beware newest tax scams Most of us are familiar with the saying, “buyer beware”. We usually know that a product offered to us at a price that seems too good to be true, or a product of higher quality than what we are paying for likely has some sort of shady origins. The guy selling Rolex watches from the inside of his jacket for pennies on the dollar is usually withholding some critical information about where it came from or how it was obtained. It’s a gamble to buy something that seems too good to be true–much like purchasing sushi from a gas station. It could, quite literally, be a crapshoot. Many of us don’t give a whole lot of thought, then, when somebody official-sounding calls and says we owe money for taxes–especially when they have a lot of our personal information on hand. Why would we question the legitimacy of it when they obviously have our phone number, date of birth, address, and our names?

Beware Anybody Calling Demanding Immediate Payment

The IRS is reporting that even though the deadline for filing taxes has expired for this year, there are still some new schemes being hatched in order to obtain your hard-earned cash. Scammers are impersonating IRS agents and demanding payment be sent immediately, usually insisting money be wired to them or placed on iTunes gift cards. They are also threatening to report would-be victims to the police to have them immediately arrested, or have their driver’s licenses revoked.

Newest Schemes and Scams

One of the newest variations of old tax scams is the “Federal Student Tax”. This is a fake tax that should immediately raise red flags. It is a strategy being used to trick students into thinking they neglected to pay taxes on student loans or grants and frighten them into forking over money which they do not owe. Scammers often sound legitimate, and often have a lot of information about the person they are targeting. Additionally, fraudsters are targeting human resources professionals for their own ill-gotten gains. They are contacting professionals and demanding W-2 information. Beware of anybody who claims to be verifying tax return information over the phone, and beware of any callers who are claiming to be in the tax preparation industry. Unless you have placed a call to a tax preparer first or you know the person calling about tax information, do not give away personal details over the phone.

Red Flags to Watch Out For

The IRS will never call to demand immediate payment over the phone. They will also not call you about taxes owed without first mailing you a bill. They will also never threaten to immediately bring in local police to have you arrested for nonpayment of taxes. The IRS will always give you the chance to ask questions or appeal any amount they say you owe. Also, they will never demand you pay in a specific manner. This includes wiring money or placing a specified amount of money onto a prepaid debit card. Finally, they will never ask for credit or debit card numbers over the phone.

How to Respond to Scammers

Do not give out any information over the phone. Hang up as soon as possible, and file a report with the Treasury Inspector General for Tax Administration (TIGTA) by visiting their website or calling 800-366-4484. Also, report it to the Federal Trade Commission by visiting and filing a consumer complaint. Be sure to add “IRS telephone scam” in the notes. If you think you might owe taxes you can call the IRS directly at 800-829-1040.

Scammers are getting more bold with their approaches to get their hands on your money. Their tricks keep evolving. As people begin catching onto one scam, they are able to start a new one. Just as you should beware of anything that seems too good to be true, beware of anything that seems even remotely fishy–just like gas station sushi. Odds are you didn’t really inherit three million dollars from a Nigerian princess who you never even heard of before the email you received. The same applies to some random tax that somebody is calling you about and demanding it get paid in iTunes gift cards.

identity theft IRS scamIdentity Theft on the Rise

Identity theft is a problem that seems to have been growing  over the past several years. Law enforcement is cracking down on identity thieves. Still, there are new ways to steal peoples’ identities every single day. The IRS released their top ten identity theft prosecutions for 2015 in March.

#1: James Lee Cobb III and Eneshia Carlyle

In June of 2015, the couple was sentenced  and ordered to pay almost $4 million dollars in restitution for their roles in identity theft. The Tampa couple used tax schemes and wire fraud to scam money from victims over the course of several years. The two conspired with others to use stolen names, social security numbers, and dates of birth in order to file phony tax returns and open prepaid debit cards. They claimed nearly $3 million dollars in income tax refunds with this scam. They will be spending several years in prison as well as having to pay millions of dollars to the IRS for their parts in the scheme.

