The Oklahoma Tax Commission requests verification on some returns

Q & A with Sean Reed of Reed’s Tax Service in Midwest City. Sean and is an enrolled agent, a federally licensed taxation expert with nationwide rights to represent taxpayers before the Internal Revenue Service

Identity theft prompts review of tax returns for some in state

Q: I understand the Oklahoma Tax Commission is sending out letters, asking for original W2s and 1099s. If taxpayers don’t respond within 30 days, the refund could be held up. Why?

A: Throughout this state, taxpayers have been victims of identity theft by those filing fraudulent income tax returns. The Oklahoma Tax Commission is trying to protect taxpayers by verifying returns are legitimate. Sometimes, however, these safeguards can impact the honest taxpayer whose return is randomly selected for review. When a taxpayer receives this request, it’s imperative to verify information submitted on an electronically filed return or to request information that is missing on a paper-filed return. This request is for the protection of taxpayers.

Q: What triggers these letters?

A: In reviewing tax returns, the Oklahoma Tax Commission may determine a need exists to verify return information, including employer or retirement fund information, wages or retirement distributions or the amount of Oklahoma withholding.

Q: If a taxpayer receives one of these letters does that mean they’re a victim of fraud?

A: Generally, no. The Oklahoma Tax Commission is simply attempting to verify the information on the return. However, there have been instances where the taxpayer contacts the Tax Commission after receiving the correspondence explaining that they haven’t yet filed a return. This provides an extra safeguard against others using your information to file a fraudulent tax return.

Q: What should a taxpayer do if they receive one of these “fraud” letters?

A: These letters aren’t “fraud” letters’ they’re requests for information to prevent potential fraud. If a taxpayer receives a letter requesting additional information, they should contact their tax professional or send the additional requested information to the Oklahoma Tax Commission along with a copy of the letter. If you have received a letter and are still unsure what to do, there’s a number on the letter that you can call. If the taxpayer hasn’t yet filed an income tax return, and believes they may be the victim of identity theft, they should contact their tax professional; file with the Internal Revenue Service the IRS Affidavit form 14039; send a copy of IRS Affidavit form 14039 along with supporting documentation to the Oklahoma Tax Commission; and provide a signed statement, including a daytime contact phone number, that you’re a victim of ID theft or fraudulent return filing to: OTC, AMD-INCOME TAX-IDENTITY THEFT, PO BOX 269060, OKLAHOMA CITY, OK 73126-9060 PAULA BURKES, BUSINESS WRITER

IRS requires charity statement for gifts $250 and larger

Donors must use care when reporting their charitable gifts

Paula Burkes Published: Tue, March 18, 2014

Q: I understand there’s an important tax case that potentially impacts everyone who contributes $250 or more to their church or other nonprofit organization, and deducts those contributions on their income taxes?

A: Yes, a Virginia couple’s deduction of $22,517 was disallowed because their church’s tithing statement lacked the proper wording.

Q: Aren’t copies of checks good enough?

A: Only those of less then $250. If they’re larger than $250, the Internal Revenue Service requires a Charity Statement.

Q: What’s the proper language?

A: There are several phrases acceptable, but this one is the best to cover the church and congregation: “Pursuant to Internal Revenue Code requirements for substantiation of charitable contributions, no goods or services were provided in return for the Tax Deductible contributions”

Q: Is there a time frame that allows taxpayers to get the proper documentation?

A: To be considered correct and timely, it needs to be on hand by the April 15 filing deadline or by Oct. 15, if you’ve filed for an extension.

Daily Q&A with Sean Reed

Most unemployed taxpayers still must file returns

by Paula Burkes Published: Tue, March 28,

Q: If you’re unemployed, do you still have to file a tax return? A: Usually. But often your tax burden will be lower, which can mean a larger refund or lower tax bill because of your lower taxable income. Q: Do you still have to file, if you were unemployed for all of 2016? A: If you have any income, including unemployment benefits and severance pay, you likely will need to file. However, if your income is below the filing requirement, you won’t. But even then, you still may want to file if there are credits for which you qualify. Q: What is the “filing requirement?” A: Generally, a taxpayers will need to file a tax return if their incomes exceed $10,350 (single filers under the age of 65) or $20,700 (joint filers under 65). Also, if you have $400 in self-employment income, you’re required to file a tax return. Q: For what credits might a unemployed taxpayer qualify? A: The Earned Income Tax Credit (EITC), Additional Child Tax Credit or the Savers Credit, to name a few. These credits can reduce what you owe or increase your refund. Q: For what deductions do unemployed workers qualify? A: If you itemize, you may deduct job hunting expenses. But for the expenses to be deductible, job searches must be in the same field as the job you lost.

