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FAQ

Frequently Ask Questions

In order to assist you, we have compiled some of the most frequently asked questions our professionals at Smart Services have received. If you have additional questions about taxes, or immigration, feel free to contact a Smart Services agent right away.

What documents do I need if I am unemployed?

If you received unemployment benefits from your state over the past year, you must claim that as income and, therefore, pay taxes on those benefits. The unemployment agency will provide you with a 1099-G form, which will have the amount of benefits you drew during the past year. The Internal Revenue Service (IRS) receives a copy as well and will tax you at the appropriate rate in your tax bracket. Not everyone owes. If you worked a portion of the past year, chances are you paid payroll taxes and could earn a refund if those deductions were overpaid.

What documents do I need if I am self-employed?

You will need to file a Schedule C using IRS Form 1040. Depending on your type of business and where you conduct business, there may be other forms you will need. You may also need to make quarterly estimated payments by filing Form 1040-ES, Estimated Tax for Individuals.

When is the deadline to file my taxes?

The standing deadline for personal taxes is April 15. However, sometimes that date falls on a weekend or after Emancipation Day (a holiday in DC) and pushes the deadline to as late as April 17.

Is there a penalty for filing my taxes after the deadline?

Yes, you can opt to pay your tax liability through an installment plan. In addition to paying taxes through an installment payment plan, there may be other options such as the Offer in Compromise (OIC). Under an OIC agreement, the IRS may agree to settle the taxpayer’s liability for less than the full amount of taxes owed. The IRS is not likely to approve an OIC if there’s evidence that the taxpayer could pay the full amount through an installment payment plan or another method. A taxpayer can request consideration for an OIC by filling out Form 656, Offer in Compromise, or Form 656L, Offer in Compromise (Doubt as to Liability), and mail the application package to the IRS.

Can I claim charitable donations without a receipt?

Yes, you can as long as you keep good records in case you are ever audited by the IRS. Be sure to record the name of the organization, the date of the donation, and the location, as well as a detailed description of the items you donated. Keep notes on the amount you claimed as a deduction and how you figured the fair market value on the items you donated. In the case of a monetary donation, as long as it’s less than $250, a canceled check or even a payroll deduction can suffice for proof of the donation.

Can I deduct expenses paid for repairing my home?

Usually, general home repairs cannot be deducted from your taxes. Home repairs are meant to keep your home in good condition, but do not increase the value of your home. However, if you live in a “federally declared disaster area” and your home is affected, then you can claim the cost to repair the damages. Or if you use part of your home as a principal place of business, some repairs can be deducted, but you must itemize your deductions on Schedule A.

How are my taxes impacted if I have filed bankruptcy?

Depending on which Chapter you filed for, taxes may not be exempt. With Chapter 7 bankruptcy, federal taxes are exempt from discharge. When filing Chapter 13 bankruptcy, it is very important to file and pay your taxes during the bankruptcy proceedings because the court can dismiss your claim if you fail to meet this requirement. Dismissing the claim leaves you responsible for all of your debts. For further tax information on bankruptcy, contact our tax professionals.

If I forgot to report a second source of income on my taxes, how can I report it now?

Since it is not a small change (missing form or math miscalculation), missed income probably requires that you file an amendment. You’ll need to file Form 1040X, Amended U.S. Individual Income Tax Return, on paper; no e-filing here. Additionally, if any changes you are making need forms or schedules attached, make sure you do so.
Don’t panic, you have three years since the date of filing or two years from paying (whichever is later) to correct the issue. But note, if your amended return claims more refund money, go ahead and cash your original refund check – no need to wait the average 12 weeks it takes to process your amended return. However, if your amended return shows you owe, you’ll want to lower fees and interest by paying those taxes as fast as you can.

I am a non-U.S. citizen and trading stocks through a U.S. internet broker. Do I have to pay taxes on the money I earn?

The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident alien. To be considered a non-resident alien, a person must meet several guidelines. First of all, the person cannot have had a green card at any time during the relevant tax reporting period, and cannot have resided in the U.S. for more than 183 days in the past three years, including the current reporting period.

