You’ve been saving for retirement for several years and built a relationship with a custodian of the traditional IRA (Individual Retirement Account). However, this year, you’ve decided for one reason or another that you want to move your retirement to a new custodian. Perhaps, it was for a job change that required you to relocate. Or, perhaps, you decided that you just wanted to build an investment retirement with someone new. There are few things to know about retirement rollovers and distributions.

1. You can only have one rollover traditional IRA per year

There is an exception. Perhaps, your custodian is going out of business or your investment is shutting down or no longer being offered. Other than this exception, you can only rollover one IRA per year. Rollover more than one IRA will result in a distribution for those rollovers more than one resulting in taxes and possible penalties if you are under the age of 59 ½

2. You can not borrow from IRA

Unlike some employer 401ks, you can not borrow from your traditional IRA. Borrowing from an traditional IRA will result in termination of your traditional IRA account and results in taxes and possible early distribution penalties if you are under the age of 59 ½.

3. When you borrow from your 401k and you leave your job, the loan to your 401k must be paid back within a short period of time (60 to 90 days). Otherwise, the loan will be considered a distribution that results in taxes and possible early distribution penalties if you are under the age of 59 ½. The 401k has to be paid back within five years (5).

4. You have sixty (60) days to rollover a cash distribution

If you receive a check distribution from your traditional IRA, you have sixty to transfer that money back into your traditional IRA account or deposit it with a new custodian. Otherwise, the distribution will result in taxes and possible early distribution penalties if you are under the age of 59 ½.

If you have a death or a serious illness that resulted in you not being able to roll your distribution within the 60 day window, you can request a waiver on the 60 day rule. The IRS may or may not grant your request.

Most IRA holders do a direct rollover to the new custodian instead of receive a cash (check) distribution.

5. You can convert a traditional IRA into a Roth IRA

When you convert a traditional IRA into a Roth, you are moving pre-taxed money from the IRA into an after tax Roth IRA which results in taxes on the traditional IRA distribution when you convert it to a Roth IRA.

6. Traditional IRA required minimum distributions (RMD) begin at age 70 ½. Not taking the required minimum distribution at age 70 ½ will result in a 50% penalty of the required minimum distribution that you were suppose to take. For example, if your RMD was $50,000 that you didn’t take, then the penalty would be $25,000.

Roth IRAs do not require a required minimum distribution until after the owner dies.

When it comes to games of chance, we often think of the state lotteries along with the Powerball and Mega Millions lotteries. Recently, I saw an article on CNBC.com where someone had calculated that winning the recent Mega Millions jackpot at $323M and taken a lump sum payout of $199M, that the federal taxes would come in at around $50M and additional state income taxes of up to 17% depending on which state you lived in that had a state income tax.
You don’t necessary have to win a lottery, raffle, at a casino, or at the race track to win a game of chance. There are countless game shows to chose from.

So what you know about winning the lottery, game shows, casino winnings, or racetrack winnings? To begin with all income from gambling or game of chance has to be reported a income under “Other Income” on the Form 1040. Winnings are reported on Form 1099G.

What make game of chance unique is that you can deduct game of chance (gambling) losses on Schedule A (Itemized Deductions) as long as you can prove your losses should you be audited using receipts and non-winning tickets.

If you should ever win, you can deduct the losing tickets as long as you have copies of the tickets or proof of the losing tickets that you purchased but didn’t win. Additionally, if you win expect to pay federal and state taxes on your winnings.

In last week’s episode, the episode was a discussion of the innocent spouse relief. However if you don’t qualify or if you’re denied innocent spouse relief, there is also separation of liability relief, equitable relief, community property states relief, and injured spouse relief.

To qualify for separation of liability relief, taxpayers must have filed a joint return and meet at least one of the following requirements.

1. You must be divorced or legally separated from the spouse with whom you filed the joint tax return.

2. You’re widow.

3. You haven’t been a member of the same household as the spouse with whom you filed the joint return at any time during the twelve month period ending on the date you request relief.

If a taxpayer doesn’t qualify for innocent spouse relief or separation of liability relief, the taxpayer may qualify for equitable relief. To qualify for equitable relief, the taxpayer must establish that given all the facts and circumstances, it wold be unfair to hold you liable for the understatement or underpayment of tax.

To qualify for relief under community property states laws, taxpayers must live in a community property state ( Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) and the taxpayers couldn’t file as married filing jointly.

When it comes to qualifying for spouse relief, injured spouse relief is not the same as innocent spouse relief. Under injured spouse relief, you are requesting an allocation of refund on a joint return. Under innocent spouse relief, you are requesting relief or allocation of relief of a liability on a married filing jointly return.

