Frequently Asked Questions

This is actually fairly common. There are usually two reasons for this happening:

You accidently paid the wrong people. Meaning you owed the IRS but made a payment to the State (FTB) or vice versa. Check your payment receipts.

or

You filed a joint return but when it came time to make the payment you listed the spouse’s name (second name on the return) as the person making the payment. When this happens the IRS/State does not post the payment to the correct account. You will need to call the number on the letter and have your payment receipt handy. It is an easy fix but does require a phone call.

To check your status with the IRS (Federal Return), follow this link:

https://www.irs.gov/refunds

Please note: You will need your exact refund amount when checking the status. If you opted to pay our fee out of your refund, you need to enter the refund amount before any fees are deducted.

To check your status with the Franchise Tax Board (California State Return), follow this link:

https://www.ftb.ca.gov/refund/index.asp

We only have access to the same refund information that you see on the IRS website. Once we submit a return and receive the acceptance acknowledgment from the IRS we will have no other information related to your return until it’s either released or the IRS sends a letter. If your return was rejected for any reason, we would know right away and be in contact with you to correct any issues and resubmit. If you are seeing “processing” under the status then you know your return has been accepted and is out of our hands at that point. There are a few reasons that your return is taking longer than usual. The most common reasons:

• You qualified for one of the following credits: Earned Income Tax Credit (EITC) and/or Additional Child Tax Credit (ACTC). These credits will cause your refund to be delayed. There is a lot of fraud attached to these credits, so the IRS does delay releasing these refunds. Normally refunds that include these credits only take an extra 1-2 weeks beyond the usual processing times.
• You qualified for a credit that needs human review. We have noticied that clients with certain credits like solar or the electric vehicle credit, may be waiting a little longer than usual to receive their refunds. Any credit that requires human review will cause a delay. This is totally normal and refunds usually show up just delayed.
• If neither of the above pertain to your return, then it may be delayed due to any number of reasons. it is rare, but does happen. 9 out of 10 times the refund shows up later than usual with no issue except for the delay. If there is a bigger issue, the IRS will send out a letter explaining the delay and they may ask for more documentation or an explanation of something on the return. There is no way to know what the issue is until the letter shows up. So please wait on contacting us until you receive the letter. Once you receive the letter contact us and we can go from there.
• Due to COVID-19 the IRS and State are taking much much longer than usual to send out and respond to letters and faxes. So please be patient. We have no way of speeding anything up. When our clients have an issue, we want it resolved as soon as possible as well, so if there was a way to speed things up, we would. So just remember we are not the IRS, so once we help you respond to the issue, it’s just a matter of waiting.

There are a few reasons why this may happen. We will break down the answers into two categories.

• If you paid us directly, and NOT out of your refund.

If you paid us directly, and your refund was less than you expected, it may have been reduced by the IRS or a Financial Management Service (FMS) to pay past-due child support, student loan debt, federal agency non-tax debts, state income tax obligations, or unemployment compensation debts owed to a state. You should receive a letter from the IRS and/or state within a few weeks of receiving your refund explaining why your refund was reduced. You can also call the FMS office of the IRS and use the automated system to check for any debts on file:

IRS Financial Management Service: 800-304-3107

• If you paid our fees out of your refund.

If you chose to pay our fee out of your refund, there is another possible scenario. All of the above still applies but in addition to that, you may be seeing our fee come out of one refund instead of the other. Our fee is taken out of the first refund that shows up. Our cover letter always shows your refunds based on your federal (IRS) refund showing up first. If your state refund happens to show up first, our fee will be subtracted from that. So even though it may seem that you received less than you were supposed to, please wait until the other refund arrives. The second refund should be more than expected since our fee has already been paid. At that point, you should see that the total from the two refunds is correct, and you’ve received everything you were supposed to receive. If it still does not add up correctly, then you may have been garnished due to one of the reasons listed in the first paragraph above.

We get this question all of the time. Many people that make under the filing threshold may not “need” to file but may still benefit (aka get a refund) from filing their return. They may be entitled to refunds due to tax withholding, and other credits like the Earned Income Tax Credit and the Child Tax Credit if they have dependents to claim. The IRS is holding billions of dollars of unclaimed refunds. These are refunds that people could have received if they filed a return even though they did not have to file a return.

