Grass Roots Taxes

Once upon a tax time, Vlad Dracula came into Diane’s office with an IRS letter.

He thought he was being audited.

Diane looked at the letter and had to explain:

This is not an audit.

This is just a bill.

That is an important tax difference.

An audit is when the IRS starts asking questions about income, deductions, records, or the tax return.

But if the IRS already knows about income and believes tax was not paid, they may not need to ask questions first.

They may just send a bill.

In Vlad’s case, the income included things like movie royalties, convention appearance fees, and possibly other U.S.-source income.

Vlad said he had already paid tax in Transylvania.

That may be true, but it does not automatically make the U.S. tax issue disappear.

Diane explains that “nonresident alien” is a real U.S. tax term.

If a nonresident alien has U.S.-source income, they may owe U.S. tax on that income even if they do not live in the United States.

And if the IRS knows about the income and did not get paid, they may want their money.

Depending on the facts, unpaid U.S. tax issues can affect other U.S. income, U.S. assets, and make U.S. travel complicated.

Vlad got hungry.

Diane declined the bite.

And the lesson is simple:

The IRS does not have to audit first.

If they already know you had income, why would they ask questions in an audit?

They may just send you a bill.

General education only. Nonresident alien tax rules, U.S.-source income, tax treaties, withholding, IRS notices, collections, assets, and travel issues depend on the facts. Ask a qualified tax professional or attorney about your own situation.

Share this with someone who thinks every IRS letter is an audit.

You know what’s scary?

Bookkeeping and paperwork.

The IRS requires small businesses to keep adequate books and records of income and expenses for as long as those records may be relevant.

And “adequate” is where it gets scary.

If you disregard the rules or think they do not apply to you, penalties can happen.

So here is the spooky question:

Do you know the rules?

Do you know what income is?

Do you know what expenses are?

Do you know what “ordinary and necessary” means?

Not everything you spend money on becomes a business deduction just because you own a business.

Business spending needs a business purpose.

If you are running a small business and do not know anything about accounting, bookkeeping, compliance, or what records to keep, do not wait until tax time and hand someone a big pile of receipts.

Come to class.

The Fayetteville Public Library is paying for me to teach my Small Business Taxes and Compliance class again.

No cost to you.

And it will be livestreamed, so you can watch from home.

Wednesday, November 04
5:30pm–7:30pm Central

We’ll talk about small business taxes, compliance, bookkeeping, records, deductions, and what you need to know in plain English.

Sign up here:
https://www.faylib.org/event/17191237

Don’t be scared.

Be smart.

Come to class.

You know what’s scary?

Everybody having your home address when you have a small business.

If you run a side hustle or small business from home, your home address can start showing up on everything.

Shipping addresses. DBA registration. Invoices. Online listings. Vendor paperwork. Customer records.

When your home address is your business address, customers have it. Vendors have it. Random strangers may have it. People who think your house is open for business may have it.

Do you really want someone knocking on your door while you are eating cereal in your pajamas?

No.

You do not.

Your business address does not have to be your house.

A virtual mailbox gives you a real street address for business mail. You can receive mail there and, depending on the service, have it scanned or forwarded to you.

You do not even have to come in to get your mail.

It helps separate your home life from your business life and protect your privacy.

If you need a virtual mailbox for your small business, check the link in my bio or sign up here:

https://Eastsquarecreativeoffices.anytimemailbox.com/signup

Don’t be scared.

Be smart.

Stop putting your home address on everything.

General education and service information only. Address rules can depend on your location, business type, filings, licenses, and facts.

Link in bio or watch on Fayetteville Library YT live Wednesday, November 4
5:30pm–7:30pm Central

Once upon a tax time, Jason Voorhees came into Diane’s office with an IRS letter.

He does not speak.

He breathes heavily and makes the ma-ma-ma-ma sound.

Diane understands him perfectly.

The IRS understands paperwork.

The letter is about estate tax.

Jason is the executor of Pamela’s estate, and the estate includes one tract of land:

Camp Crystal Lake.

In Diane’s example, Camp Crystal Lake is valued at $20 million.

The estate tax threshold used in the video is $15 million.

That means the estate is $5 million over the threshold.

At roughly 40%, the estate tax bill is about $2 million.

Jason does not have the money.

Diane suggests reopening the campground to raise funds.

Jason appears to have other ideas.

Then Diane notices the machete.

Then the chainsaw starts.

And the estate tax lesson ends quickly.

Here’s the real point:

Estate tax usually only affects large estates, but when it applies, it can create a serious liquidity problem.

A family may own valuable land, a business, a farm, a camp, or real estate, but that does not mean there is cash available to pay the tax.

Executors need qualified help.

Families with valuable property need estate planning before the scary letter shows up.

And no, the IRS does not accept machetes as payment.

General education only. Estate tax rules, exemption amounts, valuation, tax rates, executor duties, payment deadlines, state estate or inheritance taxes, and liquidity planning depend on your facts and current law. Ask a qualified estate attorney or tax professional about your own situation.

Do you know what’s scary?

Healthcare.gov asking how much money you are going to make next year.

Open enrollment starts November 1, right after Halloween.

Scary.

When you sign up for Marketplace health insurance, they ask you to estimate next year’s income.

How do you know that?

You don’t.

You guess.

Diane has watched this go wrong in both directions for years.

