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FAQ's
Prior to addressing some of your 'other' frequently asked questions, I want to take this time to address one that I hear over and over again:
Are the expenses we incur as mariner's deductible?
First and foremost I need to say that the IRS was put into position for the sole purpose of ensuring that we as taxpayers stay compliant. As your tax preparer, it is our responsibility to ensure that we keep you compliant. ALL of the deductions we take on behalf of our clients are spelled out in black and white in IRS Publication 529, IRS Publication 17, for incidental expenditures IRS Publication 1542, Revenue Procedure 2008-59, and the Tax Court Case - Johnson v. Comm., 115 T.C. 16 (2000)., which incidentally validated only the 'incidental' portion of the meals and incidental (M&IE) rate and clearly stated that mariners provided with meals were NOT allowed to take the full M&IE rate that some preparers continued to take.
We find in many instances by including your union dues, job search expenses, passport/TWIC fees, incidental expenses, required physicals, tools and supplies we are able to save our clients in excess of $1,000. These savings are magnified if you reside in a state that recognizes itemized deductions.
I will elaborate further on this after I address some of the other frequently asked questions, but feel free to look at the following links:
www.taxslayer.com
www.bankrate.com/business-expense-that-benefit-you.com
www.irs.gov/employee-expense-deduction.gov
FAQ's?
1. I received a letter from my state assessing interest and penalties on my tax return, I paid and remitted my return upon receipt from you, do I have to pay the interest and penalties?
Since your employer does not withhold state income taxes you are required to pay state estimates. Estimates are due on April 15th, July 15th, October 15th and January 15th. Recognize all state estimate tax payments paid during the filing year are tax deductible on your Schedule A itemized deductions. We provide you with estimated tax worksheets when we send back your completed return. If you are going to be remitting your returns to us late we will provide you 1st quarter estimates upon request.
We have form letters we will be happy to email you, however paying and remitting quarterly taxes are your responsibility and any additional correspondence required will need to be done by you.
Please note if we file an extension on your behalf:
An extension of time is granted only to file your Federal and State return. There is no extension of time to pay tax due if applicable. Penalties and interest are imposed whenever tax is paid after the original due date or quarterly estimates are not remitted.
2. For the past three tax years I have received surprise amendments, frivolous tax return notices, or letters stating that my return has been selected for audit, how do I know that if I switch to you I won't encounter the same?
Unfortunately I can not guarantee that you will not receive a frivolous tax return notice or an audit request, however I can tell you that none of the returns prepared by TWTS have been changed by the IRS!
In order to adequately answer your question I do need to give you some history. When the initial complaint against Martin Kapp was released in April 2006 I contacted the attorney who was handling the case for the DOJ. My reasoning for contacting the DOJ was to ensure and validate that the way we were preparing mariner tax returns was within IRS guidelines. I was told at that time that several of my returns had already been pulled for review and that THEY WERE WITHIN IRS GUIDELINES. I can assure you had I heard differently I would have ceased preparing mariner returns that very day! Unfortunately the complaint did not stop the defendant from preparing returns in the same fashion outlined within the very complaint. Returns continued to be processed invalidly until the judgment and permanent injunction was issued on August 20, 2007.
In addition to requiring Kapp to provide the IRS with names and social security numbers of all clients from 2000 forward, the judgment ordered Kapp to post a link of said order on his website for one year from August 20, 2007-August 20, 2008. Ironically the 500 frivolous tax notices were issued on August 20, 2008, the date the order expired! To date the only common thread of mariners that received frivolous notices or audit letters is that they were Kapp clients at one point from 2000-forward.
I need to add, in addition to auditors, revenue agents and IRS attorneys I have also been told by a DOJ Attorney that they wished there were more preparers like myself. Between that and the track record of having no changes to our audits or inquisitions, I feel it's fairly apparent that we prepare returns that are within IRS guidelines and will pass the compliancy test!
