she does not send money by credit card or money order during the call.

You easily can guess that the state doesn’t work that way. The con artist is prospecting for money and, probably, credit card numbers.

The DOR alert sent out an email alert this week about the latest scam. Here are some red flags that scammers are at work on the phone or in emails. The tax agency announced it will NOT:
•Call about an account balance due without first sending mail.
• Demand payments without first sending mail.
• Require payment information over the phone.
• Threaten to involve police in a collection.

 If your shopping cart is piled high with notebooks, pens and other school supplies in the next few weeks, save those cash register receipts – even after the charges have cleared your bank account. There’s a good chance you’ll be able to lower your state tax bill or a receive a bigger refund with them when you file your 2014 tax return.

Minnesota families with children attending grade schools and high schools, as well as home schools, can subtract costs of school supplies and other expenses from incomes on state tax returns.

Even better, some families with limited incomes can qualify for tax credits, the most powerful state tax breaks available. Credits offset state taxes on a dollar-for-dollar basis.

 Most expenses directly related to schooling qualify for either a subtraction or a tax credit. For example, tutoring expenses and rental fees for instruments for music lessons are among the approved items. But non-academic expenses don’t qualify, even if they have a direct connection to the school.  So, athletic gear and team uniforms – except for clothing required for gym classes – don’t make the cut.  There is a $200 limit for computer hardware/ and software expenses, too.

 Those receipts for educational expenses can produce a good-sized return of Minnesota taxes. Using the subtraction, parents can lower income as much as $1,625 or each grade school student and $2,500 per child for junior high and high school students. Taxpayers eligible for credits can reduce their taxes as much as 75 cents for every $1 spent on school supplies. They also can file for refunds even if they do not owe any taxes.

 For a broad look at the education tax breaks, type “K-12” in the search box for the Minnesota Revenue Web site, www.revenue.state.mn.us. It leads to a specialized Web page about them.

 How do you know which expenses will work and which won’t?  Minnesota Revenue offers two fact sheets to help with those details. Look online for Income Tax Fact Sheet 8, called “K-12 Education Credit and Subtraction.”  Eligible expenses for home schooling are spelled out in Income Tax Fact Sheet 8a.

 If you’ll be visiting the Minnesota State Fair this month, you might want to stop in at the Minnesota Revenue booth in the EducationBuilding. The state tax people are offering a special envelope to help parents/guardians hold on to receipts from school supply shopping.

We at EricJohn Ltd. suggest another handy way to track those education expenses. Snap photos of receipts with a cellular phone and store them in an electronic folder for easy reference at tax time.

 

 

 

You might have heard talk about the revival of “bonus,” or special, depreciation for big business purchases. It was lucrative. Until it ended last Dec. 31, taxpayers were able to take a 50 percent write-off from the cost of business equipment in the first tax year of use, far more than normal depreciation.

The U.S. Senate did move to bring it and many other federal tax breaks back to life through 2015 with the Expiring Provisions Improvement, Reform and Efficiency Act of 2014 – nicknamed “EXPIRE” for fun.  The bill even won a motion putting it up for consideration in the full Senate.

But nothing has happened since May. It seems the Senate’s attention to EXPIRE has expired for the time being.

So, while 50 percent bonus depreciation still is possible, it also is languishing a long way from your 2014 business tax return.  You may want to factor that in to equipment buying decisions in the last half of the year.

P.S. In recent years, Minnesota business taxpayers were required to add back 80 percent of this depreciation to state tax returns.

Want to explore some equipment buying scenarios for your 2014 taxes? We’re ready to help. Call or email us at EricJohn Ltd.

 

Soldiers and sailors from Minnesota who served recently in combat zones should keep Oct. 15 in mind. It’s the deadline for claiming a special state tax credit worth $120 for each month in harm’s way.

This year’s filing deadline is the last chance for armed forces members stationed in combat zones any time during 2010. Those serving from 2011 through 2013 still can apply on an ongoing basis, Minnesota Revenue announced.

The tax credit applies to both veterans and to service members on active duty. There are three main requirements:

• Minnesota is the soldier/sailor’s home of record.
• He/she must have served in a combat zone or hazardous duty area during the year of application. (The Internal Revenue Service lists eligible areas at http://www.irs.gov/uac/Combat-Zones.)
• The member must have received combat pay.