If you still are wondering if you should file, the IRS has an online tool to help:

https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return

A person who is married does have the option of filing their return as Married Filing Separately. This is 100% legal and can sometimes be beneficial. Over the years we have learned that when most people ask this question, they have been given bad advice from a friend. Most of the time, these people giving this advice are actually using the term “separately” incorrectly. More than likely they are recommending that you file Single or Head of Household in order to qualify for some of the low-income credits, mainly the Earned Income Tax Credit (Filing as Married Filing Separately immediately removes the Earned Income Credit). This is, of course, ILLEGAL. Those are not legal options if you are married. So be careful who you get your tax advice from!

There are many rules regarding what qualifies a person as your dependent. So the answer can be complicated. One of the more important rules regarding dependents is the relationship test. We often hear “they are basically my kids” or “they are my step-kids”. The IRS rules are very clear on this. So in most of these scenarios that we see, we have to explain that the dependent you are trying to claim does not pass the relationship test.

The IRS has an online tool that only takes a few minutes and can precisely answer the question “Whom May I Claim as a Dependent”? Here is that link:

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

The most important document that you need to provide is called a 1098-T form. Most schools do not mail this out anymore. Most of the time is it found in the student’s online portal or emailed to the student. Have the student find this form before coming into your appointment. In addition to the 1098-T, the other expenses that can possibly help are: books, supplies, and equipment necessary and required for the classes. These need to be paid for out-of-pocket in order to qualify.

It is important to note that living (rent, food, etc.) and transportation-related costs are not allowed when calculating these credits.

Once your return has been accepted by the IRS and/or the state, it is not possible to update your bank account. What will happen is that they will send the funds to the account shown on your return. If the account is closed, the bank will reject the funds. Once the funds bounce back, the IRS and/or the state will mail a paper check to the address shown on the return. This normally delays the refund by a few weeks.

This is normal if you chose to pay our fees via your refund. When you choose this option, the process is a little different than if you had paid us out of pocket. Our partner bank creates a temporary account in your name (you’ll notice your SSN is part of the account number). This temporary account number is what you are seeing on your return paperwork. Once the IRS/State releases the funds it will first go to this temporary account, then immediately flow into your actual personal account, minus our fees. So there is no need to worry, it’s completely normal when the fee is paid out of your refund.

It is important to understand how taxes work. You have the actual taxes you owe when you do your tax return. Then you have your withholding that pays some or all of those taxes. In other words, your tax withholding (the taxes that get withheld from your paychecks) is like a savings account to pay your IRS tax bill. If you had more than enough saved, then you get a refund. If you didn’t have enough saved, then you will owe the difference (plus possibly penalties and interest). So when you go EXEMPT you are telling your employer to not put any of your money into that savings account. Not only that, you are doing it on a paycheck where you are making more money than usual. So it’s even more important to make sure you are having enough withheld. Even though it may seem that you lost a huge portion to taxes. You’ll get any extra back in the form of a refund (or reduce what you would have owed). To put it simply, you’ll benefit later versus now.

If you had enough paid in withholding during the rest of the year, then you might be OK going exempt on one check. Even then, we do NOT recommend it. Most people don’t know what “enough” is, so going exempt is taking a risk. On top of that we hear it time and time again “oh yeah, I went exempt and forgot to change it back”. In many of those cases, clients end up owing thousands of dollars. So in the end, if you go exempt, you are not magically going to walk away with more money. You will simply pay for it later when you do your taxes. Bottom line, keep your withholding set correctly ALL YEAR and you’ll have a much better outcome once you do your taxes.

Stop listening to tax advice from co-workers!

The simple answer is no (with one exception). Reinvesting the proceeds will not help you avoid paying taxes on the sale. Here are the most common scenarios:

• Selling your primary residence. If the home you are selling has been your primary residence for two of the last five years, you do not have to pay taxes on the first $250,000 ($500,000 if married) of the gain (aka profit) from the sale. Regardless of what you use the proceeds for. If you sold your primary residence before the two-year mark, you will need to pay taxes on the entire gain (there are some exceptions). For more info research “sale of primary residence exclusion” to learn more about the rules regarding this exclusion.
• Selling a rental or investment property. This is treated completely different than the sale of your primary residence. The only way to avoid, or defer, paying taxes on the gain is by doing what is called a 1031 exchange. You can defer paying capital gains by reinvesting the proceeds into a like-kind property within a certain amount of time. This is a fairly complicated process and it needs to be initiated BEFORE you sell your property. You should consult a real estate company that specializes in 1031 exchanges if this is something you are considering.

