IMPORTANT W-2 ADD BACK INFORMATION FOR 2020

As the year draws to a close, please be reminded that you MUST add back to your W-2 earnings for 2020 the following:

  • Accident and health insurance premiums (S corp shareholders - 2% or more)

  • Personal use of company car

  • Group term life insurance over $50,000

  • Other taxable compensation including bonuses and tips

These amounts must be given to your payroll provider before December 16 to be added to your W-2 for 2020.

Should you have any questions about any of these items, please do not hesitate to call our office.

Why Do I Owe So Much?

Nearly 83% of the 50 million returns processed yearly by the IRS result in refunds, with an average refund of $3,120. However, there are many circumstances when one is told the dreaded opposite - that money is owed the IRS or state during tax season.

Some reasons you may owe money:

1. You failed to engage in tax planning. There is little that can be done in January-April to turn back the clock to the previous year. The key is to have a tax plan in place during the year.  Business owners could pay business expenses before year-end, defer income, invest in equipment, and offer employee bonuses. Individuals could accelerate or increase charitable contributions and pay off medical expenses. There are strategies that can be engaged with professional assistance.

2. Your withholdings were incorrect. Did your income increase significantly? Are you self-employed with fluctuating income? Determining an accurate withholding amount can prevent sticker shock during return preparation.

3. You didn't pay estimated taxes. Perhaps you sold a property and did not pay estimated taxes. Typically, you are responsible for making estimated tax payments if you expect to owe $1,000 or more for the year. Paying estimated taxes can prevent you or your company from a surprise at tax time.

It is essential that you engage in tax planning year-round to avoid unexpected tax liability.

Contact us here to learn how Koerner & Associates can help.

    I'm Being Audited, Now What?

    Receiving a notice from the IRS that you or your company is being audited can invoke fear in even the calmest, most organized individuals. While the IRS audits on average less than 1% of taxpayers each year, it does happen, and your deliberate response to that alarming correspondence is essential.

    You've received notice that you're being audited, now what?

    1. Seek representation. It is essential to hire a tax professional to represent you. This may be your one and only audit (hopefully), but a professional has appeared before taxing authorities innumerable times and is well versed in the procedures and knows how to limit tax liability. At Koerner & Associates, we have represented hundreds of individuals and businesses in relation to IRS and state tax audits. The difference between attempting to proceed solo versus with the aid of a professional is thousands of dollars.

    2. Follow their advice. A professional is there to coach you throughout the process. It may be frustrating at times, but following their strict advice is essential. We often prefer our clients not to attend meetings past the initial. It is for your protection and benefit.  

    3. Recognize what they’re asking for. The IRS or state taxing authority auditing you or your business will tell you exactly what they’re looking for. Begin to collect documentation only in relation to what they are seeking - ie. if they want gas expenses, supply gas expenses.

    4. Get organized. Organize documents asked for by category and date. Give yourself ample time for this step as it often takes far more time than anticipated. Consider implementing a new process to become more organized with your expenses moving forward.

    An audit, while always time-consuming and stressful, doesn't have to be a complete catastrophe. At Koerner & Associates, we are adept at representing audited clients and are available to provide guidance and representation to avoid tax liability. Contact us today!