Timalyn Bowens, EA, Author at Think Outside the Tax Box

AUTHOR SPOTLIGHT

Timalyn Bowens, EA

Timalyn Bowens is the owner and lead accountant for Bowens Tax Solutions. She is also affectionately known as “America’s favorite enrolled agent” by clients and colleagues across the U.S.

As an enrolled agent, Timalyn is licensed by the Internal Revenue Service as a tax expert and given clearance to officially represent your case to them.

At Bowens Tax Solutions, she spearheads a team of industry specialists with 24+ years of collective experience serving clients and getting results.

Timalyn began her career in 2011 at a distinguished global accounting firm, where she fell in love with taxes and tax law.

“You don’t deserve to be paralyzed by tax debt. That’s why I’m on a mission to fill the tax literacy gap one taxpayer at a time. Navigating the IRS alone can be nerve-wracking. Let us help make it a pain-free process.”

Timalyn has been praised for her ability to teach as she works by her clients and for being knowledgeable, patient, and reliable by her peers and mentees.

When she isn’t fighting tax debt, you can find her outside with her husband and daughter enjoying everything that nature has to offer.

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The Tax Professional Self-Care 10 Commandments

Every Spring there is some point in the tax season that I have to remind myself why I chose to become a tax professional. I am often comforted to find out that I am not the only person questioning my career decision. Tax pros nationwide share on social media that they are thinking the same thing. So let me ask you.

Why did you choose to do this to yourself again?

You promised yourself to fire problem clients and improve systems. Yet we’re here in March, how did you do with keeping your promise to yourself?

My first busy season Thomas Reuters released a video that I found funny, at one of their tax conferences. There are children that talk about why they want to be a tax accountant. A few reasons they give are:
• To work 22-hour days;
• To work with numbers that are changing all the time;
• Having lots of turnover with burned out employees.

My personal favorite is to have 3 people do the work of 8.

In hindsight it almost sounds like they were describing the tax industry during 2020 and 2021. When I first watched the video, it was hilarious. But 12 years later I still smirk, but for different reasons. I can totally relate to the sarcasm. Nobody goes into this industry for those reasons yet here we are each Spring on the verge of burnout.

Did you think of your why? I want you to write it really big and post it somewhere that you will see it every day when you are working at your desk.

I want to share with you 10 things that you can implement to protect you and your why. I like to call them the Tax Professional Self-care 10 Commandments.

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The Family Business and Taxes Part Two

“I have a way you can avoid paying taxes on part of your household income and get more work done in your business. Are you interested in hearing about it?”

Those are two sentences most of our business clients would love to hear. You may be able to e-mail those two sentences to your client after reading this article. Who wouldn’t want a way to be more efficient and reduce their tax liability?
Have you had clients calling you to ask if they can save $12,000 by hiring their child? My favorite is, “I heard I can pay my child tax-free. Is that true?” I have received the call and e-mail quite a few times. There has been an uptick since 2018. The misinformation makes me cringe, but the strategy makes me smile.

So today we are going to look at the strategy and answer these questions:

● How much can a taxpayer pay their child and neither one pays Federal income tax?
● Which business entities does this strategy work with?
● How can a business avoid paying payroll taxes when hiring their child?

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The Family Business and Taxes Part One

What is one thing that most business owners have in common? Why did you start your business? Many business owners I have talked to over the past decade started their entrepreneurship journey for similar reasons. Think about your clients and what reasons they have given you and see if these ring true.

“I want to be in control of my time.”
“I need to spend more time with my family.”
“I don’t want a cap on my earning potential.”

I find those to be pretty noble reasons. I haven’t come across a business owner yet that says, “I want to pay more taxes for fun.”. So as an advisor how can we help our clients have freedom, time with family, and save on taxes? One strategy is to hire family members. It can’t be any family member though, remember there is a strategy to this.

I know some of you are thinking, “that sounds great!”. Then others of you are thinking, “who wants to work with their family?”. Well trust me, when saving money is the topic of discussion more people tend to listen. The least you can do is present your clients with the facts, and here they are:

• The taxpayer can avoid paying certain payroll taxes by hiring a family member.
• You can help them potentially drop a tax bracket while keeping the spending power in the family.
• Protecting a spouse from tax debt.
• Lower Federal student loan payments.

To do this we have to make sure the client hires their family as employees. This whole strategy goes down the drain if the family member is a contractor that receives a 1099. Today we will focus on how to properly implement the game plan when hiring a parent or spouse.

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Payroll Taxes — The Nail in the Small Business Coffin

“Two men showed up saying they were from the IRS because I hadn’t paid my taxes. It scared me to death. Am I going to jail? Can they do that? I’m scared.”

That is what the taxpayer blurted out as soon as I answered my business phone. Now before you say, “Timalyn, no way!” Yes, way! This was February 2020 when the world was still open, and the IRS was wide awake. Revenue officers were still on the phone making calls and showing up to businesses.