 

However, non-U.S. citizens who hold green cards and have been in the U.S. for at least 31 days during the current year and more than 183 days in the past three years are classified as resident aliens for tax purposes and are subject to different guidelines than non-resident aliens.

 

If you fall under the non-resident alien category and the only business you have in the U.S. is in investments (stocks, mutual funds, commodities, etc.) within a U.S. dollar-denominated brokerage firm or other agent, you are subject to the following tax guidelines. In terms of capital gains, non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm. This does not mean, however, that you can trade tax free – you will likely need to pay capital gains tax in your country of origin. In terms of dividends, non-resident aliens face a dividend tax rate of 30% on dividends paid out by U.S. companies. However, they are excluded from this tax if the dividends are paid by foreign companies or are interest-related dividends or short-term capital gain dividends. This 30% rate can also be lower depending on the treaty between your home country and the U.S., so it is important that you contact your brokerage firm to verify the rate.

 

If you are a resident alien and hold a green card or satisfy the resident rules (183 days), you are subject to the same tax rules as any U.S. citizen.

Do I have to pay taxes on money that was gifted to me?

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Do I have to pay taxes on money that was gifted to me?

No. The federal tax laws do not consider gifted money to be earned income therefore it is not taxable to you. No state has a tax law on gifted money either.

Am I taxed on money that I inherit from a loved one?

Generally, property received as an inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, the income is taxable to you.

Do I need to report work-study income if I am a full-time student?

Yes, any money which you received as a result of work is taxable income and must be reported on your tax return. Attach your W-2 showing your earnings and your taxes withheld to your tax return.

Why is my refund less than I expected?

Many factors can contribute to why your refund is less than you expected. You have to consider the three elements that define a refund: your taxable income, the amount withheld from your paycheck for federal and state taxes, and your tax rate. If you aren’t getting as much money back try to look on the bright side – you didn’t give the IRS a zero-interest loan.

Who can I claim as a dependent?

The short answer is that you can claim a “qualifying child” or “qualifying relative” if they meet specific requirements related to residence, relationship to you, age, financial support provided and income. Even significant others or friends can qualify in some cases.

What is the earned income tax credit and how do I claim it?

This question is also a frequent question for hard times, but many low- and middle-income filers are not familiar with this credit. Some families believe they don’t make enough to file their taxes, but taxes must be filed to get this credit, which may help a family with three dependents receive a credit worth up to $5,891.

Can I deduct the cost of searching for a job? Are moving expenses for my new job tax-deductible?

Job search and moving expenses may be tax-deductible depending on distance and other factors.

What are the tax implications of withdrawing money early from a retirement account?

Withdrawing money early from a retirement account comes with a 10 percent tax penalty plus regular income tax on the amount withdrawn. Watch out if that additional retirement money bumps you into the next tax bracket, which could affect Social Security taxes and other considerations.

What is the eligibility for the child tax credit?

You can claim an additional $1,000 credit for each dependent child under the age of 17 if you meet income and support tests.

Why should I choose Smart Services to prepare my taxes?

Are you one of nearly half of all American taxpayers overpaying the IRS? Could you be repeating the same mistakes or overlooking deductions year after year? Smart Services’ tax professionals thoroughly examine each customer’s tax situation to get every deduction, credit, and tax advantage possible. We pledge quality tax preparation coupled with premier customer service. And we guarantee accuracy or your money back.

Does Smart Services offer e-file?

Yes, we do. Smart Services offers e-file and free direct deposit for refunds directly sent to the customer’s bank account.

What types of visas are available if I want to come to the U.S. for a visit or temporary stay?

If you wish to visit the United States temporarily or be granted entry for a very specific period of time, you will need a non-immigrant visa. Some of the most common types of non-immigrant visas are a student visa (should you be looking to further your education and skills), business investor visas (if you are planning on coming to the U.S. to invest in a business), or a travel visa (if you wish to do some traveling in the U.S.).

What type of visa should I get if I want to become a permanent U.S. resident?