You will not be able to avoid paying taxes by using the proceeds from your rental property sale and using them towards either your existing primary residence or the purchase of a new primary residence.

Yes. If you do not have all of your information (or are just not sure if you have it all) the process is pretty simple. The first step is to request wage/income transcripts from the IRS. Here is a link to the IRS website where you can submit this request:

https://www.irs.gov/individuals/get-transcript

The quickest way is to request them online, if that does not work for you call the number listed on the page or follow the link to request them by mail. You’ll want to request the wage transcripts for all of the years you need to file.

Once you have those transcripts, you have one more step. Since these transcripts only show federal info, you’ll need to call the state and ask them to provide you with the state withholding information. You should be able to read the employer name and wage amounts shown on the federal transcripts to the state over the phone and they will give you the corresponding state withholding information for each w2 and/or 1099.

The phone number to the California FTB is 800-852-5711

Once you have the federal transcripts and the state withholding information, we can take care of the rest. Give us a call or send us a text to schedule your appointment.

No. We only have access to your tax return that we prepared in our office. A transcript is something different. It can only be provided by the IRS. It’s the IRS’ version of your tax return. Here is a link to request transcripts.

https://www.irs.gov/individuals/get-transcript

The quickest way is to request them online, if that does not work for you, call the number listed on the page or follow the link to request them by mail.

If you need a transcript for FAFSA reasons, we highly recommend using the IRS Data Retrieval Tool while completing your FAFSA. This will normally eliminate the need to provide a transcript.

Sometimes referred to informally as “comfort letters,” a typical verification request relates to a client’s pending loan or refinance. In most cases, we are asked to provide written confirmation containing language specified by the requester. Please understand that it is the responsibility of the lender to verify and complete their own due diligence rather than rely on verification from our firm. We prepare tax returns therefore our scope is very limited when remarking on a client’s credit worthiness or day to day financial status. This includes any information on business ownership, as well as past or current status and finances. For this reason we can only verify that we have filed your tax returns, nothing else. If your lender tells you that a letter, with their specific wording, is needed to approve your financing, that does not change what we can provide to you. You may need to look into hiring a firm that specializes in these letters. They will more than likely need to review your tax returns, business formation documents, and most importantly your past and current financial statements. Not only will they need to see these documents, you may have to provide detailed information so that they can verify the information on these statements. Having to go this route would be unfortunate but it is becoming more common in a world where everyone wants to shift responsibility to another party.

Our liability insurer has provided us with a template of the letter that we can provide. We recommend reviewing this letter and confirming this will satisfy the lender’s requirements. Please do this by either downloading or printing off the form and submitting it for review by the underwriter. There have been many instances where the client tells us that this letter will work (as told by the loan officer) only to follow up a few days later saying that the underwriter is requiring additional language. Once again, the template that you see here, is the only letter that our firm can provide. If this does not cover their requirements, you may need to seek out a firm that specializes in providing these comfort letters.

CLICK HERE FOR A PDF SAMPLE OF THE LETTER WE CAN PROVIDE

It is rare but does happen now and then. Your return is stuck in some weird limbo where you have not received anything and can’t seem to get any answers on why. Or you were asked to send supporting documentation but it was denied or you have not heard back. Since we do not have access to your IRS account and the status, we recommend contacting the IRS Advocates Office. This is the last resort when we’ve done everything we can with still no progress. They are a branch of the IRS dedicated to helping taxpayers that have not been able to resolve their issues through the normal channels. Here is a list of offices in California:

https://www.irs.gov/advocate/local-taxpayer-advocate#California

Contact them and let them know your situation. Make sure to have detailed notes on what has happened up to that point. If the delays are causing your financial hardship, make sure to bring that up as well.