#2 Keisha Lanier and Tracy Mitchell

In September of 2015, 9 defendants stood trial for defrauding the IRS of $24 million dollars in an identity theft tax refund scam. Ringleader Keisha Lanier was sentenced to 180 months in prison. She was also ordered to for close to $6 million for her role in the conspiracy. Between January of 2011 and December of 2013, Lanier and co-conspirator Tracy Mitchell filed more than 9000 false federal income tax returns. They claimed $24 million dollars in fraudulent refunds. The IRS paid out nearly $10 million in refunds on these claims.

#3 Eddie Blanchard

In August of 2015, Eddie Blanchard was sentenced to 204 months in prison in Virginia. Blanchard and co-conspirators Ramoth Jean, Junior Jean Merilia, and Jimmy Lord Calixte traveled to Richmond several times in 2012 to steal personally identifying information. They used the information to file hundreds of fake tax returns. The ring used online tax preparation programs to claim large refunds on the returns. They then requested the refunds be put onto prepaid debit cards. The scammers were forced to pay almost $570,000 in restitution for money collected via the scam.

#4 Julio Concepcion

In July of 2015, Concepcion was sentenced to 84  months in prison in New Jersey and ordered to pay over $5.5 million in restitution. Along with several conspirators, Concepcion was able to collect personal identifying information to file false returns. He then obtained fraudulent refund checks and opened bank accounts to deposit the checks using fake information.

#5 Patrice Taylor

Taylor was sentenced to 84 months in prison in July of 2015 in Georgia. Taylor was sentenced along with three other suspects for collecting nearly $2.5 million dollars in scams. She and her husband filed over 1000 tax returns electronically using personal information gained from her employer. Patrice Taylor was employed at a hospital in Georgia. She gained access to patient information files in order to use their identities for fake tax returns.

#6 Stacy Williams

Stacy Williams was sentenced in June of last year in Georgia. She was the last of 15 defendants charged federally for a variety of crimes including wire fraud, wrongful disclosure of individually identifiable health information, and aggravated felony theft. She was sentenced to 94 months in prison and ordered to pay close to $85,000 in restitution for her role in the scheme.

#7 Tamaica Hoskins

The Alabama woman was ordered to spend 145 months in prison for her role as a ringleader for a $4 million dollar identity theft ring. Hoskins, along with several co-conspirators, used stolen identities to file over 1000 fake tax returns and claimed more than $4 million in refunds. She was able to steal personal information from a number of places and set up sham businesses in order to file the fake returns.

#8 Tiffani Williams

Tiffani Williams was ordered to pay over $1.5 million dollars and sentenced to 123 months in prison in Tampa, FL. Last September, the Florida woman was convicted of theft of property and aggravated identity theft. Over a four year period, Williams used several aliases to gain personal identification of others. She then used this personal information to file tax returns. She and others involved in the ring collected over $5.3 million dollars in federal tax refunds.

#9 Jason MacLaskey and Omar Butt

These two men were the final ones sentenced for a large identity fraud ring in Houston. Both men were sentenced to 120 months in prison. They were also ordered to pay $315,000 in restitution. As part of their scheme, they obtained social security numbers, birth dates, and names from almost 400 taxpayers. They used the information to file false tax returns. The entire crime ring netted over $1.4 million dollars in false tax refunds.

#10 Densom and Winzorn Beaucejour

The Miami brothers were each given 70 month prison terms for their roles in identity theft and fraudulent unemployment insurance claims. They gained personal information from more than 1000 individuals. They used this information to file phony tax returns for nearly $415,000 in refunds.

The IRS takes identity theft very seriously. They are presented with millions of dollars worth of false income tax scams each year. In response to the rise of identity theft the IRS has begun working with the Law Enforcement Assistance Program. They have set up more than 1100 state and local offices in 48 states. For more information about identity theft and how the IRS is dealing with it, visit the IRS website.




