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Calling all creatives! Compete in Rummage ReDux Challenge!

We invite you to take part in one of our favorite local events – but know prize money is taxable income! For more information on taxation of prize money, click here.
As part of the City of Iowa City’s longstanding Rummage in the Ramp resale event – the City is offering an opportunity to “redo” a donated item and win some cash too!

The Rummage ReDux Challenge is an opportunity to transform used items found at Rummage in the Ramp from serviceable to spectacular, all while competing for a top prize of $300.

Rummage in the Ramp is a reuse sale organized by the City of Iowa City and staffed by local non-profit groups. This annual event helps divert tons of items from the landfill, with proceeds benefiting groups that volunteer their time to help. The 2017 event is scheduled for Wednesday, July 26 through Thursday, Aug 3, 2017 at the Chauncey Swan Parking ramp, 415 E Washington Street, located across from City Hall.

How the challenge works:

  • Purchase an item(s) from Rummage in the Ramp anytime during the event starting Wednesday, July 26
  • Complete a contact form at the sales trailer so staff can keep you informed about Rummage Redux schedules
  • Snap photos of your item during the transformation process
  • Track the total cost and time spent on your project
  • Showcase your project at the Rummage ReDux Challenge event on Wed., Aug. 2 at 5:30 p.m.
  • Create and show a storyboard that includes before and during photos, your cost and time invested, as well as your contact information
  • The judges will visit with you and make their award decisions by 7 p.m. that evening

Judges will evaluate projects based on: imaginative reuse and overall improvement, quality of work, ability to be completed affordably and within a reasonable time period, and presentation and thoroughness of the storyboard. First, second and third place will all take home cash prizes.

For more information about the Rummage ReDux Challenge, contact Public Art Program Coordinator Marcia Bollinger at 319-356-5237 or Marcia-Bollinger@iowa-city.org.

To learn more about Rummage in the Ramp, and to see the 2017 event schedule visit icgov.org/rummageintheramp.

reposted form the City of Iowa City News Release

IRS Offers Tips for Teenage Taxpayers with Summer Jobs

 

Students and teenagers often get summer jobs. This is a great way to earn extra spending money or to save for later. The IRS offers a few tax tips for taxpayers with a summer job:

  1. Withholding and Estimated Tax. Students and teenage employees normally have taxes withheld from their paychecks by the employer.  Some workers are considered self-employed and may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year.
  2. New Employees. When a person gets a new job, they need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from the employee’s pay. The IRS Withholding Calculator tool on IRS.gov can help a taxpayer fill out the form.
  3. Self-Employment. A taxpayer may engage in types of work that may be considered self-employment. Money earned from self-employment is taxable. Self-employment work can be jobs like baby-sitting or lawn care. Keep good records on money received and expenses paid related to the work.  IRS rules may allow some, if not all, costs associated with self-employment to be deducted. A tax deduction generally reduces the taxes you pay.
  4. Tip Income. Employees should report tip income. Keep a daily log to accurately report tips. Report tips of $20 or more received in cash in any single month to the employer.
  5. Payroll Taxes. Taxpayers may earn too little from their summer job to owe income tax. Employers usually must withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer, in a timely manner.
  6. Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If a person meets certain conditions, then they are self-employed. If the taxpayer does not meet those conditions, and are under age 18, they may be exempt from Social Security and Medicare taxes.

ROTC Pay. If a taxpayer is in a ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive may not be taxable, see Publication 3 for details

How to Handle IRS Letter/Notice

Issue Number:  IRS Summertime Tax Tip 2017-04

Inside This Issue

Tips on How to Handle an IRS Letter or Notice

The IRS mails millions of letters every year to taxpayers for a variety of reasons. Keep the following suggestions in mind on how to best handle a letter or notice from the IRS:

  1. Do not panic. Simply responding will take care of most IRS letters and notices.
  2. Do not ignore the letter. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do. Read the letter carefully; some notices or letters require a response by a specific date.
  3. Contact Brooke 319.239.9903 or email is best.
  4. Respond timely. A notice may likely be about changes to a taxpayer’s account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return. A timely response could minimize additional interest and penalty charges.
  5. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return. If the taxpayer agrees, they should note the corrections on their copy of the tax return for their records. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
  6. Taxpayers must respond to a notice they do not agree with. They should mail a letter explaining why they disagree to the address on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
  7. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the related tax return and notice when calling.
  8. Always keep copies of any notices received with tax records.
  9.  The IRS and its authorized private collection agency will send letters and notices by mail. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.