Depending on your current immigration status or situation, there are a number of visas available to foreign nationals wishing to permanently immigrate to the United States. There is a fiancée visa (if you are a foreign national engaged to a U.S. citizen), family visas (if you have or are the relative of a U.S. citizen and wish to immigrate to the U.S.), a work visa (if you have unique skills or requirements which make you a hot commodity in a particular field or industry), and more.

How long will my green card remain valid?

Permanent residency, obtained through a green card, allows a foreign national to live in work in the United States on a potentially indefinite basis. When a green card is first issued it is often a temporary green card and is valid for two years. After the first two years, providing you have not been convicted of any criminal activity and have maintained your eligibility status, you can apply for a permanent residence visa which is valid for ten years.

Once I obtain a green card, what do I need in order to obtain citizenship through naturalization?

Once an individual has been granted a green card, and if they wish to obtain U.S. citizenship through the naturalization process, there are certain requirements which must be met. You must have been physical present in the U.S., as a green card holder, for at least 50% of the time. You must not be away from the U.S. for any more than one year, and ideally less than six months prior to your citizenship application. You must not have committed a serious crime of moral turpitude. You must be able to write and speak English and more. Consult with one of our professionals in order to get a complete list of the qualifications and requirements.

My visa has expired, what can I do?

If your visa has expired, the first thing you need to do is contact our immigration professionals. We will sit down with you, review your current status and situation, and then help you determine the best course of action to pursue. Time is of the essence when it comes to expired visas, so we advise you do no delay.

Are contributions to my 457(b) plan included in my AGI?

Contributions to your employer’s 457 plan are not included in your AGI, assuming that you are making traditional deferrals and NOT making Roth 457(b) contributions. Because these traditional contributions are pretax, your employer does not report the deferred amount as income. Instead, the deferred funds are listed under box 12 in your w-2.

You might also consider making contributions to health spending accounts such Flexible Spending  (FSAs) or Health Savings accounts (HSAs) if they are offered by your employer. These are tax deductible ways to pay for medical services. As a young person, it may be cost effective for you to opt for a high deductible major medical policy from your employer. You can then contribute more than $3000 tax deductible each year to an HSA to cover your medical expenses. Distributions from this account for qualified expenses are tax free.

I am in the United States on a temporary visit and wish to obtain a permanent visa, what can I do?

Changing immigration status while in the United States, can be difficult, and there is no guarantee it can be done. If it is possible, and what you will be required to do, vary from person to person. That is why this kind of question can only be answered after consulting with an experienced immigration professional. Here in Smart Services, we will take the time to review your status and case, analyze the situation at hand, and help you map out the course of action best geared to accomplish your immigration objectives.

I'm a permanent resident and would like to know if I can file a petition for my parents, do I have to wait until I become a US citizen before I can apply for them?

You must wait to become a citizen to sponsor a parent.

What is the five-year waiting rule for Roth IRAs?

There are two five-year waiting periods that apply to Roth IRAs. However, in both cases, the waiting period for a Roth IRA begins on the first day of the applicable calendar year. How this rule applies to you depends on the circumstances.

To clarify, let’s look at the rule in detail:

  1. For the five-year waiting period to determine whether a Roth IRA distribution is qualified (that is, tax and penalty free), the five-year period begins the first day of the first year for which any of your Roth IRAs were funded. For instance, if you converted your Traditional IRA to a Roth IRA in November 1998, your five-year period begins January 1, 1998. Or, if you made a regular contribution to your Roth IRA for 1998, which could occur any time between January 1, 1998, and April 15, 1999, your five-year period begins January 1, 1998. If you establish other Roth IRAs after that first Roth IRA, your five-year period for those new Roth IRAs still begins January 1, 1998, regardless of when those new Roth IRAs are established. A qualified distribution from your Roth IRA is tax and penalty free and there is only one five-year waiting period, which begins with your first Roth IRA. If your Roth IRA distribution is qualified, you need not be concerned with the other five-year period.
  2. The other five-year waiting period applies only if the distribution is non-qualified. For this purpose, there is a separate five-year period for each Roth IRA conversion, and each one begins the first day of the year in which the conversion was made. For instance, if you converted your Traditional IRA to a Roth IRA in 1998, the five-year period for those converted assets begins January 1, 1998. If you later convert other Traditional IRA assets to a Roth IRA in 2003, the five-year period for those assets begins January 1, 2003. To determine whether you are affected by this five-year rule, you need to consider whether the distribution being made from your Roth IRA includes Roth conversion assets and, if so, what year those conversions were made. For this purpose, the ordering rules must be used.
I have a 12 year old US Citizen child. Can he/she sponsor me for a green card?