As a writer, I am usually behind the scenes. I don’t draw a lot of attention to myself, and I don’t try to be seen as the face of anything. It’s not because I don’t like my face–I have an OK face for the most part. Most of the features are in the right places, and some would even say it’s a nice face. But now I digress. I have taken on a lot of different types of writing projects over the years. Most of them are behind the scenes, ghostwriting for other people. That’s totally fine by me. As long as I get to write, I won’t complain. I don’t look to be credited for what I’ve written. I simply surmise satisfaction from a job well done knowing that I have reached the targeted audience. That’s more than enough for me!

From There to Here

It’s actually funny how I came to be the blogger for the business. You see, this year is the first time in almost 13 years that I didn’t have a child at home with me all day, every day. My oldest son is now in middle school, and my youngest is in Kindergarten. It left me with a little bit of time on my hands and started me yearning to go back out into the “real world” again. It’s amazing how sheltered a person can become after spending most of her free time in the company of tiny humans. Don’t get me wrong–I wouldn’t trade my time as a mother for anything in the world. However, once I started recognizing which episode of Bubble Guppies was playing (and also deciding I had already seen the episode and didn’t like it) I realized that perhaps it was time for me to get my feet wet in the big world again. I began looking for jobs that were flexible, and when I saw an ad for an assistant at a family-operated tax preparation business, I applied immediately. Within a few hours, I had received an email from Jan wanting to schedule an interview. From his email I was able to gather a few things: he was friendly, sincere, and professional. I liked him immediately.

Writer Behind the Blog

Prior to the phone interview with Jan and Jennie, I was extremely nervous. It had been a very long time since I had interviewed for anything (besides by a poll taker outside of King Soopers, once, but that’s completely unrelated). Immediately, I was put at ease by Jan and Jennie. I didn’t know a whole lot about tax preparation, but I was willing and eager to learn. I WANTED to learn. More than anything, I wanted to be a part of the Gagliano Associates team because it felt right. It felt like family. It felt like home. Unfortunately, my availability wasn’t really suited to what they needed for their busy season. Surprisingly, though, I received a call from Jennie the next day asking me if I would be interested in writing the blog. The rest is history!

The Makings of a Great Writing Team

In terms of actually being the writer behind the blog, Jennie sends me ideas, links, and articles that she finds interesting. We correspond almost daily, and brainstorm the best blog at the best time. She is the exact type of client a writer like me wants–she knows what she is looking for, yet still allows me the creative freedom I need to put together good material each and every week. And the best part of all? As a freelance writer, I am still able to be at home with my kids every day. I still get to be a mom first and foremost while doing something else that makes me feel challenged and also gives me the opportunity to correspond with other grown ups. Really, it’s a win-win.

Other Blogs

I’ve contributed to other blogs in the past including Mile High Mamasbut I am devoting most of my time to Gagliano Associates for the time being. It works beautifully for my family, and it works well for Jan and Jennie, too. In the meantime, I want to thank everybody personally who takes the time to read what I’ve written. I couldn’t do what I do without all of you.

gagliano associates, customers, clients, familyWhen Lou Gagliano told his wife, Martha, he wanted to start a tax preparation company after he retired from IBM, she had her doubts. Who retires just to start another business? Who starts an income tax preparation business? Well, Lou and Martha Gagliano, that’s who! Mr. and Mrs. Gagliano learned everything there was to know about tax prep for individuals in the 1980’s. Although at first skeptical, Martha knew THIS was something she would love doing. They spent a year preparing individual tax returns for H&R Block and then decided to take the plunge and start Gagliano Associates in 1987.

Gagliano Associates: the Early Years

Martha laughed as she remembered the first year they started the business. They had two clients the first year. Lou acted as support staff while Martha prepared and filed the two returns. After that first year, business steadily increased. There was no print advertising or radio commercials. Instead, the business expanded by word of mouth. Lou and Martha both agreed that treating their clients like gold was the biggest priority. Making them feel like friends would keep them returning. It would also have them telling their friends about the amazing people they had preparing their tax returns. “I told clients they could expect to save our fee simply from missed deductions,” Martha said. Lou added, “we actually used to pay people for referrals in those first few years.”

