Landmark Tax Group - February 2021

Landmark Tax Group - February 2021

Landmark Ledger

(949) 260-4770 Professional | Experienced | Licensed Expert IRS & State Tax Relief

February 2021

Don’t Get Trapped in an IRS ‘Groundhog Day’

M any people are guilty of procrastinating at one time or another, but procrastinating on taxes is one thing we want to avoid. It’s the easiest way to fall behind on taxes, and it takes a lot of extra work to get caught back up. In January, people set goals for themselves. They look at the year with fresh eyes, ready to take on the world. But by the time February rolls around, their entire perspective has changed. Most people forget about or give up on their personal goals by Feb. 14. They just lose interest or end up focusing on other things. Or they get stuck in a rut. They may have a big goal they want to accomplish, but they aren’t sure how — or they’ve discovered by solving one problem, they’ve actually created another one. In my line of work, I see taxpayers who set the goal of getting current on their taxes. They may still owe back taxes from years past and want to eliminate that burden, but no matter what they do, they can’t seem to escape their IRS problems. Here’s what I mean: In trying to get squared away with back taxes, they end up falling behind on the current year’s taxes. They find that they don’t have the resources or ability to

take care of both. The end result is a seemingly endless cycle of owing taxes. It’s kind of like being trapped in “Groundhog Day,” except there’s no Bill Murray — it’s just the taxpayer and the IRS going in circles.

impact their retirement goals. One tax problem may have been solved, but more problems have been created. So, how does someone get control of their back taxes without getting stuck in an IRS rut? It really starts with a plan of action. The IRS gives taxpayers a number of options when it comes to paying back taxes. For example, the IRS allows qualifying taxpayers to pay in installments. This eases the burden and gives a taxpayer more control over what they pay each month.

Other options include penalty removals, and the Fresh Start

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Program, which we focused on in our January 2021 newsletter. If you have questions or need help getting out of a tax rut, don’t hesitate to get in touch. You can visit our resources page at LandmarkTaxGroup.com/ Free . This page is packed with resources that address a number of tax problems and also includes strategies to help you get current on back taxes, while avoiding the endless cycle with the IRS. It’s time to break the cycle! We’re here to help you put together a plan of action and get back on track.

This happens to a lot of people. To complicate matters further, many people pull from retirement funds, such as a 401(k) or IRA, in order to pay their back taxes. They do this because they have no other income sources to pull from. While this strategy may help them get current on back taxes, it leads to other problems. For one, the taxpayer may be hit with a 10% penalty for early withdrawal. This is on top of any fees and taxes that may accompany the withdrawal. And two, once the retirement money is taken out of the account and used, it’s gone forever. The taxpayer will have less money to draw upon during retirement years, which may negatively

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Love Boosts Your Immune System and Lifespan

It doesn't take a scientist to tell us that a healthy, loving relationship can

married couples and singles had lower blood pressure than people in low quality marriages. Which means,

But how does it improve your immune system? That’s a bit of a mystery to researchers. So far, women in love have shown changes in their gene regulation of immune cells compared to women not in love. Some theorize that this is in order to prepare for pregnancy. Unfortunately, we still don’t have conclusive research on whether men in love better fight flu and other viruses, too. High blood pressure is known as the “silent killer” since it has no symptoms, but it will steadily degrade your health over time, significantly increasing your risk of chronic conditions like heart disease. And while love is certainly not the only way to lower blood pressure, it’s comforting to know our loved ones can boost our health for a longer, happier life. Happy Valentine’s Day!

lessen our stress — but did you know it also boosts our immune system's

at least in terms of your health, it’s much better to be single than unhappily married.

response and could help us live longer? Multiple studies have shown that couples in happy, loving marriages tend to have lower

How does it help your blood pressure exactly? Well, when positive events occur, the hormones oxytocin and vasopressin interact with your

dopamine reward system. Vasopressin in particular helps control blood pressure.

blood pressure. Marriage itself isn’t the key to a healthier life — the love is, researchers find.

Of course, getting into a new relationship can be a little stressful! Cortisol, the stress hormone, initially rises when you fall in love. However, it quickly drops in a long-term, stable relationship. Those low cortisol levels sustained for a long period of time contribute to many health benefits.

How do researchers define a loving relationship? To put it simply, it depends on the couples’ own opinion. Married couples with a high quality (aka loving) relationship showed significantly lower ambulatory systolic blood pressure than singles. However, happily

6 Ways to Reduce Your Chance of an IRS Audit

Document everything. If you're unsure if the IRS will understand your claimed exemptions, deductions, or expenses, provide the agency with documentation to substantiate your claim, such as receipts, copies of canceled checks, or a letter of explanation. A licensed tax preparer will know when additional substantiation is warranted.

