Diversity Income Tax Service

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12/31/2025

When a taxpayer have one W-2 with both federal and state wages/withholdings and another with only state information and no federal.

Tax preparers can only file a single federal tax return reporting all customer income from all W-2s, and separate state returns as required.

If the forms are from the same employer and the federal information in boxes 1-14 is the same, some software will allow tax preparers to combine the state details on a single entry by adding an extra state line in boxes 15-17.

12/18/2025

Due Diligence Questions

By law, a tax preparer must keep contemporaneous records of their interaction with the taxpayer, asking the taxpayer questions and documenting their answers.

Here are some different kinds of questions taxpre may want to ask.

If the taxpayer has income, does the income reported seem sufficient to support the taxpayer and the qualifying children being claimed? If not, you should ask additional questions pertaining to both the income and the children.

If the taxpayer has self-employment income, ask your client: How long have you owned your business? Do you have documentation to substantiate your business? Who maintains the business records? Do you have separate banking accounts for personal and business transactions? If not, how do you differentiate between the two? Have you received a 1099-NEC or 1099-MISC to support the income?

Ask yourself: Did the client provide satisfactory records of all income and expenses? Are the expenses reported consistent with this type of business? Is the amount of expenses reported reasonable? Are there expenses missing that are typical for this kind of business?

If the taxpayer is claiming Head of Household status, ask your client: Have you ever been married? Is your spouse deceased? If divorced, can you provide a copy of your divorce decree if requested by the IRS?

If separated, can you provide a copy of a separate maintenance agreement if requested by the IRS?

If married, did you live apart from your spouse for the last 6 months of the year and can document that if requested by the IRS? Did you maintain more than half of the cost of the home and can you document that if requested by the IRS?

By asking detailed questions and clarifying unclear information, as a tax preparer not only comply with IRS regulations but also to ensure the accuracy of tax returns especially those claiming specific credits or filing statuses, protect both tax preparer and the clients from potential audits, disallowances, penalties, and interest.

Is It Time To Stop Tossing Your Paystubs? Time To Take a Closer LookThe abbreviation "EMB" on a check stub most likely s...
12/08/2025

Is It Time To Stop Tossing Your Paystubs? Time To Take a Closer Look

The abbreviation "EMB" on a check stub most likely stands for Employer-Paid Benefits or Employee-Paid Benefits.

This indicates contributions made toward benefit plans such as health insurance or retirement savings.

The specific meaning can vary by employer, as companies often use customized codes for items on a pay stub. To be certain, you should check with your employer's human resources or payroll department.

It's advised to read your paycheck to ensure you are being compensated correctly, catch errors in pay, hours, deductions, correct tax withholdings, your name, Social Security Number, and other details are accurate to prevent tax filing errors.

A common, unfortunate discovery made at tax time is when employees realize their tax withholdings were insufficient, leading to a substantial balance due." As a taxpayer, you are responsible to pay the taxes owed regardless of errors made by third parties, such as your employer employer's error. You can inform your employer of their error and ensure they fix their withholding for future pay periods by submitting a new Form W-4.

Regularly checking your pay stub is a fundamental financial habit for financial control and accuracy, errors happen more often than you think.

12/04/2025

Test ODC for a Qualifying Relative

This is the biggest tax mistakes people make when claiming tax credits. To avoid common tax mistakes, taxpayers should familiarize themselves with the specific IRS rules for claiming a qualifying relative as a dependent.

What is ODC?

An Other Dependent Credit (ODC) qualifying relative is a dependent, who is not your qualifying child, for whom you provide more than half of their support. The ODC is a nonrefundable tax credit of up to $500 per qualifying person.

The relationship can be a wide range of blood or legal relations, including: parents, siblings, half-siblings, grandparents, stepparents, foster children, nieces, nephews, aunts, uncles, and certain in-laws. Unrelated individuals who lived with you for the entire year as a member of your household (cousins only qualify if they live with you all year).

To claim someone as a qualifying relative for tax purposes, you must meet the following tests:

Not a qualifying child: The person cannot be your qualifying child or the qualifying child of any other taxpayer.

Member of household or relationship: The person must either live with you all year as a member of your household or be related to you in a specific way.

Gross income: The person must have a gross income below a specific threshold (e.g., less than $5,200 for tax year 2025).

Support: You must provide more than half of the person's total financial support for the year.

Joint return: The person must not file a joint tax return for the year, unless it is filed only to claim a refund of withheld income tax or estimated tax paid.

Here is a sample question that tests the rules for a qualifying relative:

Question: Your half-sibling, who is 28 years old and not a student, lived with you for the entire tax year. He earned $6,000 from a part-time job during the year, and you provided more than half of his financial support. He did not file a joint return. Can you claim him as a qualifying relative?

Answer: No. While he meets the relationship, residency, and support tests, his gross income of $6,000 is over the $5,200 threshold for tax year 2025.

It is essential for all taxpayers to carefully review their tax returns before filing to ensure accuracy and avoid common mistakes.
Verify that you qualify for all claimed credits and deductions. Double-checking your return helps ensure you receive the correct refund amount and avoids future issues with tax authorities.

Hope this information is helpful! If you have any further questions, please don't hesitate to reach out.