Keeping it in the Family

Of course, most current clients know the legacy of Gagliano Associates, but they don’t know the history. When Lou and Martha Gagliano started the business in 1987, there were two clients. By the time they retired, there were hundreds of clients. During the final few years of Lou and Martha’s tenure as the owners of GA, daughter Jennie Hrdlicka stepped in to assist. Much like Martha, it wasn’t something that she necessarily wanted to do for a living. But after a very short time in the office, Jennie realized she loved it, too. “It was like creating a financial puzzle that helps people get the maximum refund they could get,” she says. Jennie’s husband, Jan, is said to have stopped in to visit Jennie one day and worked on a return and never left. He and Jennie learned income tax preparation at the same time because he was in the mortgage business. He felt learning to do taxes would benefit him in the mortgage industry. It was kismet that Jan and Jennie would purchase the business her parents started and run with it, making it what it is today.

Passing of the Torch: GA then vs GA Now:

When Lou and Martha Gagliano started the business, they never dreamed of all that would transpire over the next twenty years. The economy changed, making everybody a homeowner. It changed again making every homeowner willing to look for investment opportunities in their homes. Stocks, bonds, and investments weren’t just benefits of the 1%–John Q. Homeowner was able to cash in on the equity in their homes when the housing bubble was expanding and invest. This made tax preparation and filing more complex than ever before. It also turned income tax preparation into a year-round business–not just a February-April venture. Lou and Martha handled hundreds of individual tax returns, but the expertise of Jan and Jennie added a whole new area of tax preparation: S-corporation tax preparation. In 2006, Lou and Martha began transitioning their clients to Jan and Jennie, and over the next 4 years they completed the transition with Jennie and Jan carrying the torch since then.

More has changed over the past few years: Jan and Jennie have continued to have success as a tax preparation business. Their business has changed from just a few months a year to being busy all year round. Years of experience, know-how, and expertise have made Gagliano Associates highly coveted in terms of tax preparation in Colorado. They also do income tax preparation for clients in many other states! Jan is a genius with numbers and tax code, and is the one to turn to with complicated returns. He specializes in S-corporations, partnerships, estates, and trusts. He also earned his EA, Enrolled Agent designation, which is essentially a master’s degree in taxes. His grasp of complicated financial situations and ability to figure out even the most complex tax issues is second to none in the business. He truly pays attention to detail and he has the perfect mind for complex interactions of tax issues. In terms of the tax authority in the office of Gagliano Associates, Jan is it. Compassionate and utterly brilliant, Jan welcomes each client warmly and confidently, and he handles their tax needs with an expertise that is top-notch. What sets Jan apart from others, particularly traditional accountants, is his background. Aside from having all of the training in tax preparation, Jan has a master’s degree in counseling. It’s this additional training which makes him so compassionate and a genuinely remarkable person. Jennie, a sharp and shrewd businesswoman, has helped catapult Gagliano Associates into the 21st century with technology that is cutting edge for the field. They offer secure and complete remote services (see the several other states part), as well as social media. There is also a way for clients to securely drop documents via their website as well as take payments–something very few in the industry even think to offer! She credits the amazing network of clients for the continued success of Gagliano Associates after all these years. Jennie has an extensive business background in addition to her expertise in income tax preparation, which sets her apart from others in the field. Both Jan and Jennie are able to connect so well to their clients because they know how to think like the customer and get inside their heads. Relatable and personable, they know the right questions to ask to dig for deductions, and make clients feel warm and welcome. They still believe in treating their clients like gold, and they want to continue serving generations of clients in the future. They offer special rates for dependent children of their clientele.