Audits are on the rise. Although there is no guaranteed way to prevent an audit, following these six tips will help you reduce your chance of being audited and all the stress and costs associated with one. Beware of your deductions. The IRS computer system may flag your tax return if your "deduction to income" ratio is unusually high. Individual and business taxpayers should only claim valid deductions on their return and use extra caution to avoid "double-dipping" by claiming a deduction or credit twice on the same return. Claim proper exemptions. Ensure your personal exemptions are correctly calculated and claimed on your tax return. For more information on exemptions, see IRS Publication 501.

tax-related records sent to the IRS, Social Security Administration, and your state. If you're an employee, be sure your Form 1040 matches the Form

Stay in compliance. The

chance of a tax audit due to random selection is

W2 filed by your employer with the aforementioned agencies. If you're a business, all quarterly filings should reconcile

very slim (less than 1%). The best way to reduce your chance of an audit is maintain compliance with your tax obligations, such as tax withholding

perfectly with your annual tax return.

File on time. Filing late, or worse, filing multiple tax returns late, may trigger an IRS tax audit. High-income taxpayers who file multiple tax returns at the same time may set themselves up for review. The IRS makes it easy to timely file your tax return using e-filing.

and filing.

Want to learn more about protecting yourself (and your assets) from the IRS? Get help at LandmarkTaxGroup.com/Free and be ready this tax season!

Ensure all of your tax filings reconcile. This includes all tax returns, documents, and other

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READY, SET, FILE! Do You Have Everything You Need to File Your 2020 Tax Return?

Are you prepared to file your tax return, if you haven’t already? It’s always good to have a checklist of all the things you need before you file. This way, you aren’t scrambling to search for that specific document when the time comes. Here is a quick rundown of several documents and information you may need ahead of filing.

• Documents related to any economic impact payment (“government relief”) you received For retirees: • 1099-R (distributions from pensions, annuities, retirement accounts, etc.) • SSA-1099 (Social Security benefits) • Deduction information  Charitable donations (You may be eligible for a $300 charitable deduction thanks to the CARES Act. However, you must itemize your deductions to qualify.)  Education costs  Mortgage interest  Child care, etc. While other information may be needed, these represent the most common documents necessary to file an accurate tax return. If you feel overwhelmed or uncertain about filing, don’t hesitate to reach out so we can guide you through the process and ensure you meet all the necessary requirements before submitting your return to the IRS. Visit LandmarkTaxGroup.com for more information.

• • •

Last year’s tax return

Social Security Number (or tax ID)

Income documents 

Form W-2 (general employment)

1099 (self-employed)

 

Schedule K-1 (partnerships)

 1099-MISC or 1099-NEC (miscellaneous/non-employee income)  1099-G (unemployment)

•

Financial statements and investment income  Bank statements  Receipts  1099-INT (interest income)  1099-DIV (dividend income)

S UDOKU

TAX QUOTES

I STILL LOVE YOU, EVEN THOUGH IT PUTS ME IN A TAX BRACKET I CAN'T AFFORD.

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Inside This Issue Break the Cycle of Back Taxes 1 High Quality Relationships Lower Blood Pressure Reduce Your Chances of an IRS Audit — Here’s How! 2 Are You Ready to File? Tax Quotes 3 Is Air Travel as Risky as You Think? 4

Sudoku Answer Key

Is It Safe to Fly During the Pandemic?

Air Travel May Be Less Risky Than You Think

Passengers Wearing Masks Most airlines mandate that passengers wear a mask during boarding and while flying, though some do allow passengers to take them off to eat and drink. Masks are still the best way to prevent the spread of COVID-19, even on airplanes. Back at the beginning of the pandemic, a man who later tested positive for COVID-19 flew all the way from Wuhan to Toronto but wore a mask the whole time. No other passengers were infected. While the risks may be less severe than you thought, you should still exercise caution. Practice social distancing during the boarding and disembarking processes as best you can and keep up to date on any outbreaks at your destination. Just because things are safer than you thought doesn’t mean you should throw caution into the air filtration system.

Back in March, when the pandemic first started to affect our daily lives, the number of U.S. airlines’ international passengers fell by 53% from the previous year. In April, the difference was even more stark — a drop of around 96%. People didn’t trust that they would be safe from COVID-19 on airplanes, and why would they? Whether earned or not, airplanes have a reputation for being flying petri dishes. That said, flying may be safer than you think, even if there are still some risks. Here are some of the ways airlines are taking precautions to minimize those risks. Using High-Quality Air Filtration The air filtration systems on airplanes are built to stop respiratory viruses from spreading. Air quality experts recommend that air in confined spaces be replaced six times per hour. Filtration systems on planes replace the

air around 20–30 times an hour. In practice, that means you risk catching COVID-19 only if someone who’s infected is sitting directly next to, in front of, or behind you. However, that doesn’t account for people moving about the cabin on flights, so take that into consideration. Blocking the Middle Seat Some airlines have tried to create social distancing between passengers by leaving the middle seat open on flights. According to research from Arnold Barnett, a professor at Massachusetts Institute of Technology, this does seem to reduce the number of passengers contracting COVID-19. Additionally, Barnett recommends that passengers try to get the window seat, since that’s where you’ll have the fewest points of contact with other passengers. It’s not quite 6 feet, but it’s better than nothing.

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