Now that many of us have filed our individual income tax returns, you may be wondering when you can expect your refund.  IRS refunds for returns that were e-filed can generally be expected in 10-21 days.  However, sometimes this time frame can change as your return moves through processing.   You can check on the status of your refund by going to the IRS website at www.irs.gov and clicking on “Where’s My Refund?”  You should wait to check until 72 hours after a return has been e-filed, or 4 weeks after a paper return has been mailed.  In order to check the status of a refund you will need:

• Social Security Number
• Filing Status
• Exact Refund Amount

While your return is being processed IRS telephone assistance cannot provide additional information so you should not call the IRS toll-free number unless “Where’s My Refund?” specifically indicates that you should.  Want to check on a state refund also?  Many state websites also provide this option.  For Minnesota go to http://taxes.state.mn.us and then to “Check your refund status”.

You can usually find the website for other states’ tax administration assistance by typing the state’s two letter abbreviation and the words “taxation”, “revenue”,  or something similar into any internet search engine.  Once you’ve found the website, then do a search for “refund”.

Did you know your tax filing obligations may not necessarily end upon your death?  When you die, your “estate” becomes a separate taxpaying entity subject to income tax.  The person you’ve named in your will to handle your affairs (generally called your Personal Representative or Executor) is responsible for making sure that any required tax filings are prepared and filed, and any taxes due get paid.

Your final individual income tax return will include income through the date of your death.  Post-death income from assets for which you haven’t named a designated beneficiary must be reported on what’s called a “fiduciary” income tax return filed by your estate, until those assets get distributed to your heirs.  Post-death income on assets for which you have named a designated beneficiary gets reported on the tax return of the designated beneficiary.  For example, if you have a brokerage account and you’ve named your daughter as beneficiary of the account upon your death (by filing the proper designated beneficiary forms with the broker), your daughter becomes the owner of that brokerage account upon your death, and all post-death income gets reported on your daughter’s income tax return.  If you don’t have a designated beneficiary named on the account, the account becomes the property of your estate, and the income gets reported on the “fiduciary” income tax return filed for your estate until the assets in the account are distributed to your heirs.

Proper planning can minimize the tax filings required upon your death.  It is not uncommon to have several tax returns required after death including; the final individual income tax returns, federal and state “estate” tax returns, a gift tax return, fiduciary income tax returns for the estate, and fiduciary income tax returns for any trusts you may have created.

We highly recommend you make your accountant and attorney part of your team when it comes to your estate planning.  The estate tax law is continually changing and can have a significant impact on how your assets are taxed and distributed to your heirs upon your death.

In the context of business taxation, “Nexus“ is a term which describes a level of activity, connection, or “ties” to a state or locality, which would cause an entity to be subject to taxation by that state or locality.

One need only look at a current newspaper, magazine, or watch the evening news to realize the states are hurting for revenue. The recession and high unemployment of recent years has taken its toll on most state coffers and the states are looking for sources of revenue to refresh them. As a result, states are taking a hard look at business taxes.

Audits of businesses by state taxing agencies are up, and many states are hiring additional auditors and designing sophisticated computer programs to target specific potential non-compliance areas. If your business hasn’t been audited by a state agency recently for some type of business tax, it likely will be in the future.  We have seen a significant increase in sales, use, and income tax audits.

Generally if your business has a “physical presence” in a state, you will have established nexus and are likely subject to income tax in that state.  Physical presence can come from the obvious such as having employees, contractors, subcontractors, or sales personnel in a state or renting property.  However, physical presence can also come from the not-so-obvious such as warranty and repair services, or it can be attributed to your business from the activities of a related entity such as a parent company or holding company.

Due to changes in how businesses operate in what is now a global marketplace, many states are moving towards an “economic nexus” standard rather than the traditional “physical presence” standard.  This standard has been aimed at businesses that earn income in a state and enjoy benefits from doing business there such as income received from licensing a trademark, making loans, issuing credit cards, etc.  Some states are also moving away from a traditional state income tax and getting their state revenues by adopting a gross receipts tax or a net worth tax.

Why should you care? State and local tax laws are complex and continually evolving and because of the significant dollars involved, quite frequently state tax issues are resolved through the courts.  An audit can take months (and in some cases years) from the time you get the audit notice to when the audit is closed.  During the audit period you can expect to have your business records closely scrutinized by the auditor and you will likely need the services of a good CPA to get you through the process.  If you have your “ducks in a row” so to speak before you ever get an audit letter you can reduce the amount of penalties and interest assessed.  And remember, when a tax return was required, but never filed, the statute typically never starts running and therefore never closes.  This means you can be subject to audit for many past years.

What should you do? Talk to your tax adviser about your business activities and try to identify the states for which you have a filing requirement.  States frequently send out nexus questionnaires; if you receive one of these questionnaires, NEVER complete and return it without first discussing it with your tax adviser.  Many times states will send these out phishing for information about your business and one wrong answer can really get a state coming after you for taxes for which you may not even be liable for.  Be courteous and prompt with state auditors.  Having closed two state tax audits for clients this week, I can tell you a little courtesy can go a long way in building goodwill with an auditor.

The IRS recently announced that it currently has $153.3 million in undelivered refund checks.  Over 99,000 taxpayers didn’t get their refund checks delivered due to mailing address errors.  The average refund for each check was $1,547.

If you think you may be due a refund, or just want to double check, go to www.irs.gov and select the “Where’s My Refund?” tool.  This tool will provide status of refunds, and in some cases, instructions on how to solve delivery problems.  If you don’t have access to email you can access the Internal Revenue Service refund hotline by calling 1-800-829-1954.

The best way to assure you receive all tax refunds is to file your tax return electronically and select direct deposit for refunds so they go directly into your bank account.  This is usually the fastest way to receive a refund as well.

Beware if you receive an email that appears to be from the IRS regarding a refund or other tax information.  Such emails are common phishing scams.  The IRS does not contact taxpayers by email regarding refunds or to request personal data.  I personally have received some of these phishing emails on a couple different occasions.

If your address has changed, there are several ways to notify the IRS to ensure you receive any refunds or correspondence including:

• Use the new address when filing your return -  when the return is processed, your address will be updated.
• Complete Form 8822 - this form can be used if you’ve already filed your return.  You can download the form from the IRS website www.irs.gov.
• Write to the IRS - send a letter notifying them of the new address.  Include yours (and your spouses if applicable) old and new addresses, social security numbers or Employer ID number.  Be sure the request is signed by you (and your spouse if applicable).  Send the request to the same service center where you filed your last return.

Tax forms, refunds, notices, etc. will be mailed to the last address provided by the taxpayer.

Be aware that if you are waiting for a refund from an amended return that was filed, it can take over 6 months for the IRS to process the amended return and send the refund!