Gagliano Associates couldn’t be what it is today without all of you. We are extremely proud of the work we do, the services we provide, and the friendships we have built with our clients. It warms our hearts tremendously to see the feedback our clients leave for us on Yelp, Google, and Facebook. We want to thank you from the bottoms of our hearts. It is because of each and every one of you that our business continues to grow and HAS grown every year for the past 12 years. We feel deeply connected to each and every one of our amazing clients–something that only happens when you truly care about your customers. We feel immensely blessed to be able to see you through the different stages of your lives–from the first joint return you need prepared after getting married to setting up college funds for your children to accessing those college accounts later on when your kids head off to college. It is our honor and privilege to be able to be parts of your lives, and we look forward to continuing to serve you in the future.


letter from the IRSAh…the feeling of relief knowing tax season has ended is second to none. Except, of course, having received a refund. A lot of us out there have already received our refunds and used them toward paying down debt, padding college funds for our children, and late-night shopping binges on Amazon (saving money on free shipping, of course). So when you open the mailbox only to find a letter from the IRS, it can make your stomach drop and the world go black and fuzzy around the edges. What could the IRS possibly want with YOU? If you receive a letter from the IRS, don’t panic. First, open it. Then panic. OK, I’m actually kidding–don’t actually panic. The IRS sends millions of letters to taxpayers every year for a variety of reasons.

What Does Your Letter from the IRS Tell You?

When the IRS sends you a notification in the mail, the best thing to do is read it in its entirety. Sounds pretty simple and straightforward, right? You’d be surprised how many people go straight into panic mode because they don’t read the letter in its entirety. The information contained in the letter will let you know why they are contacting you and what you need to do to respond. Whatever you do, don’t simply ignore the letter. Ignoring correspondence from the IRS will not make them go away. And unfortunately, there’s no way to unsubscribe from their mailing list. Most letters from the IRS are regarding changes to your account, taxes you owe, or a payment request. Occasionally, there will be a request for more information.

What to do if the IRS Made Changes or Corrections to Your Return

First and foremost, review the information and identify the changes made by the IRS by comparing it to your original return. If you agree with the changes, you typically don’t need to reply unless the letter states otherwise or you need to submit an additional payment. If you do NOT agree with the changes, you HAVE to respond. Write a letter describing why you disagree with the changes, and include any documentation to support your case. The contact information and mailing address will be included in the original correspondence from the IRS. For additional information on responding to a notice, click here.

Be Aware of Tax Scams

Scammers are always looking for ways to try to steal your money, and claiming to be the Tax Man is one of the ways criminals can try to take advantage of you. The IRS will always send notices by mail, and will never attempt to contact you via email, social media, or by phone. They will also never ask for financial or personal information. If you receive anything in the mail or via email or social media that is suspect, you can always contact the IRS directly. For more details on some of the tax scams that are common, check out our post on the Dirty Dozen Tax Scams. 

Of course, we are always here to help assist you with any communications from the IRS. Clients can call or email with any questions or concerns regarding letters from the IRS for continued support–even AFTER the end of tax season. Because we’re just awesome like that 🙂


Haute Tot Consignment SaleIt never ceases to amaze me just how expensive it is to keep kids clothed–especially if we are talking name-brand clothes the kids would be proud to wear and apt to show off given the opportunity. Haute Tots, a local business that specializes in kids’ consignment clothing and accessories, is committed to doing just that. They provide high quality children’s clothing that is new or gently used at a fraction of the cost. And when your kids tend to outgrow their clothing within a few weeks of purchase, getting them for a bargain is essential. Particularly if you don’t want to go broke keeping your kids from looking slightly homeless.