3. Why did you remove uniforms from your organizer?
This past year has been very enlightening to us. Per IRS Publication 529 'work clothes and uniforms are deductible if required and not suitable for everyday use'. An example used is a painter who may be required to wear a white cap, white shirt, white bib overalls, is not distinctive in character or in the nature of a uniform and therefore not deductible. You can still deduct the cost of protective clothing that is required such as safety shoes or boots, safety glasses, hard hats, and work gloves, so I removed the line item in it's entirety so that if a mariner called in regard to these expenses we could clarify to ensure that you stayed within IRS guidelines.
4. I have read on your website and have heard you say that the incidental portion of the M&IE rate is a valid deduction, however I recently went through an audit with a return prepared by someone else and my per diems were disallowed?
When going through an audit is it your burden and responsibility as the tax payer to substantiate your deductions. Recently we have heard that many mariners had their incidental deductions challenged, some for using Maldives ($19/day) instead of the valid Diego Garcia ($6/day) rate or Rome ($35/day) instead of La Spezia ($23/day) and unfortunately those mariners lost all of their per diem deductions for what if ultimately correctly calculated would have made a difference of less then $100! As a result they had a tax deficiency in excess of $700. Again, IRS Revenue Agents are solely ensuring that you are compliant, if you are going into an audit and see a land locked city being used as a port, contact us. We have an extensive data base and can correctly calculate your per diem so that you only loose what was initially overstated and not all of your LEGITIMATE deductions!
5. If we are in port and I go out to eat after eating galley food for the past 24 days straight, can't I deduct that?
If a meal is available to you on board the ship at no cost you can not deduct the expense you incurred. However, if the galley is closed for sanitation reasons or due to re-stocking issues you will be able to deduct 80% of incurred meal expenses since you are under DOT (Department of Transportation) hours of service limits.
6. I am required to sign in and out of my union hall before and after joining the ship, is this deductible?
Yes, your travel expenses for such fall under 'job search' expenses and should be included on that part of our organizer.
7. Do you e-file returns?
YES! This is new for the 2008 tax year. As I said earlier this year was very enlightening to us. It became apparent that all of the attachments we were submitting with your originally filed mariner returns were being discarded. We will provide you with back-up of all of your Schedule A line 21 deductions as well as keep a copy on file here, so should your return ever come into question we can substantiate all line item deductions.
The process to e-filing the returns is as follows: we will email you your return to review for any omissions or misstatements; upon an email approval to Colleen at twts@transport1040.com we will e-file on your behalf.
There is tremendous value to e-filing, it is fast and convenient, even your refund is expedited. It conforms with federal and state paperwork reduction acts, if a social security number is incorrect or has been taken on another return we are advised within 24 hours, allowing us to correct and resubmit, This will elevates the hassle for you of signing and mailing in the hard copies.
8. What if I have extensive stock trades tracked by gainskeeper or have other attachments that I would typically mail in with my return, can I still e-file?
We will remit Form 8453 along with any required substantiation on your behalf, again eliminating the hassle on your end and ensuring that your e-filed return is compliant with IRS guidelines.
9. Do I need to make copies of the paperwork I send to you?
No. Everything you mail to us will be returned to you. Should you want a copy of your original organizer just advise.
10. Can you explain this new anytime, anywhere organizer?
We will email you a link with a distinctive sign-in or you can sign-in directly at our website. After signing in you will assign your self a password and if you choose you can also change your sign-in ID. Once in you can populate our organizer, many mariners may find it easier to access through the year as expenses are incurred. Once complete and you have all year-end information you simply 'send' the organizer to us. The website is 128-bit encrypted so you do not need to be concerned about someone gaining access to your information.
After you send us your information you will be able to track the progress of your return, from sign-in, database computation, tax preparation, review, emailed for approval, e-file status, compiling process, to mail confirmation of hard copies to you. You can even confirm that an extension was filed on your behalf.
Your completed return will be available to you for to retrieve for four years on-line. Many clients have had to contact us for copies of their returns for retirement planning, mortgage process to financial planning; well now it will be as accessible as any website. A tremendous value to our clients who are half way around the world in April!
11. How do I get a copy of the Transport Workers Tax Service's calendar?
We will start mailing calendars out to the union halls in October, if you want one sent directly to your home or to the ship, please contact Claudia at claudia.botz@transport1040.com or Missy at missy.webb@transport1040.com.
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