Applying takes a single form, M99 (Credit for Military Service in a Combat Zone), for the year involved. The form is available at the Minnesota Revenue Web site. The form asks for proof of service, which members already have or can obtain.

The 2010 credit is $120 for each month in the combat zone, and a partial month counts. So, even a day can qualify for a full month’s benefit! The tax credit can mean hundreds of dollars for active duty, Reserve, National Guard, retired and discharged military men and women from Minnesota. Survivors also can apply on behalf of deceased military members who qualify.

For a complete description of the combat zones tax credit, go to: http://www.revenue.state.mn.us/individuals/individ_income/Pages/Credit_for_Military_Service_in_a_Combat_Zone.aspx.
Minnesota Revenue also details other tax breaks for military on its Web site. .

EricJohn Ltd. can help both active duty members and veterans claim the tax gratitude Minnesota offers for their service.

It is property tax payback time for many homeowners and renters in Minnesota. Better yet, taxpayers who are eligible for refunds are going to find the state government is more generous than last year. Property tax rebates are up 3 percent for homeowners and 6 percent for renters this year.

It also winds up that more Minnesota taxpayers can qualify for the refunds, which are set on a sliding scale based on income levels and tax/rent payments. So, if you didn’t qualify last year, maybe this is the year!

There’s still more plenty of time to apply. Both homeowners and renters can request refunds on Form M1PR through Aug. 15, the official deadline.

Qualifying homeowners will get their refund based on local government (city, county, township, etc.) property taxes payable in 2014; technically it’s called the “homestead credit refund.” The maximum refund is $2,657.

Renters claim their property tax refunds based on rent they paid in 2013. The max rebate is $2,120.

Minnesota Revenue last week announced a complication  for taxpayers who filed for refunds early. If your household income was changed by the middle class tax cuts and you applied for a property tax refund before April 2, you’ll need to amend that M1PR to reap a full refund.

The correct household income is the important issue here. If you filed the M1PR from April 2 forward and used the new household income, no other action  should be necessary. The tax agency will either adjust your property tax refund form (and will send you a letter explaining any changes) or will process them as usual.

Taxpayers who were not affected by the middle class tax cuts also won’t need to take any new action.

EricJohn Ltd. is ready to navigate the property tax refund system for Minnesota taxpayers.

Still waiting for a big refund from that slew of Minnesota tax changes this spring? You officially can worry now.

Friday, June 27, is the self-imposed deadline set back by Minnesota Revenue for working through about 260,000 tax returns. They were affected by the tax breaks, but filed before April 2, when the agency had new forms, etc. available.

If you don’t see your refund by Friday or haven’t heard from the tax collectors, feel free to fret – and start tracking!

Of course, there is one obvious explanation for a missing refund. “Taxpayers who do not hear from us by June 27 did not qualify for the 2013 middle class tax cuts, according to our review,” Minnesota Revenue Commissioner Myron Frans said back in May.

T the agency will update and give more guidance during a conference call and Webcast at 10:30 a.m. on Friday. Register for the Web presentation at https://revenue.webex.com/revenue/onstage/g.php?d=749169653&t=a

To start tracking an missing refund, you or your tax preparer should dial up Minnesota Revenue by phone 1-800-652-9094 or send an email to [email protected]

 

Minnesota taxpayers will know by June 27 if recent changes in tax laws put more money in their pockets. State Revenue Commissioner Myron Frans promised Tuesday that, by that date, his department will process all 2013 returns due to benefit from a group of new laws that were nicknamed “middle class tax cuts.”

It seems these tax breaks also may affect property tax refunds. So, Frans told Minnesotans with those tax cuts NOT to file 2013 claims for either the Homestead Credit Refund (for homeowners) or the Property Tax Credit Refund (for renters) until further notice.

Why not? Well, Revenue wants to make sure their incomes are correct before taking those 2013 refund claims. In addition, the state Legislature still is considering some other property tax changes, Frans said.

Here’s what to do now if you were affected – or think you were affected – by this spring’s middle-class tax breaks.