About Haute Tots Sale

The premise for the Haute Tot sale is simple: stock up and save boatloads of cash. Founders Kristi Hard and Heather Brion are committed to providing the best quality items for the lowest possible prices. Children can be outfitted for an entire season from the sale for just pennies on the dollar. In fact, many households use the sale as a swap: they are able to sell their children’s used clothing in exchange for purchasing clothing in current sizes. Sales happen in temporary locations with a maximum of 120 consignors being accepted at a time. Why only 120 consignors? It allows Hard and Brion to maintain the utmost quality. The two women carefully inspect each item for wear, cleanliness, style, and overall condition. This allows them to keep the sale small while still standing behind the highest quality items and bottom dollar prices, or as they like to say, “upscale consignment sale for savvy moms”. And don’t worry–you don’t have to be a mom to shop the sale. Grandparents, aunts, uncles, friends, neighbors, or whomever can all take advantage of amazing sale prices for high quality merchandise.IMG_4636

Don’t be fooled by thinking the Haute Tots sale is small! There are literally thousands of items to choose from. Name brand clothing from Janie and Jack, Baby Gap, Gap, and Justice (to name just a few) are offered to shoppers looking to make the most out of their kids’ clothing budgets from newborn sizes all the way up to youth 16.

Upcoming Sale and Location

The next sale will be held at the Jefferson County Fairgrounds starting on Friday, April 29 and running through Saturday, April 30. You read that right–just two days to completely revamp your kids’ wardrobes for the rest of the year! Aside from clothing, there is also a wide variety of toys, games, and furniture. Hours are from 9:00 am-6:00 pm Friday, and 8:00 am-12:00 pm on Saturday with a 1/2 price sale beginning at 1:00 pm on Saturday and running until 4:00 pm. For more information, including hours, location, consignor information, volunteer information, or additional information on the upcoming sale, click here. You can also check out the Facebook page for information on upcoming sales and events.

form 1099When you are an independent contractor or a small business, it might be confusing filing your taxes. When do you need a Form 1099-MISC? When do you NOT need one? How much do you need to make before you have to file? Understanding the different types of forms needed for specific businesses is one of the most common issues many taxpayers have, and not filing a Form 1099-MISC when one is required is a huge mistake a taxpayer can make.

What is a Form 1099-MISC?

Simply put, or in terms that a fifth grader (or myself, actually) can understand, a Form 1099-MISC lets the IRS know you received taxable payments at some point during the year. The IRS utilizes this tool as a means of fighting under-reporting income by the self-employed. The IRS has been known to impose stiff penalties on businesses which intentionally fail to file this form when required.

Landlords and Business Owners: Who Must File a Form 1099-MISC?

If you are a property owner and act as a landlord, you are required to file a 1099. Also, if you are an unincorporated independent contractor (a sole proprietor), you must file this form if you earn more than $600 a year for work done in the course of your trade or business–any trade or business that is performed for the purposes of gleaning a profit. It also applies to business owners who employs independent contractors or sole proprietors, you are required to file the 1099’s if you have paid out more than $600. You DON’T, however, have to file this form for non-business related services. These can include payments for household services such as babysitting, housekeeping, and gardening. Running your home isn’t considered a profit-making activity. But wouldn’t it be awesome if it was?

Self-employment is becoming more and more common as taxpayers decide they want to be their own bosses. Freelancing is something that is no longer just a position for the independently wealthy or those with an already-firm client base. Instead, people are able to set their own hours, and work on their terms, which is making the practice of hiring independent contractors and sole proprietors more commonplace. Many businesses find there are a lot of benefits to using outside contractors for certain facets of their business. But there is an enormous amount of pressure from the IRS to report these payments so that the earners are contributing properly to their tax liabilities. For more information, or to obtain a form, visit the IRS website.Landlords and Business Owners



retirement savings, saving for retirement, early withdrawal, savings, retirementSaving for retirement is something that we all know we have to do. Yet few of us use the right tools to set aside the right amount of money each month to ultimately be able to retire when the time comes. Saving is hard to do for a lot of people–and even harder when you are living paycheck to paycheck. It is something that we have all seen a generation struggle with as the Baby Boomers stay in the workforce longer, often with plans of working until they are no longer able to. And Generation X has taken a page from the Boomers’ book, opting to spend instead of save. It’s often with the thought that there will be plenty of time to save later, not realizing that they are drastically cutting into their hopes of a comfortable retirement with every paycheck that is spent rather than saved.