Since the pandemic, many taxpayers, business owners included, have become lax in taking care of their tax obligations. This is due not only to many small and micro businesses still struggling financially, but also because the IRS has not been as aggressive the past few years. Business owners with employees are in a far more dangerous position if they have not kept up with their taxes.

That’s why we’re going to look at one of the worst types of taxes to get behind on, payroll taxes. One of my mentors even refers to them as the “kiss of death” to business owners. The penalties for not paying payroll taxes can bury and put the nail in the coffin of most small businesses.

Let me show you how these taxes can be the grim reaper. Let’s start from the top with what payroll taxes are and how the payroll tax penalties work.

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IRS Installment Agreements: A Potential Cure for Forosophobia

Taxpayers who seek tax planning strategies fall into two categories. We have taxpayers who plan well and want to keep their tax liability manageable and low as possible. Then, we have the taxpayers the IRS hits with a tax bill bigger than they were expecting. Both taxpayers are dealing with a case of forosophobia.

When the latter happens the taxpayer often goes into a panic or at least a small sweat. Whether they have the money sitting in a bank account or not, they weren’t intending to spend it on taxes. So, it changes their financial planning. This is when the forosophobia really starts to set in.

Forosophobia is the fear of the IRS and taxes. Have you experienced this with your clients? When tax season rolls around, they are anxious to see whether they owe taxes or not. Clients who haven’t made their estimated tax payments and don’t have anything to show for their income hold their breath. They wonder things such as:

What happens if I can’t pay?

Will I go to jail?

The IRS is going to empty out my bank account.

Once a taxpayer’s mind starts on this emotional rollercoaster it can be difficult to get them off. But as their trusted tax advisor you are in a very powerful position. Not only can you help them calm down and breathe again, but you can also get their lives back from this fear. As a licensed professional you can step in their shoes and handle their IRS problems for them.

If you aren’t familiar with this process, don’t worry, I’ll give you a breakdown of a potential cure for their forosophobia. Let’s look at who can help the taxpayer and how.

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Innocent Spouse Relief

“I knew he was a crook when I married him.”

Come again? And you still married him? That’s what I said in my head as it took every muscle in my face to keep my forehead from scowling. But instead, I said, “What do you mean?”

“We always had good money and nice things, but we never paid taxes. I always owed when I was single. But when we got married, I stopped working and we never owed.”

Let me take a moment to rewind and get you up to speed. This taxpayer, let’s call her Mrs. Bonnie for the purposes of this story, reached out because she needed to file last year’s tax return. She was recently widowed, and her husband typically handled the tax filing. So, she was already feeling overwhelmed and lost when it happened.

She went to the mailbox and pulled out mail from the IRS. It was a CP3219A , notifying her that credits claimed on a previous tax return were being disallowed by the IRS. Not only did she owe taxes, but she also owed accuracy related penalties. She only had 90 days to respond if she disagreed and didn’t know what to do.

When she reached out to me, she inquired about whether I could review previous year returns. Mrs. Bonnie wanted to make sure that they were “done right”. This isn’t a strange request. I told her that I would review the prior year to have a baseline and if I saw anything fishy, I’d bring it to her attention and perhaps look at another year.

I didn’t even make it to the signatures before the fishiness leaped off the page. I set up a meeting with her via Zoom to review my findings. As I begin to ask about some of the credits claimed and her husband’s business her answers did not match what was on the return. That’s when she let me know that she knew her husband, Mr. Clyde, was a crook when she married him.

Mrs. Bonnie didn’t know much about taxes, but she did a bit of research. She read about something called Innocent Spouse Relief and thought she may be eligible. Let’s look at what Innocent Spouse Relief is and why Mrs. Bonnie was not eligible, but your client may be.

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Injured Spouse Relief

“It feels like a sucker punch to the gut.”

I was on the phone with a client who was a newlywed and filing with their new spouse for the first time. They kept their paycheck withholding as single. So, they were anticipating a larger than usual tax refund.

Like a lot of taxpayers, they spent their refund before they even received it. Each day, they were checking “Where is My Refund ?” and even their IRS account. Then, it happened.

Code 898: Refund applied to non-IRS debt .

It looked as if they wouldn’t receive that refund they already spent. Now, my client did not know what to do. Before getting married, my client’s spouse told them, “I never get a tax refund.”

But they failed to mention why they never got a refund. Honestly, they did not know what their refund was paying for. We later found out that each year the Treasury Department garnished the refund for back child support. My client knew their spouse had child support but did not know they were behind on it.

If you have a client in this situation, all hope is not gone. I could help my client find out what offset the tax refund. We could also get a portion of the refund back.

You can do the same thing for your client. That is assuming that one spouse is not liable for the debt that offset the tax refund. The IRS calls this injured spouse relief.