Some people guess too low because they want a lower monthly payment. Then spring comes, actual income is higher, and they may owe thousands back at tax time.

Scary.

Other people guess too high. Their monthly payment becomes too expensive, their income goes down, they cannot make the payment, and they lose their health insurance.

Also very scary.

So what do you do?

Do the best you can with real numbers.

Look at last year’s income, this year’s income, raises, job changes, side hustles, self-employment income, and investment income.

If your income changes during the year, update the Marketplace as soon as you know.

Do not wait until tax time to tell the system your income changed 8 months ago.

Don’t be scared.

Be smart.

Guess carefully. Update the Marketplace when things change.

General education only. Ask a qualified tax professional or Marketplace helper about your own situation.

What’s scary?

Official-looking letters that are not actually from the government.

Small business owners get these all the time.

They may say:

Final notice. Compliance. Annual report. Certificate. Labor law poster. Business filing. Tax record. Immediate response required.

They look official on purpose.

But sometimes they are not from the IRS, the state, the county, or the Secretary of State.

Sometimes they are marketing letters. Sometimes they are scam-like solicitations. Sometimes they are trying to sell you something unnecessary or overpriced.

Before you pay, check the envelope.

Look at the return address. Look at the sender address. Google the address.

If it is a UPS Store, pack-and-mail shop, virtual office, random suite, or private company, it is not a government agency.

Do not use the phone number on the suspicious letter until you verify who sent it.

Go to the real agency website. Use the official phone number. Ask a qualified professional if you are unsure.

Don’t be scared. Be smart.

If tax notices, compliance, business filings, deadlines, and small business paperwork confuse you, come to Diane’s Small Business Taxes and Compliance class through Fayetteville Public Library.

Livestreamed so anyone can attend from home.

Wednesday, November 04
5:30pm–7:30pm Central
Sign up here:
https://www.faylib.org/event/17191237

Share this with a small business owner before they pay a fake-looking “official” notice.

What’s scary?

Not knowing the status of your taxes.

Did you file?

Did the IRS process the return?

Did your payment post?

Do you have a balance?

Are you late?

Did someone file using your identity?

Do you know?

Or are you just hoping nothing is wrong because no scary letter has shown up yet?

That is scary.

Create or log into your IRS online account and check.

You may be able to see account information, balances, payment history, transcripts, and other tax records.

If you have a business, IRS business tax account options may also help with certain business information.

You will likely need ID.me verification, so do not wait until there is an emergency.

This does not replace a tax professional.

But knowing is better than guessing.

Don’t be scared. Be smart.

If tax compliance, records, deadlines, and IRS accounts confuse you, come to Diane’s Small Business Taxes and Compliance class through Fayetteville Public Library.

Livestreamed so anyone can attend from home.

Wednesday, November 04
5:30pm–7:30pm Central
Sign up here:

https://www.faylib.org/event/17191237

Share this with someone who avoids IRS letters and hopes for the best.
Fayetteville Public Library

What’s scary?

Healthcare.gov wanting you to log in through ID.me when open enrollment starts.

Open enrollment starts November 1.

If you do not get health insurance through your job, this is when you may need to sign up for next year’s Marketplace health insurance.

And if you wait until then to figure out your ID.me login?

That can turn into a horror movie.

Passwords. Email access. Phone codes. Document uploads. Selfies. Name mismatches. Address mismatches. Locked accounts.

No thank you.

ID.me is not the villain. Waiting until the last minute is the scary part.

Set it up now. Test your Healthcare.gov login now. Make sure your email and phone number work now.

Don’t be scared. Be smart.

If health insurance, Marketplace income, taxes, and small business compliance make your head spin, come to Diane’s Small Business Taxes and Compliance class through Fayetteville Public Library.

It is paid for by the library and livestreamed so anyone can attend from home.

Wednesday, November 04
5:30pm–7:30pm Central
Sign up here:

https://www.faylib.org/event/17191237

Share this with someone who buys Marketplace insurance.

Once upon a tax time, Adam Frankenstein came to Diane’s office because his tax return got rejected.

Yes, that Frankenstein.

Flat head. Bolts in the neck. Green and purple skin. Scars.

But also clean gray suit, polite, educated, and very well spoken.

The IRS rejected Adam’s return because someone else claimed him as a dependent.

Diane asked if he was someone’s dependent.

Adam said no.

His father abandoned him in the Arctic Circle, got on a boat, and left him for dead.

That was several years ago.

Adam is doing better now. He gets therapy, works as a performer, does commercials, appears at conventions, and works haunted houses during the season.

He is not anyone’s dependent.

Diane’s advice was to create or secure his IRS.gov online account and apply for an IP PIN.

An IP PIN is an Identity Protection Personal Identification Number.

It helps protect your Social Security number from being used on a tax return without your permission.

Once the IRS issues the IP PIN, a return using your Social Security number generally needs the correct PIN to be accepted.

That can help if someone else claimed you or used your Social Security number.

And if Adam’s father falsely claimed him and received tax benefits, Dad may have to pay that money back when the IRS figures it out.

Moral of the story:

If you are paying your own rent, your own bills, and supporting yourself, you are generally not your parents’ dependent.

But if your parents are still paying your phone, insurance, housing, bills, or major support, you may still be their dependent.

Facts matter.

Don’t claim someone who is not your dependent.

Even if you created him and abandoned him in the Arctic Circle.

General education only. Ask a qualified tax professional about your own situation.