Start Saving Now

The sooner you start saving for retirement the better. Employer-matched savings plans are a great way to jump-start your retirement plan. 401K plans are one of the most common employer-sponsored retirement plans. Speaking with a financial adviser can help you to figure out the best way to invest your savings to help build up a nice little nest-egg for further down the road. We recommend contributing the maximum allowed, which is $18,000 in 2016 (for earners under the age of 50 and $24,000 for earners over 50). Many people don’t realize this is an option, but it allows you to put away much more than you think. Another consideration is a ROTH plan for retirement savings. The beauty of the ROTH retirement plan is that it allows you to sock money away. It is not deductible at the time of contribution; but it is completely tax-free when withdrawn at retirement age. To get both the contribution deduction AND the tax-free withdrawal, consider a 50/50 split to a ROTH and 401K.

Common Mistake: Dipping into Retirement Savings

Emergencies arise. Stuff happens. Furnaces quit. Computers crash. Cars break down. Taxpayers are often tempted to dip into their 401K to pay for large ticket items, not aware of the huge penalty they can incur as a result. Even if they ARE aware of the penalties, they often think that money can just be dumped back into their retirement accounts later on when finances are more stable. The problem is, people in the 25% tax bracket end up paying AT LEAST 35% on the money they withdraw from savings to taxes. There is also a state tax incurred on the withdrawal. That’s a huge amount to have to pay penalties on, and not worth it in the long run–not to mention the huge jump in taxable income that must be handed over to the IRS. The withdrawal from retirement accounts often puts taxpayers into a higher tax bracket, making their tax responsibility even higher. If you must dip into your 401K, consider taking it as a loan. The loan isn’t considered taxable as long as it is payed back. And it must be  payed back with interest, which means you are making money on yourself! One thing to consider when taking a loan against your 401K: if you lose your job before it is paid back, you have 30 days to do so, otherwise it is considered a withdrawal and there are taxable penalties.

How Early Withdrawal from Retirement Savings Impacts your Taxes

If you do end up deciding to dip into your retirement fund regardless of the penalties, keep in mind there is an additional tax obligation. Depending on how much you withdraw, you may need to file additional tax forms. Form 5329 on the IRS website may be required in addition to your regular taxes. Speak with your tax professional to find out how the early withdrawal will affect you, and if dipping into your retirement pool is a wise decision.

A penny saved is a penny earned. Unless, of course, you are simply putting your pennies into an old mattress instead of a high-interest savings account. Then a penny saved is a penny that loses value due to inflation. But that’s another topic for another day. Retirement is something that seems so far off to so many taxpayers. But it’s astonishing how quickly the time goes by, and if you’re not saving for your golden years already, you may find yourself in the same situation as so many of the Baby Boomers–working until you are physically unable to. With the insecure future of Social Security looming on the horizon, most of us know that is likely not going to be a viable option for us when the time comes to enjoy some quiet time in our later years. That is why saving for retirement is so critical to insuring a secure future.

We all know some othings every taxpayer should knowf the most basic things every taxpayer should know. We [usually] know the date to file by, what our filing status is, and for what fiscal year we are filing. These things typically go without saying, but because tax code seems to
be too difficult for most of us to fully grasp, we often ignore some of the things we should add to our knowledge of preparing and filing our taxes with the attitude of “ignorance is bliss”. And while an “ignorance is bliss” approach might save you some sanity when your kids are shaving your dog or attempting to eat a piece of candy of indeterminate age, it doesn’t have a whole lot of sway with the IRS. That being said, there are a few things every taxpayer should know. These things can save a lot of money, as well as a significant amount of stress when it comes time to prepare your taxes.