For more on this topic, visit IRS.gov. Click on the link ‘Respond to a Notice’ at the bottom center of the home page. Also, see Publication 594, The IRS Collection Process.

Get IRS.gov/forms-pubs at any time.

To make a payment, visit IRS.gov/payments or use the IRS2Go app to make a payment with Direct Pay for free, or by debit or credit card through an approved payment processor for a fee.

NEW CORRESPONDENCE AUDIT PROCESS!

Hence why documenting Itemized Deductions (emphasis on charitable contributions) is critical!

The pilot will involve between 4,000 and 5,000 taxpayers already selected for audits of itemized deductions on Schedule A of their income tax returns. The taxpayers will receive a notification (Pub 5254) inviting them to participate, and if they decide to do so, they will register and communicate with the Internal Revenue Service through a secure online portal.

Taxpayers and tax professionals will need to authenticate their identities via IRS eAuthentication to access the portal, and will then receive notification to their registered e-mail address telling them to log into the TDC secure portal to view messages. Taxpayers will be able to upload documents or receipts, and respond to IRS questions in the portal.

If you receive a call from a taxpayer pertaining to this program, assure the caller that it is a legitimate IRS program and refer them to the insert (Pub 5254) included with their notification of examination. At this time, only those taxpayers who received the Publication in the mail may participate.

Average Itemized Deductions – (2013-CCH)

I often get asked for national averages and current information is hard to find because 2013 is deemed to be current.

Adjusted Gross Income Medical Expenses Taxes Interest Charitable Contribution
$15-30,000 $8324 $3275 $6722 $2253
$30-50,000 $7937 $4039 $6839 $2609
$50-100,000 $9133 $6354 $7780 $3083
$100-200,000 $11,929 $10,991 $9462 $4074
$200-250,000 $18,455 $17,861 $11,957 $5452
$250,001 or more $36,883 $51,605 $17,060 $20,930

 

 

Lawsuit Settlements – Individuals

  1. Interest is always taxable
  2. Punitive damages are taxable except in wrongful death claims
  3. Personal injury or sickness damages are not taxable, including damages for lost wages or earnings capacity caused by physical injury

 

Award Type Taxability Attorney Fees Subject to AMT
Personal Injury Exempt NA NA
Civil Rights Taxable Pre-AGI No
Punitive damages Taxable 2% Itemized Yes
Contract Claims Taxable Business NA
Slander/Defamation Taxable 2% Itemized Yes
Backpay Taxable 2% Itemized Yes
Class Action Award Exempt if consumer Pre-awarded NA
Other awards Taxable 2% Itemized Yes
Interest Taxable Depends on award Maybe
Emotional Distress Taxable * NA NA
Mental Anguish Taxable * NA NA
Loss of reputation Taxable * NA NA
  • In Murphy v IRS, No. 05-5139 (D.C Cir 8/22/06) an award of damages for mental anguish was held tax free, but reversed on appeal. Therefore awards for mental anguish, emotional distress or loss of reputation are taxable.

IDOR Changing Process to Prevent Identity Theft & We Are Too!

The refund may take longer. Iowa Department of Revenue (IDOR or IDR) is committed to combating identity theft and tax refund fraud. We have robust fraud engines built into our processing systems and we are dedicating more time to verifying the validity of tax refund claims before issuing refunds.  The extra time taken helps ensure the right person gets the right refund and criminals don’t pocket Iowa taxpayers’ money.

The taxpayer may get correspondence from IDR. Part of the verification process may require an examiner to reach out to the taxpayer.  If you do receive correspondence, contact the examiner listed as soon as possible to expedite the process.