• If you filed early (before April 2) , be patient and WAIT until June 27 to start tracking your 2013 tax refund. Processing should be done by then. “Taxpayers who do not hear from us by June 27 did not qualify for the 2013 middle class tax cuts, according to our review,” Frans said.
• If you disagree then, you or your tax preparer should contact Minnesota Revenue by phone at 1-800-652-9094 or by email to [email protected].
• WAIT to file or amend your property tax refund until Minnesota Revenue issues a “File Now” announcement. (Note: Property owners typically have until Aug. 15 to make their claims.)
• Keep an eye on Minnesota Revenue’s Web site, www.revenue.state.mn.us, and monitor the latest news by clicking on the orange “Tax Law Changes” button.

A big bunch of taxpayers are affected. Minnesota Revenue estimates about 260,000 returns that qualified for the tax cuts had been filed before April 2. That was the date when Revenue’s processing systems caught up to the changes. They have to be specially processed and, so far, about 52,000 are done.. Another 1.1 million returns eligible for the tax cuts were filed after revised forms were available on April 2.
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Minnesota’s Department of Revenue is assuring taxpayers that their last-minute electronic tax payments met the April 15 deadline, even if their online bank statements  don’t show them yet.

“We have received inquiries from taxpayers questioning why their payment doesn’t show up as coming out of their bank account(s),” the agency announced.

It could take two or three days after an electronic payment to be recorded in a taxpayer’s bank account. But Minnesota Revenue credits payments on the day they are requested.

So, if you or your tax professional hit the “send” button on April 15, your state taxes were paid on time.

 

If you won’t have your federal (and state) tax returns ready by the end of the day on Tuesday (April 15), it’s probably time to join the millions – actually close to 12 million taxpayers – asking for an extension.

The extension adds another six months to the deadline, making it Oct. 15. The IRS won’t ask you why you need it.  BUT – and it can be a big “but” – the IRSstill expects you to estimate income and pay any taxes by the normal deadline.

Over the last several years, the IRS has become more black and white in its enforcement of various rules that once were monitored loosely.  For example, the tax agency has beefed up its oversight and penalties for compliance involving Forms 1099.

So, what does this have to do with your extension?  In 20 years of practice, I have never had an extension denied; not even one marked with all “zeroes”!  That said, Form 4868 – Extension of Time to File — may be the next in line for enhanced enforcement.  The IRScan deny your extension request based on a poor application.

WHAT THE IRS WANTS

In a nutshell, an extension is not valid unless the taxpayer’s liability is estimated properly, using currently available information.

The penalty can be stiff.  If the tax liability is not properly estimated, the IRS will deny the extension and can assess a late-filing penalty (up to 25% of tax due) in addition to a smaller late payment penalty (1/2% per month).

OUR SOLUTION

Don’t break out in a sweat just yet! You can come up with a reasonable estimate. At EricJohn Ltd., we base your estimated income and taxes on your prior year return and adjust them for your 2013 situation. As a starting point, did you make more or less money than a year ago?  If you have some figures but just haven’t had the time to go back through the numbers, we can work with that information, even if you are missing some income or expenses. We’ll take it from there.

Spending just 5 to 10 minutes to pull together some figures could save you hundreds — maybe even thousands — in tax penalties. If you need to file an extension with zero info, know that it’s risky.We don’t advise it. But it’s better than no attempt at all!

 

The housing crisis still lingers, and state and federal agencies have been assisting homeowners who need help keeping their homes.  So, the IRS family of 1098 forms now includes a report specifically for “mortgage assistance.” Form 1098-MA shows the payments.

If you received one for 2013, are you subject to tax on those mortgage assistance payments?

The National Association of Tax Professionals looked into that question after numerous inquiries. The short answer was “No.”  Its  researchers discovered those government agency payments fall within the “general welfare exclusion” and can be excluded from gross income.

But, there still is some tax caution here for mortgage-related deductions. If  you deduct mortgage interest and/or real estate taxes on your federal return, the deduction can be limited because of the assistance.

The NATP says you can claim only the smaller one of two amounts – either the mortgage assistance (shown in Box 3 of Form 1098-MA) or the mortgage interest plus real estate taxes you actually paid.

If you have a tax advisor like EricJohn Ltd., he or she should be able to easily compute the right number.