Big problems on the horizon for Michigan undocumented workers, filing tax returns and obtaining Citizenshiip

The requirements for filing tax returns can be complicated, but basically, if you earn money in the United States, you are required to file a tax return.

And on the same token, in order to become a US Citizen, you must be current in filing tax returns

So if you are a in the US unlawfully, and working, you are required to file a tax return and pay income taxes.

The worker files a tax return and applies for an ITIN number.

The IRS issues ITIN numbers regardless of your status as becoming a US Citizen.

For Michigan workers, this has been relatively simple.

Until recently.

In order to apply for a ITIN number, you need to some form of valid identification.

Michigan used to issue Identification Cards without proof of US Citizenship.

Michigan now does not issue Identification cards without proof of lawful presence here in the US
MCL 28.291

Those identification cards that Michigan used to issue are set to expire, and undocumented workers will be unable to renew them.

Michigan undocumented workers who may wish to take advantage of some of the new immigration reforms will not be able to get an Identification card from Michigan, thus they will not be able to get an ITIN number, and not be able to file a tax return.

Stay tuned, there may be a need for some kind of amnesty type of program.

How to file a tax return if you do not have a Social Security Number - Simplified

Here is the bare basic information for filing a tax return and applying for an ITIN

You need to complete your tax return as if you have your identification numbers, leaving the identification numbers blank

Include a completed form W-7

You need to include an official identification document when you submit your return.

Examples of official identification are found at:

http://www.uscis.gov/i-9-central/acceptable-documents/list-documents

The tax return is completed and submitted to the IRS in Austin

Your original identification documents will be returned to you.

Doug Zandstra CPA EA
http://www.dougzandstra.com/

Questions?

Health Savings Account Basics

HSA Accounts Simplified 

If you have to pay a lot of out of pocket medical expenses, chances are you have what is called a High Deductible Medical Insurance Plan.

These are becoming popular with employers because they are far cheaper than comprehensive insurance policies.  These are especially attractive for small businesses who simply can't afford comprehensive insurance for employees.

The burden of the cost of the insurance, and the additional medical costs shifts to the employees.

One way for the individual to help with the additional cost of health insurance, and medical expenses is to get a health savings account or HSA

A health savings account is basically a checking account that is used for health related expenses.

Money that is deposited into your health savings account is tax deductible.

Money that is spent from your account is intended to be used for medical related purposes.  If you spend money from your HSA for non-medical related expenses, you are penalized on those expenditures.

You will receive annual statements for your tax returns that show the amounts that you deposited and spent from  your account.

Banks have different requirements for minimum balances etc...

As the name implies, "Savings Account" this is a savings account.  This is your money treated like a savings or checking account.

Basic Rules

There are some rules for HSA accounts.

HSA's are only for those who have "High Deductible" health insurance.  For 2015 a high deductible insurance plan is defined as having a deductible $1,300 or $2,600 depending on single coverage or family coverage.

For IRS purposes, you have to keep your medical receipts for expenditures from your HSA accounts as supporting documentation.

There are limits as to how much you can deposit into your HSA account.  This depends on who is covered, you or your family, and the amounts are $3,350 or $6,650 for 2015

Nuts and Bolts

Ask about getting a debit card for your HSA account. This will make it easier for you to pay for medical expenses such as prescriptions at pharmacies.

Ask your bank about the minimum balance requirements and keep the minimum in the account.  When you get a medical bill, write the check from your HSA, then write a check for the same amount from your checking account and put it into your HSA account.  The deposit into your HSA is tax deductible  

For More Information Contact Me

Recommended Service providers

Over the years I have worked with many different service providers and have had good experiences and bad experiences. I can, and have assisted my clients with various other types of services beyond tax and accounting, but there are other fields of expertise that enable me to perform my services.

The desired result is that you - my - client gets the best service. This takes outside qualified experts in their respective fields.

Of course I like to work with people who work well with me and who I already have an established relationship with. Relying on other professionals is the smarter and most efficient way to operate.