If a taxpayer is requesting relief under injured spouse relief, the taxpayer is requesting their part of a relief from their spouse’s liabilities including separate past-due federal tax, state tax, child support, or federal non-tax debt (such as a student loan) owed by your spouse.

When it comes to tax liability for the married filing jointly status both spouses are responsible for the information filed on the tax return. But, what happens if one spouse finds later that income was under-reported and the IRS has assessed penalties and interest in addition to an additional tax liability.

Let’s take the scenario one step forward and assumed that the spouse did not know if the under-reported income and wants to claim innocent spouse.

The IRS offers an innocent relief spouse program for spouses who were unaware of what their spouse was reporting on the tax return. To participate in the innocent spouse relief program and get approval from the IRS and the tax courts to participate are several conditions that have to be met.

1. You have to have filed a married filing joint report with your spouse for the tax year the IRS is assessing for additional taxes, interest, and penalties for the under-reporting of income and tax liability.

2. The spouse requesting innocent spouse relief must have been under duress when they signed the return.

3. The spouse requesting innocent spouse relief must complete Form 8857 statement that outlines the steps and requirements for relief.

4. Spouse must establish at the time that the return was signed, they did not know of the under-reported income or tax liability.

5. Prove using facts that it would be unfair to hold the spouse responsible for the understated tax liability.

6. Spouse requesting innocent spouse relief must elect the relief within two years after the collection activity begins to collected the understated tax.

7. The spouse must prove that they did not participate in the understatement of income and taxes.

The courts and the IRS may grant partial relief depending on the facts.

Entrepreneurs usually start their business as a side business in addition to their daytime job as a way to make additional money. Other entrepreneurs just have a business they’ve started. Other entrepreneurs have a full-time business they’ve started. However, they’re not making a profit.

However depending on several factors, the IRS and courts could determine that your business or is a hobby instead of a hobby.

To distinguished the difference between a hobby and a business there are several considerations that factor into whether you a business or a hobby.

Depending on your business and your business structure, business income and expenses are reported on business tax returns. Hobby expenses on the other hand are reported on itemized deduction form Schedule A

1. There must be a profit motivation from your time and effort.

Do you have a profit motivation? Are you trying to make a profit? How much time and effort are you putting into your venture.

2. You must depend on income from the activity.

Do you depend on the income from this activity? Is this the only income activity you have?

3. Loses must be beyond control of the taxpayer or in the startup phase.

When you start a business, there is often legal and other startup fees including loan origination fees which have to be amortized over sixty (60) months? Were there other expenses beyond your control that caused a loss?

4. You change something in the business model to improve profit.

Have you make changes in your business to attempt to make a profit or grow your profit?

5. Do you have the knowledge to have a successful business or you have a mentors or an employee that can help you have a successful business.

Do you have the knowledge in your business to make your business a success and to create a profit? Do you have employees, friends or mentors that you surround yourself with to make your business a success?

6. Have you had a profit in the past from similar business activities.

Did you have a similar business in the past where you made and reported profits?

7. Did you have a profit in any prior years?

With your business, have you ever had a profit? Maybe there is a temporary economic downtown occurring in your business creating losses.

8. Can you expect to have a profit in future years from asset appreciation?

Do you own an asset that is going to increase in value over time that enable you to have a profit in your business?

When it comes to excuses for not filing a tax return, there is no shortage of excuses that taxpayers give. In this episode, I discuss some of those excuses. While it may not be all the excuses for not filing a tax return, these are the most common excuses.

1. I didn’t feel like filing a tax return this year.

Most taxpayers would agree they don’t like filing a tax return with the IRS or the State; but they do they do file a tax return whether they have a tax refund or an additional tax liability.

2. I forgot to file or pickup the returns.

There is always one taxpayer or two that will tell you that they forgot that the tax deadline is April 15th and October (with extension). I had one taxpayer who I would contact to ask them about filing a tax return or an extension to only have them call me up on April 14th or April 15th asking if I could file their tax return. They would also pull this on October 15th. Another taxpayer would be conveniently out of town on April 15th and October 15th.

3. I was confused about what I needed to file on the tax return or how I needed to file.

There is no shortage of tax preparers that will help you comply with the federal and tax laws that can answer your tax questions. The IRS and States have phone numbers for taxpayers to call if you have questions. It may be a little difficult to contact the IRS and the states as the deadline gets closer especially in the afternoon. I recommend contacting the IRS and states in the morning as soon as their offices open.