Earned Income Tax Credits (EITC) refunds will not be paid until early March. Beginning in 2017, a new federal law requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) until mid-February.  This change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent fraud.  IDR will also take time to apply its own fraud checks to EITC refund claims. As a result, it will likely be the beginning of March before EITC refunds are issued.

Taxpayer’s can help themselves by providing a driver’s license number. 

Most electronic tax software has an optional field for driver’s license number.  Providing that information as part of the return will expedite our verification process. This option is not available for paper returns.

bmp, CPA will require all clients to provide a valid driver’s license number to help expedite the IDOR verification process.

Personal Fund Raising Sites –

These sites, also known as crowd funding, provide a way for an individual or group to raise funds for business or personal purposes through a website that acts as a middleman. The website accepts donations through credit cards, takes their fee, and then distributes cash to the individual. The link to the site is often shared via other social media such as Facebook and occasionally even gets conventional press. In 2013 crowdfunding sites raised $5.1 BILLION per an industry report.

GoFundMe is a website that allows people to list a ‘needed’ cause and request contributions from others throughout the world. Common requests include illness and accident victims, but also other ‘needs.’ In addition to the 5% that GoFundMe deducts from each transaction, WePay collects 2.9% and 30 cents from each GoFundMe transaction.

GoFundMe address tax situations directly on their website by stating that no contribution deduction is allowed because the amounts are personal gifts and charitable contributions may not be deducted when paid to an individual. This determination leads to the other side of the gift: the recipient, and GoFundMe’s position is also that the recipient receives tax free gifts from individuals, not payment for work, product or services.

The website does offer a Certified Charity Campaign which sends the funds directly to a registered nonprofit, which would appear to be deductible.

If the recipient of the funds receives more than $20,000 they will receive a 1099-K from the site. The professional tax industry agrees with GoFundMe tax position discussed above and would report that amount on Line 21 of Form 1040, then deduct the same amount as non-taxable fits received and attached an explanation that it was personal gifts from individuals funded through the GoFundMe website.

If Not Now, When? Seth Godin

Care a little more. Show up. Embrace possibility. Tell the truth. Dive deeper. Seek the truth behind the story. Ask the difficult question. Lend a hand. Dance with fear. Play the long game. Say ‘no’ to hate. Look for opportunities,…

If not now, when?

Care a little more.

Show up.

Embrace possibility.

Tell the truth.

Dive deeper.

Seek the truth behind the story.

Ask the difficult question.

Lend a hand.

Dance with fear.

Play the long game.

Say ‘no’ to hate.

Look for opportunities, especially when it seems like there aren’t any left.

Risk a bigger dream.

Take care of the little guy.

Offer a personal insight.

Build something magical.

Keep your promises.

Do work that matters.

Expect more.

Sign your work.

Be generous for no reason.

Give the benefit of the doubt.

Develop empathy.

Make your mom proud.

Take responsibility.

Give credit.

Play by a better set of rules.

Choose your customers.

Choose your reputation.

Choose your future.

Thank the ref.

Reward patience.

Leap.

Breathe.

Because we can.

It really is up to us. Which is great, because we’re capable of changing everything if we choose.

All we can do is all we can do, but maybe, all we can do is enough.

Break from the Norm – Me.

If the house goes up in smoke, I want to make sure I save…

  1. Madi – she’s my 6 year old black tri Australian Shepherd mix. She’s the reason I get up early every morning (and go back to bed), have an appreciation for life, patience for clients, and willingness to work the long hours of tax season

    Right now I have another responsibility that is worth saving – her name is Lady M. She’s a purebred Australia Shepherd foster dog. She’s beautiful inside and out. Life isn’t the same without a good foster dog!

  2. Keys/Phone/Laptop – Madi and I love road trips and I can work anywhere when I choose too so phone and laptop are critical. Plus my best friend lives in Wisconsin so I have to be able to communicate with her!
  3. A little black stand that belonged to my grandpa’s mom. I remember the day he told me the story of how important that stand was to his mom and how it rotated rooms as he grew up.
  4. A brown tri level stand that was my mom and dad’s first night stand. The same stand that the baby monitor sat on when I was brought home from the hospital.

What’s on your must save list? PS — no need to include tax returns on your list; I always have electronic access to those!