D.I.T Solutions

11/12/2025

Attention Tax Preparers

For the 2025 tax year (returns filed in 2026), tax preparers need to know about key changes from the One, Big, Beautiful Bill (OBBB) Act, including increased standard deductions, SALT deduction (the new SALT deduction limit is temporary (effective for tax years 2025-2029) and subject to phase-out limitations based on Modified Adjusted Gross Income (MAGI), new temporary deductions for tips and overtime, adjustments to the Child Tax Credit, and the permanent extension of the Tax Cuts and Jobs Act (TCJA) tax rates.

08/07/2025

Life changes require W-4 updates: It is essential to revisit and adjust your W-4 allowances following significant life events, including marriage, divorce, the birth or adoption of a child, a new job for you or your spouse, or substantial income changes.

Are You Prepared?It's never too early to start preparing for next year's tax season, ideally you should be thinking abou...
08/04/2025

Are You Prepared?

It's never too early to start preparing for next year's tax season, ideally you should be thinking about it throughout the year. Review your pay stubs to ensure taxes are being paid correctly. Regularly reviewing your pay stub helps you spot and rectify any inaccuracies in payment, tax withholdings, or other deductions. Checking your pay stub ensures you are withholding the right amount from your salary, so you don't owe the IRS a hefty sum and potentially face penalties at the end of the year.

Don't let tax season sneak up on you again. Plan ahead and save yourself from last-minute rush. Tax planning is the process of examining your current financial situation and creating a strategy to minimize the amount you will pay in taxes at the end of the year. A tax planning strategy is beneficial to everyone regardless of their tax bracket.

To be effective at tax planning you have to determine your tax bracket. The parameters of each tax bracket change from year to year. The next step is to know the difference between tax credits and tax deductions. Both are able to reduce what you owe on your taxes at the end of the year. Consider your filing status, your filing status can significantly impact your tax liability. Tax credits and deductions are a valuable source of tax saving money.
Proper tax planning strategies make it easier on yourself come next year’s tax season,
and you may save yourself money as well. By taking these steps now and maintaining good financial record-keeping habits and checking your pay stubs throughout the year, you can be well-prepared for a smoother tax season, a hefty refund or your tax liability is "washed" meaning accurately matched your final tax liability, you're paid the exact amount you owe, no more, no less.

If you have any questions feel free and contact us. We’re always happy to answer any questions.

Attention Business Owners!!!BOI (Beneficial Ownership Information) reporting rules under the Corporate Transparency Act ...
01/05/2025

Attention Business Owners!!!

BOI (Beneficial Ownership Information) reporting rules under the Corporate Transparency Act (CTA) for enhanced national security and anti-money laundering efforts.

FinCEN defines a beneficial owner as, any individual who, directly or indirectly, either (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25 percent of the ownership interests of a reporting company

After the initial report has been filed, there is no annual reporting requirement.

The deadline approaching for reporting Beneficial Ownership Information. Don’t wait! Begin BOI filing today to meet the deadline. Call us if you have any question about this information.

Understand Your Tax BracketWhat does your tax bracket mean?A tax bracket is the range of incomes taxed at given rates, w...
10/24/2024

Understand Your Tax Bracket

What does your tax bracket mean?
A tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status.
The amount of income tax you pay is determined by how much you earn, and this is broken down into different tax brackets. Understanding your tax bracket is the cornerstone of any good tax planning strategy. Because knowing where you stand can help you make informed decisions about deductions, allowances, and even how to time your income. When your income goes up or down, your tax bracket may change accordingly.

The 2024 tax brackets apply to income earned this year, which is reported on tax returns filed in 2025.
Tax rate 10%, 12%, 22%, 24%, 32%, 35% and 37%.

Your tax bracket may change for a variety of reasons. These include:

Getting a raise
Changing jobs
Losing your job
Getting married
Having a kid

A change in tax bracket could mean you need to change how you approach filing taxes, and doing this the correct way could save you hundreds or even thousands of dollars.

If you've been neglecting to look up your tax bracket, consider this is your wake-up call.

We are here to serve and guide you through your financial journey.

How do you get ready for tax season?Every tax year brings about changes to the hows and whys of tax-filing. To prepare f...
09/12/2024

How do you get ready for tax season?

Every tax year brings about changes to the hows and whys of tax-filing.

To prepare for tax season, understand your filing status, determine your ax bracket, make sure your name & address are updated gather all tax documents, decide whether to file yourself or use a tax preparer, look at credits and deductions, max out your IRA contributions and adjust your tax withholding to ensure you pay the proper amount throughout the year. If you have requested a PIN and you're unable to retrieve your IP PIN online, call 800-908-4490 for specialized assistance. If you file your return without your IRS-assigned IP PIN: They’ll reject your electronic return. You must have the PIN to file your tax returns.

By the time you file your taxes, it is too late to change your adjusted gross income. At this point, the tax year is already passed; a more suitable way to help ensure you maximize income after tax is to be proactive with your planning.

Planning ahead can help you file an accurate return and avoid delays that can slow your tax refund.

If you have any questions. I am here to provide the guidance and support you need every step of the way. Please don’t leave personal information on this page.

Thank you for entrusting us with your financial affairs and allowing us to be a part of your journey. I am honored to be your financial advisor.

09/11/2024

Please note, IRS only begins accepting PTIN renewals for the 2025 tax season on or after October 15, 2024.

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