No, your 12 year old child won’t be able to sponsor you. A child (or anyone) must be at least 21 years old to file a sponsor petition, with the only exception being that there is no minimum age to file a petition for a spouse.

What are the tax advantages of a stock without dividends?

Great question. The tax advantages of a stock without dividends are the controlled taxable events you can encounter. When a stock distributes, dividends you are taxed at are either qualified or ordinary dividend rates. The preferred rate is qualified dividends as it is subject to capital gains rates which could be tax-free (assuming your taxable income is in the 15% bracket or less) assuming you hold on to your investments for over a year.

Depending on your goal, you might want overall growth for your investment and not need the income. If that is the case, the benefit of investing in a stock with no dividends is the company retains the profits and reinvests in the company that allows for potential more growth. The tax benefits are the capital gain rates as I discussed earlier that you control when you sell the investment. You could simply cherry pick the tax years that are in a low bracket so you can sell your position and pay no taxes.

How long should I keep my tax records?

Keep your tax records for a minimum of 3 years. After that, it depends on your situation as to the length of time.  If you wrote off a bad debt, better keep them for 7 years. If you have a small business, 7 years may serve you best. Be sure to keep not only a copy of the return, but all the supporting documents.

If I have been the victim of a crime in the U.S., can I apply for a special visa?

A special visa called a U Visa may be granted to immigrants who have been the victim of certain crimes (including sexual assault and domestic violence), suffered injury because of the crime and then helped the police to resolve the crime.
If this sounds like your situation, then consult one of our immigration professionals to find out if you are eligible for a U visa.

What should I do if I am questioned or stopped by police or immigration or they come to my home?

If police or immigration officials come to your home or work, they must have a warrant to enter. (A warrant is a piece of paper signed by a judge giving permission to enter your home or workplace.) Ask the officials to slip the warrant underneath the door. If you open the door and allow them to come into your home or workplace, this may be considered giving them “consent” to enter. If they enter without a warrant, request their names and badge numbers and state that you did not “consent” to a search.
If police or immigration officials stop you on the street and do not have a warrant, they may not arrest you without evidence that you are a non-citizen. You do not have to consent to a search of yourself or your belongings. Do not lie about your citizenship status or provide fake documents. Do not carry with you any documents that are from your country of origin or are false.
You have the right to remain silent and to speak to a lawyer. Avoid questions about where you were born or how you got to this country, and don’t sign any documents before speaking with a lawyer, even if officials are pressuring you to do so.
If you are arrested by police, do not resist, even if you believe the arrest is unfair. Say that you wish to remain silent and ask for a lawyer immediately. If you can’t pay for a lawyer, you have the right to a free one. Don’t say anything, sign anything or make any decisions without a lawyer. You have the right to make a local phone call and to be assigned an interpreter if you need one. Police must release you after 48 hours (not counting weekends and holidays) if they don’t formally charge you with a crime in court. If you are accused of a crime, consult with an immigration attorney to make sure that the crime will not affect your immigration status.
If you are taken into immigration custody, you have the right to a lawyer, but the government does not have to provide one for you. Ask for a list of free or low-cost legal services. Avoid signing anything, such as a voluntary departure or stipulated removal, without talking to a lawyer. If you sign, you may be giving up your opportunity to try to stay in the U.S. You also have the right to have an officer contact your consulate.

What is the difference between an immigrant visa and a non-immigrant visa?

Immigrant visas are considered green cards – they are permanent and classify the holders as permanent residents of the designated country. Non-immigrant visas are temporary and are only useable for a predetermined amount of time.

What services and guarantees does Smart Services offer?

Sometimes the best things in life are free! Free tax or immigration advice may prove invaluable, and it’s available just by calling us or stopping by our office.

For more details and inquiry please don’t hesitate to contact us