I’ll walk you through how you can help your client with their refund garnishment sucker punch. Yes, you can help them get their part of the refund back. Let’s start with what injured spouse relief is. Then we’ll look at who qualifies as an injured spouse and how to request injured spouse relief.

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Inflation Reduction Act Clean Vehicle Credit

Get $7,500 when you buy your Telsa with this new tax credit. President Biden signed the Inflation Reduction Act (IRA) on August 16th, 2022, and the misinformation started circulating almost immediately. I’ve seen it, you’ve seen it, and this means that our clients have seen it as well. It’s our job to help them navigate these new laws to help them maximize their tax savings.

Taxpayers have been able to save on their taxes by buying an electronic vehicle (EV) since 2008 . So, the tax savings are nothing new.

How the tax savings work has been completely revised under the IRA. That’s where you come in as an expert advisor. The maximum credit for all clean vehicles is now $7,500. A new credit was even added under the IRA to make used EVs eligible for a tax credit.

But here is the thing, battery size no longer matters. The assembly, production, and taxpayer income does matter. Not understanding the changes made to Section 30D can cost you and your client. Your client can pay an unexpected additional $7,500 at tax time and you lose a client. Or you can stay the hero, saving them $7,500.

I want you to stay the hero so let’s look at the qualifications for the $7,500 under the Inflation Reduction Act.

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Inflation Reduction Act — Up to $40,000 in Tax Credits with Clean Commercial Vehicle Credit

First, you need to get an EIN, then get an LLC, establish business credit, and then you can buy a car in your business name. That process may get you a new car but that does not make it a business expense or eligible for a credit. Friends, that is not how this works; that is not how any of this works.

I’ve noticed a recent obsession in the online business world with writing off car expenses. Especially clean vehicles since President Biden signed the Inflation Reduction Act in August.

There is a correct way to do so, and then, there are a variety of ways to do it incorrectly. If you don’t believe me, just scroll through TikTok and Instagram, it will make your head hurt.

Misinterpretations of Section 179 have set the internet ablaze. That is why I want to make sure we set the record straight on how the clean vehicle credit can benefit businesses. That is if your client follows the guidelines set by the IRS. *Hint, hint: It requires more than buying the car in your business name using your business credit.

Let’s look at the amendments and additions to the IRC that make this credit valuable to business owners too. You have an opportunity to help your clients save $7,500 to $40,000 when they buy a qualifying clean commercial vehicle from now until December 31, 2032.

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Inflation Reduction Act — The Residential Clean Energy Credit

Your clients may think that business owners get all the tax breaks and incentives. But that’s not quite true. We see that with the expansion of clean energy tax credits in the Inflation Reduction Act. One of the goals of the Inflation Reduction Act is to address climate change. The bill does this by helping taxpayers save green for using green energy.

Taxpayers can not only enjoy tax benefits from riding clean the next 10 years. Your environmentally conscious clients can also reduce their tax bill as they make clean energy changes to their home. What client do you have right now that would enjoy claiming 30% of the costs of their home improvements for a tax credit? Not sure? Well get your pen and paper to make a list while we go over how this new credit can save them this tax year until 2034.

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Inflation Reduction Act – Energy Credits for Your Home

The Inflation Reduction Act has brought back and revised credits we have seen before. One of these credits had a $500 lifetime value but now can be $1,200 for each eligible tax year. That is a potential $11,500 increase in savings for your clients. They do not have to build a new house to take advantage of these savings. Taxpayers can receive this credit for improvements made to their home.

The tax savings do not stop there. If your client buys an electric vehicle, they are going to need somewhere to charge it, right? Well, the Inflation Reduction Act has considered that, too. Homeowners can save an extra $1,000 on their taxes by installing the charging equipment at home. Let’s explore how you can help your non-business clients capitalize on these types of tax savings on these improved energy credits. We will look at both credits now.

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Fully Funding Your HSA

It’s 4th quarter, soon taxpayers will be reaching out to their trusted advisors. They will want to see what they can do last minute to save on taxes. There isn’t much you can do at the end of the year. Still, these taxpayers will reach out expecting you to wave a magic wand and save them a few thousand dollars.

Well, this year you may be able to do just that. Even if they have already maxed out their retirement accounts. Taxpayers are not restricted from using this strategy by income or self-employment. Are you ready to add this triple tax advantaged savings tool to your bag of resources?

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Divorce and Taxes

“Timalyn, Alyssa and I filed for divorce, and we will finalize everything before Thanksgiving. Does this change things for our taxes?”

“No! Can we wait until January 1?” were my initial thoughts. But then I realized that if this news blindsided me, the seemingly happy couple was probably also scrambling for answers. They were looking to me to be calm during an upcoming storm.