4 I had a death or serious illness that occurred.

The IRS and the states will often look at the circumstances and the relationship between the taxpayer and the individual that pass-away or was seriously sick when it comes to a death or illness to determine if they will waive the penalties and interest for late filing and / or late payment.

5. I received bad advice from a tax professional.

When to comes to bad advice, someone told you they didn’t think you needed to file or you didn’t need to complete a particular form. Depending on who the tax professional was, the IRS and states will determine if they need to waive the penalties and interest for late filing and / or late payment. If it’s your uncle Bob who is not a tax professional, the IRS and the states will most likely not waive the penalties and interest.

6. Filing a tax return is voluntary and not required.

The IRS and States have heard this excuse many times from taxpayers. Usually, this excuse is extended into the income tax amendment that created the income tax system wasn’t ratified by the states. Taxpayers can use this excuse if they want but be warned that it doesn’t work when you’re standing before the judge and the IRS.

7. I was deployed overseas in the military and didn’t have the time to file a tax return or an extension.

The military will often work with the IRS to extend members of the military tax returns in April who are deployed overseas. But, it is still your responsibility to extend your extend and meet the filing deadlines.

8. My records were destroyed.

The IRS and the states will work with you if your records were destroyed in a fire or a natural disaster. If your city, county, or state is involved in a natural disaster, the IRS and the States under a Presidential or State Emergency Declaration will extend tax due dates for those affected.

9. I didn’t know I was suppose to file.

Similar to I was confused and I received bad advice, some taxpayers will use this excuse when it comes to not filing a tax return.

10. I wasn’t able to get help from the IRS or a tax professional

During the tax season, it is not uncommon to be on hold for long periods of times when you’re trying to contact the IRS or the States especially if you have a question. Often, the call gets dropped after being on hold. Sometimes, the best time to contact the IRS and the states is call as soon as the IRS (1-800-829-1040) and the states opens their phone lines in the morning. Tax professionals will often get back with you in a day if you have a question about your tax return.

In this episode, I discuss when it may be time to find a new tax preparer. Most taxpayers who use paid tax preparers to prepare their tax returns never consider that they may need to find a new tax preparer. However, sometimes it becomes necessary to find a new tax preparer.

1. When the tax preparer refuses to put their PTIN (Preparer Tax Identification Number) on the return.

The IRS requires that tax preparers have and use a PTIN number on a tax return they have prepared.

2. The tax preparer refuses to sign the return

Paid tax preparers are required to sign a tax return they have prepared.

3. Your tax preparer ask you to file your own tax return.
Paid tax preparers who file over ten tax returns are year are required to E-file client tax return unless the client objects in which case Form 8948 (Preparer Explanation for Not Filing Electronically)

4. Your tax preparer tells you that you have a large tax refund without looking at your tax support documentation (W-2, 1099s, etc).

Without looking at and entering your W2s, 1099s, etc, there is no way to tell in what type of refund you will receive or if you will have a tax liability.

5. Your tax preparers asks what size of refund do you need this year.

Again at and entering your W2s, 1099s, etc, there is no way to tell in what type of refund you will receive or I you will have a tax liability.

6. Your tax preparer is no longer in business after April 15th.

Once the April 15th deadline is finished, your tax preparer is no longer available to answer questions about your tax return if you should have questions come up and if you have a notice form the IRS.

7. Your tax preparers doesn’t allow you to ask questions about your tax return or review your tax return with you.

Your tax preparer should be able to go through your tax return should you have questions and review your tax return with you.

8. Your tax preparer is unable to explain their fee schedule or how they determine your fee they charged you.

Tax preparers should be able to explain their tax return preparation fees. Is their fee a flat fee? Are they charging by the hour?

9. They want to charge you a fee or commission based on the amount of your refund?

The IRS has found in studies that preparers who charge you a fee based on he amount of the refund often use credits and deductions that taxpayers aren’t entitled to.

10. The tax preparer asks you to sign the return before you have the opportunity to review the return or they ask you to sign a blank return.

Never sign a tax return that you haven’t reviewed or had questions answered by your tax preparers. Once you’ve sign the return, you have committed to the IRS or State that your tax return is complete and accurate.

11. Your tax preparer ask you to direct deposit your refund into an account that doesn’t belong to you so they can deduct their fees from the deposit before issuing you a check from that account.

The IRS has begun to limit the number of tax refunds that can be direct deposited into one account to cut down on fraud and identity theft. So, while this may not be a serious problem as it once was, this is still something to watch out for.

When it comes to unclaimed property do you as an individual or a company have unclaimed property that is being held be a state just waiting for you to claim it.