If you need professional services that correlates to my services such as: Payroll, Financial planning, Bookkeeping, Legal, QuickBooks etc. Here are a quick bit of information and services that each of these of these people provide. If you do contact them please mention my name thank you

Here are the experts that I recommend:

Trucking Industry
Mike Ritzema 
The trucking industry is complex and requires and expert
Mike specializes in this area and I highly recommend him, and is highly regarded in this area of expertise.  All of the truckers who I have referred to him have told me later on that they have been very pleased with him.
Also IFTA tax returns for trucking firms and various other taxes etc..  that require attention

Ritzemapayroll.com
616-608-1800

Estate Planning and General Business Law
Brian Plachta
Possibly the most friendly, personable attorney out there.
Brian does his homework, is affordable and has a wealth of experience.
My clients love him because of his down to earth style
Again, I have never had a client walk away unhappy with him

http://www.pmalawpc.com/
616-458-3994

Non-Profit Accounting and Tax
Non-profit accounting and tax also requires a CPA who specializes in this area.
Tax returns, setup and bookkeeping for Non-Profits is Lin's area of expertise.
Lin and I have worked together for over 15 years.  I highly recommend her

Lin Beenen CPA
Linda C Beenen CPA PLLC
318-0000

6672 Trust Fund Penalty and EFTPS

The issue of what is Trust Fund and what is not Trust Fund can be a problem because of EFTPS.

EFTPS is the Electronic Federal Tax Payment System and was put in places some 15 years ago, gradually all businesses have become required to make all Federal tax payments using it.

The Regulations say that officers and responsible persons are personally liable for "Trust Fund" taxes, but in reality, it's not possible to pay the trust fund portion of the tax first.

First, the Trust fund portion of payroll taxes is generally levied to an officer, or an individual who is determined to be the responsible person.    If the business is still operational, then, presumably, the business is still paying wages, as well as the payroll taxes on those wages.

Second, The IRS allows payments for unpaid payroll taxes to be applied as the taxpayer desires.   Thus if the company is heading for financial failure, the person responsible for making the payroll taxes may wish to designate how the payments are to be made.

The IRS has longstanding policy that allows it to apply non-designated 6672 payments in manner it saw fit.  Fit means that the payments are first applied towards Non-6672 penalties, then to the 6672 penalties.  Thus even as the penalty in total is being paid down, the Trust Fund portion does not get paid down.  It is only after the non-trust fund portion of the tax is paid that the trust fund portion gets paid.

The only way to know this, is to check the balance periodically and check the officers' balance and compare the results.

If the business is still in operation, and is paying the payroll tax liability it is required to use EFTPS

The problem is that EFTPS does not allow payments to be "designated" for trust fund.

While the business remains in operation, and uses EFTPS, the 6672 portion cannot be designaated, the officer remains on the hook while until the entire tax (and penalty and interest) is paid in full.

There is a method for asking that the IRS remove any liens that the officer may have,  otherwise, this just emphasizes the importance of keeping current on payroll taxes.

Divorce Tax Considerations

Here are a few things you need to know regarding divorce and taxes

1. Splitting assets between husband and wife without considering the property’s basis
2. Losing the benefit of the child tax credit the, HOPE and Lifetime Learning Credit, and
3. losing the deduction for qualified tuition and related expenses
4. Assuming that the payment of attorney and expert fees is deductible
5. Filing a joint return
6. Disguising child support as alimony
7. Forgetting to specify that alimony ends at death
8. Assuming that the capital gains tax or gain from sale of principal residence is based on
9. the client’s share of the proceeds
10. Letting alimony payments drop off too quickly
11. Fighting over the dependency exemption when the client cannot make use of it
12. Not consulting a tax expert

Rules for Deducting Donated Services

A question that gets asked routinely is if you can take a deduction for services.  For example, if a taxpayer is a professional chef, and cooks at a charitable event, or a web site developer helps a charity set up their website, it is a legitimate question to ask if the time spent can be deducted as a donation.

The short answer is no you cannot

The general reasoning behind the rule is that if you do not report the income, you do not get the charitable deduction.

Charitable deductions are not allowed for contributed services. This includes blood donations, advertising, or broadcasting newspapers or radio. Reg §1.170A-1(g).

The rules apply even if the services involve the production of a final product.

The tax returns for Non-profit organizations recognize donated services, in general the amounts are the same.

So, if you want the charitable deduction, you have to donate a product or cash that has been acquired with income that you have paid tax on in the past.