Know the Difference Between Taxable and Non-Taxable Income

Do you know what the difference is? It seems self-explanatory; but it can get a little tricky trying to determine whether income is taxable or non-taxable, and is one of the top 5 things every taxpayer should know. Generally speaking, all income is taxable. But not all money you receive is considered taxable income. Confused yet? Indeed. Me too. So let’s break it down a little bit to make it easier to digest. Let’s suppose your great-great-great-aunt’s cousin, Mildred, has unexpectedly passed away at the age of 109 (or 108–the age doesn’t really matter here).  Mildred leaves a chunk of money to you as an inheritance. That inheritance is not considered taxable income in most states. Other types of non-taxable income include child support, life insurance, and gifts. Income earned from a job, interest on investments, capital gains, wages, salaries, tips, and commissions ARE considered taxable income and need to be reported as such. For more details on how different types of income are classified, click here.

Things Every Taxpayer Should Know: Social Security CAN be taxable

Most people don’t realize that social security benefits can absolutely be taxable income. In cases where social security is the only source of income, then it most likely won’t put you into a tax bracket in which it is taxed. One of the things every taxpayer should know, however, is that if you combine social security with other forms of income, it raises you into a higher tax bracket. That makes the social security income taxable income.

Understanding Tax Brackets

Most of us know that different levels of income are taxed at different rates. What most people don’t know is that if your income seeps into a higher tax bracket, you don’t pay a higher rate on your ENTIRE income. You only pay a higher tax on the amount that pours into the higher bracket. It can save you a lot of money in taxes if you understand these brackets and pay your taxes accordingly.

Credits and Deductions

One of the things I have recently learned is that credits and deductions are not the same thing. Understanding the difference between credits and deductions can be extremely beneficial when preparing your taxes, and looking for credits for which you are eligible can greatly reduce your taxable income. When it comes to preparing your taxes, credits are ultimately better than deductions. Credits reduce your taxes dollar for dollar, so a $500 energy credit will reduce your taxes by $500. Deductions, on the other hand, only reduce your taxable income by a percentage. Sure, some deductions will reduce your taxable income substantially more than a small credit. But a $1000 deduction for somebody in a 15% tax bracket will only reduce your taxes by $150. It is important to note that many of your credits and deductions can disappear as your income rises. Once your income reaches certain levels, you may no longer qualify for the same tax breaks you once did. By knowing which ones you qualify for, you might be able to do some tax planning which will help you preserve as many of these breaks as possible.

Itemizing Deductions for Maximum Savings

You don’t HAVE to itemize your tax returns to take advantage of some common deductions. But itemizing your tax return allows you to deduct substantially more on your personal taxes, which maximizes your tax savings. These personal deductions can include a portion of your cell phone bill, gasoline, clothing, or other expenses linked to your job. On the flip side, there are plenty deductions which are available above the line if you choose not to itemize. These commonly include student loan interest, educator expenses, paid alimony, and penalties on early withdrawal of savings.

Most Important Things Every Taxpayer Should Know: How Much to Withhold

A lot of people are tempted to withhold more than they should from their paychecks. The thinking is that it will allow for a larger refund come tax time. Yes, it absolutely gives taxpayers a bigger refund check. But that money is also being held by the IRS interest-free throughout the year. The money would better serve taxpayers in a savings account. Even a low-interest savings account will be more beneficial to a taxpayer than zero interest from the IRS. Instead, consider adjusting your withholding to reflect a more accurate estimate of what you will owe the IRS and invest the difference in a high-yield savings account. It is, after all, YOUR money. You shouldn’t have to wait until tax time to be able to have access to it.

These things every taxpayer should know are not an all-inclusive list. The tax laws and codes can become quite complicated, but working with your tax professional and brushing up on some of the easier aspects of the tax laws and codes can ultimately help you save a significant amount on your debt to the IRS. Of course it also helps to know how changes in tax laws and codes will affect you personally. Reading up on tax extenders annually can help you decide how these changes will impact your tax accountability. If nothing else, they can certainly be an excellent cure for insomnia.