Would $10,000 of unclaimed property interest you? What about $1,000, $800, $500, $100 or even $50? States are holding billions of dollars of unclaimed property. Some of it may belong to your.

There is only one to determine if you have unclaimed property. You have to go out to that state(s) unclaimed property websites that you have had a relationship with companies in the past. There is a Missing Money (http://www.missingmoney.com) website that many states report unclaimed property to. All it takes is going to the website and entering your name or your company’s name into the fields and clicking the submit or search button.

If you find your name on the list, it could feel like Christmas. Except for gifts, it would be cash that is being held by the states.

The definition of “unclaimed property” is is intangible assets (cash, stocks, or bonds) that a company, other entity, state is holding that belongs to you that have become abandoned. It includes bank accounts, stocks and dividends, wages, refunds, insurance payments, gift certificates, credit balances, utility deposits, and overpayments just to name a few.

Each state has their guidelines and laws as to what makes up unclaimed property with specific due dates and when property becomes abandoned for companies and businesses to report unclaimed property.

To claim your unclaimed property should you name come up after doing a search for unclaimed property, most states allow you to download a form from the website or will send you in the mail. Some of the backup details that the state will require are driver license, proof of address, proof of relationship (executor, trustee, officer, owner, etc) for businesses, estates, and trusts. Some states may require that you prove you had a relationship with that particular business.

There are some companies that will help you recover your unclaimed property for a fee. But, why use these companies when the provide the service for free.

So, google or yahoo (insert state here) unclaimed property and hit search to see if you are a winner in the world of unclaimed property. You never know what the state is holding and for once it may feel like Christmas outside of Christmas. At least, it may feel like you hit the unclaimed property jackpot.

1. Changes in income or corrections in income
Perhaps your income changed because a K-1 was amended or a Form 1099-B that was changed by a brokerage firm.

2. Social Security Number was incorrect
Should be easy; but, it happens when a dependent’s or another social security number get entered incorrectly on the tax return.

3. Dependent’s Name
Again, it should be easy; but, if a name on the tax return doen’t match the social security information, the IRS is going to reject the return. Perhaps, the spouse didn’t change the information with the social security office.

4. Change in deductions
Whether it’s a change in income, changes in deductions will be another reason to file an amended tax return. Whether it’s schedule A deductions or adjustments to income on page one of the Form 1040, taxpayers may need to amend their tax return for changes in deductions.

5. Additional Form information
Perhaps after you file your tax return, you receive a 1099-B or a Schedule K-1 form that was not included with the original tax return.

6. Tax Credits
When a taxpayer received additional tax credit (foreign, energy, American Opportunity) information or changes in tax credit, the taxpayer may need to amend their tax return.

7. Electing to go from married filing separately to married filing jointly to get the tax benefits of filing married filing jointly.

8. IRS requests that the taxpayer file an amended tax return after an audit.
Usually this happens when there is a refund from an audit.

Domicile is the country, state, county, and city that a person treats as their permanent home, or lives in and has a substantial connection with. For many of us, we will move several times during our lifetime changing the state or city that we live.

However to do it correctly, you must change your address. Arkansas recently had a couple of cases before the Arkansas Finance and Administration where the question of domicile came up.

The question of domicile will often come up when a taxpayer moves from a state with an income tax to a state without an income tax. With the Arkansas cases, one taxpayer moved from Arkansas to Texas and the other taxpayer moved out of the state. In both cases, the taxpayers used an Arkansas address of a finance or their parents which trigger a notice from the State when the State of Arkansas matched Federal tax returns with an Arkansas to Arkansas tax returns filed by Arkansas taxpayers. In the case of both taxpayers, they did not file a state of Arkansas income tax return.

How is state domicile determined?

States use different tests to test for domicile. These are some of residency / domicile test?

1. What address is used on the Federal Tax Return?
2. What address is used on driver’s license?
3. Where is the taxpayer registered to vote?
4. What address is used on hunting/fishing/other state licenses?
5. Where is the taxpayer’s bank account?
6. What address used for county/city real tax, personal tax, and other assessment records?
7. Where is the immediate family/relatives living?
8. Where is the employer located?
9. Where is the taxpayer tax withholding being held?
10. Address for utility, telephone, and commercial documents
11. Address for vehicle and trailer registration?
12. Address on government documents
12. Location of taxpayer
13. Other records

So, how does a taxpayer keep from being assessed for domicile issues.

A. Change your address on state, documents, bank, utility, financial, and other accounts.
B. Get a new driver’s license.
C. Update your voting records.
D. Use your correct address on the Federal and State returns