Some federal retirees could be overpaying Oklahoma taxes

Some retired federal employees of Tinker Air Force Base, the U.S. Postal Service or the Veterans Health Administration who paid into the old Civil Service Retirement System inadvertently could be paying state taxes that they don’t owe. Some retired federal employees of Tinker Air Force Base, the U.S. Postal Service or the Veterans Health Administration who paid into the old Civil Service Retirement System inadvertently could be paying state taxes that they don’t owe. Since the 2011 tax year, Oklahoma excludes from state taxes 100 percent of what those federal retirees paid into the Civil Service Retirement System in lieu of Social Security. The tax savings means those retirees can keep hundreds of dollars more a year, experts say. For example, a federal retiree whose pension totals $37,000 annually would save $836 under the state tax exclusion. Still, many retirees and tax preparers miss that fact, and continue to overpay hundreds of dollars in state taxes, said Sean Reed of Reed’s Tax Service in Midwest City. People can file an amendment on past returns to recoup overpayment, but only for the three previous years, he said. “If you owe the government, you owe them forever,” Reed said. “But if they owe you, it’s only for three years.” So affected state filers — potentially tens of thousands in Oklahoma — face an April 15 deadline to file amendments to their 2011, 2012 and 2013 tax returns. Last year, Newalla residents and Tinker retirees Tom and Tandye Kramer got back $4,112 after Reed filed amendments to three prior returns because of state tax overpayments made on Tom’s pension. “He’d said we might be able to get some money back, but holy moly, I never expected $4,000,” said Tandye Kramer, 56. The unexpected return, she said, was a welcome addition to the college fund of their daughter, who’s studying computer graphics at Rose State College. Kramer said the tax service she’d previously used had missed the state tax exclusion, which was phased in starting in the 2007 tax year. Reed isn’t surprised. “Most tax software doesn’t have a red line that pops up to ask whether you retired under the old system,” he said. “Preparers — or filers, if they’re doing it themselves — just have to know it.” The exclusion is spelled out in the tax booklets of the Oklahoma Tax Commission, but the agency doesn’t send paper forms to taxpayers if they’ve stopped using them, he said. Most federal employees hired on or after Jan. 1, 1984, automatically are covered under the Federal Employment Retirement Service and pay into Social Security. When they retire and draw their Social Security and pensions, they subtract their Social Security on their state income tax forms and the first $10,000 of their annual Federal Employment Retirement Service pension. The state tax exclusion for federal retirees under the Civil Service Retirement System was trumpeted by Rep. Gary Banz, R-Midwest City, and others. “Bottom line, it was a culmination of more than a decade of attempts by legislators, particularly in the Mid-Del area,” Banz said. When the federal government moved away from one retirement system to another, Banz said, it moved away from a defined benefit plan to a defined contribution plan, “which is a big part of the conversation now, for our state employees.”

Daily Q&A with Sean Reed Paula Burkes by Paula Burkes

Most unemployed taxpayers still must file returns

Q: If you’re unemployed, do you still have to file a tax return?

A: Usually. But often your tax burden will be lower, which can mean a larger refund or lower tax bill because of your lower taxable income.

Q: Do you still have to file, if you were unemployed for all of 2016?

A: If you have any income, including unemployment benefits and severance pay, you likely will need to file. However, if your income is below the filing requirement, you won’t. But even then, you still may want to file if there are credits for which you qualify.

Q: What is the “filing requirement?”

A: Generally, a taxpayers will need to file a tax return if their incomes exceed $10,350 (single filers under the age of 65) or $20,700 (joint filers under 65). Also, if you have $400 in self-employment income, you’re required to file a tax return.

Q: For what credits might a unemployed taxpayer qualify?

A: The Earned Income Tax Credit (EITC), Additional Child Tax Credit or the Savers Credit, to name a few. These credits can reduce what you owe or increase your refund.

Q: For what deductions do unemployed workers qualify? A: If you itemize, you may deduct job hunting expenses. But for the expenses to be deductible, job searches must be in the same field as the job you lost. PAULA BURKES, BUSINESS WRITER

Winnings in lottery, horse racing, casinos taxed at rate of filer

Q&A with Sean Reed Paula Burkes by Paula Burkes Published: Tue, September 27, 2016

Q: How are gambling winnings taxed?

A: Income from gambling, which includes winnings from the lottery, horse racing and casinos, is taxed at the taxpayer’s tax rate. Winnings aren’t limited to the above, but also include cash and noncash prizes. You must report the fair market value of noncash prizes like cars and trips.

Q: Do you only have to report the winnings from the W2G forms the casino issues?

A: As with all income, you’re required to report all winnings, not just those that for which the casinos issue a W2G.

Q: Can gambling losses offset gambling winnings?

A: Yes, you can deduct your gambling losses on Schedule A, Itemized Deductions. The total you can deduct, however, is limited to the amount of the gambling income you report on your return.

Q: How does a taxpayer keep track of what he lost?

A: Keep records of your wins and losses. This means keeping items such as a gambling log or diary, receipts, statements or tickets.

Q: Does the state of Oklahoma tax winnings from other states?

A: Yes, the state taxes worldwide income. So winnings from anywhere have to be reported to the state