To give you some context, I had helped this family lower their back taxes by $16,000 and get a payment plan that worked well with their cash flow. Then, by implementing a few strategies they had just saved an extra $20,000 on their last tax return. We were planning on saving them even more money in upcoming years.

Then, that is when it happened. Divorce.

I never saw this happening, so I never prepared for it. But if it happened to me, it will happen to you. Clients divorce.

Some of the things we are going over today may seem obvious to you. But remember what is obvious to us as tax experts is not obvious to our clients, especially if they are going through a life-changing event such as divorce.

Here are four things you need to inform your client about when it comes to their divorce and taxes…

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CURRENT EDITION

Beyond The Returns – Live Webinar Series Event!

Tax season is always demanding. But what comes after? As a dedicated tax professional, it’s crucial to continually enhance your practice and adapt to an ever-changing landscape.

Introducing the Beyond the Returns Series – an in-depth suite of four live webinars designed to transform your firm’s future.

Key Highlights:
• Navigate the complexities of practice mechanics.
• Achieve a fulfilling balance between home and work.
• Dive deep into the imperatives of security and liability.
• Strategize your firm’s life cycle, from inception to retirement.

Led by industry veterans, Amber Gray-Fenner, EA, NTPI Fellow, USTCP and Matt Metras, EA, this series promises actionable insights to ensure you’re well-prepared for the 2024 filing season and the years to come.

Don’t miss out on this opportunity to redefine and rejuvenate your tax practice.

Building a Strong Personal Brand as an Accountant: Strategies for Success

What is a personal brand?

If you asked me that question in 2018, I would not know how to answer it.

As I embarked on my journey to entrepreneurship, I took on any accounting-related project that came my way. I had yet to learn about the meaning of a personal brand. Fast forward to 2020, I launched my CPA firm just before the COVID shutdown. While established CPA firms could sustain or pivot to new services, I still had to figure out how to get clients, build my online presence, and establish trust to create my brand.

I learned on my journey that in today’s competitive landscape, a personal brand has become more critical than ever. Professional success is directly related to one’s brand, especially in service-based industries such as accounting. Surveys show that more business owners and young entrepreneurs are looking for accountants they can rely on for not only their technical skills and qualifications but also for a personal connection. Therefore, creating a solid personal brand distinguishes accountants from the rest of the crowd, enhances their credibility, fosters loyalty, and opens doors for new opportunities.

I will share my experience, dive into the significance of a personal brand for accountants, and provide actionable strategies to help you build a solid personal brand that resonates with your target audience.

Salt Miner’s Run for the Roses Ends with a Big Tax Bill

Judge Mark Holmes of the United States Tax Court expressed admiration for the achievements of Joseph G. Bucci Sr. whose American Rock Salt provides the salt to keep many of the streets in the Northeast passable in the winter. You can learn a bit about that from an interview in New York by Adriane Quinlan . The positive remarks were no help in the ultimate result. Judge Holmes agreed with the IRS that Bucci’s three side hustles — a real estate enterprise, a farm, and some racing horses — were “Activities not engaged in for profit” making losses unallowable. The total tab including accuracy penalties for 2016 and 2017 was $711,980. Judge Holmes explained the result in a bench opinion, which is less formal than a memo decision. The trial began in Buffalo on June 14, 2023.

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    Short-term rentals like AirBnb are becoming increasingly popular with taxpayers who invest in real estate. For many taxpayers, the appeal of these properties is the flexibility and cash flow potential. However, there may be an overlooked third tax benefit. In many situations these short-term rentals may not qualify as a rental activity to the IRS, and that may offer a big tax break. While many rental activities generate losses, this can leave taxpayers facing the frustrations of not always getting to deduct those losses right away due to the passive activity limitations.

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    My client formed three limited liability companies (LLCs) to hold his rental properties. Without consulting me, he filed Form 8832, Entity Classification Election, to elect C corporation treatment, effective January 1, 2020, for these LLCs. I want the LLCs to be disregarded entities, which is the most tax-efficient structure for his situation. What is the best way to undo these elections?

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    Quick Guide to Claiming Work-From-Home COVID-19 Expenses to Reduce Your Tax Bill

    This information is particularly important if you are the owner/shareholder of your own corporation – C or S corp. You can set up payroll and designate tax-free reimbursements for you to be working at home – as well other tax-free money for you and for your employees. (We will discuss employees momentarily. Yes, it’s essential.) If being an employee is your main source of income – watch out! The short answer to employees claiming an office in home deduction this year is... There is no deduction!

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    Five Tax Reduction Strategies for the Casual Cryptocurrency Owner

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    My client plans to take about $15,000 in distributions in excess of his basis from his S corporation construction business. I know this generates tax for him. He’s in the 32 percent tax bracket and single. Does he also have to pay the 3.8 percent net investment income tax and the 0.9 percent additional Medicare tax on this amount? Is there a way for him to avoid taxes on this amount?

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