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Tax Tips and Resources in Twin Cities, MN



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Archived Tuesday Tax Tips


What is IRS Form 2848, Power of Attorney?

Form 2848, Power of Attorney and Declaration of Representation’s, purpose is to authorize an individual to represent the taxpayer before the IRS. The person the taxpayer authorizes must be eligible to practice before the IRS. Form 2848, Part II, Declaration of Representation, lists eligible designations. They are attorney, certified public accountant, enrolled agent, officer of the taxpayer organization, full-time employee of the taxpayer, family member, enrolled actuary, unenrolled return preparer (limited), student attorney or CPA (limited), and enrolled retirement plan agent. The taxpayer and authorized representative will sign and date the form. The authorization will allow the representative to discuss the taxpayer’s tax issues with the IRS and request and inspect the taxpayer’s confidential tax information. (IRS Form 2848 Instructions) (TTT 08/08.17)

Employer Classification of Workers (Part II):

The IRS is alerting employers to classify workers correctly. An employer that misclassifies employees as independent contractors may be liable for employment taxes. However, an employer that has a reasonable basis for classifying its workers as independent contractors may be entitled to special relief under section 530 of the Revenue Act of 1978 (P.L. 95-600). The IRS also has a Voluntary Classification Settlement Program that provides an opportunity to reclassify workers as employees for future ax periods, with partial relief from federal employment taxes.
Workers who believe an employer improperly classified them as independent contractors may use Form 8919, Uncollected “Social Security and Medicare tax on Wages, to figure and report the employee’s share of uncollected social security and Medicare taxes. (IRS Fact Sheet FS-2017-9) (TTT 08/01/17)

Employer Classification of Workers (Part I):

The IRS is reminding employers of the importance of correctly classifying workers for purposes of federal employment taxes. Whether a worker is an employee or an independent contractor depends on a number of factors that fall into three categories: behavioral control, financial control and the type of relationship between the worker and the service recipient. An employer who is unsure of how to classify its workers can file a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. There is no fee for requesting a worker classification determination. (IRS Fact Sheet: FS-2017-9) (TTT 07/25/17)

Teenage Taxpayers with Summer Jobs:

Summer jobs are a great way to earn extra spending money or to save for school. Students and teenage employees normally have taxes withheld from their paychecks by the employer. Some workers are considered self-employed and may be responsible for paying taxes directly to the IRS. A self-employed person pays taxes on earned income by making estimated tax payments during the year. An employee will complete Form W-4 for their employer and a self-employed person will complete Form W-9 for their contractor. Visit for more information. (IRS 2017ARD 130-1) (TTT 07/18/17

Unemployment Benefits:

Unemployment compensation is included as income for the year received. The taxpayer should receive a Form 1099G, Certain Government Payments, by January 31. This form shows the amount received and the amount of any federal income tax withheld. You can choose to have federal income tax withheld by using Form W-4V, Voluntary Withholding Request. If you decide not to have withholding you may have to make estimated tax payments during the year. (IRS 2017ARD 047-2) (TTT 7/11/17)

MN Political Contribution Refund:

Minnesota voters can claim a political contribution refund on amounts they donated to candidates for state office or to a state political party on or after July 1, 2017. An individual may claim a refund of up to $50 and a married couple who filed a joint political contribution refund application may claim a refund of up to $100. In order to claim the refund, taxpayers must complete Form PCR, Political Contribution Refund, and must include the original Form EP-3, Minnesota Political Contribution Receipt. (MDOR News Release 6/23/17) (TTT 6/27/17 & 7/4/17)
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Are Social Security Benefits Taxable?

A quick way to find out if you should/may have to pay tax on the income is: Add one-half of the social security income to all other income, including tax-exempt interest. Then compare that amount to the base amount for your filing status. If the total is more than the base amount, some of your benefits may be taxable. Base amounts are: $25,000 Single, head of household, qualifying widow or widower with a dependent child, or married filing separate and lived apart for all of the year; $32,000 Married filing jointly; $0 married filing separate and lived with your spouse at any time during the year. (IRS 2017 ARD 031-1) (TTT 6/20/17)

Estimated Tax Payments:

Taxpayers usually will have taxes withheld from their pay if they are an employee. However, if a person doesn’t have taxes withheld, or they don’t have enough tax withheld, they may need to make estimated tax payments. Taxpayers that are self-employed normally have to pay their taxes this way. Taxpayers normally make estimated tax payment four times a year. Dates that apply to most people for 2017 are April 18, June 15, Sept 15, and Jan 16, 2018. Taxpayers can pay online – Direct Pay or by payment vouchers – Form 1040-ES. (IRS 2017ARD 069-38) (TTT 6/13/17)

IRS Payment Options:

Taxpayers who owe money have many payment options, including direct pay, electronic funds withdrawal, same-day wire, debit or credit card, and check or money order. Some of these options are free; others require a fee. Taxpayers who missed the filing deadline because they could not pay all of the taxes they owe should consider filing and paying what they can to lessen interest and penalties. (IRS IR-2017-85) (TTT 6/6/17)

Basic Tax Tips for the Sharing Economy:

What is the “Sharing Economy?” Taxpayers using one of the many online platforms to rent a spare bedroom, provide car rides or any number of other goods or services may be involved in the sharing economy. The IRS offers a “Sharing Economy Tax Center” on their web site. A few keys areas you may want to review are the taxes, deductions, rentals, estimated payments, payment options, and withholding. The IRS has a YouTube Video “Your Taxes in the Sharing Economy” that may be helpful. (IRS 2017ARD 064-5) (TTT 05/30/17)

IRS Tips to Safeguard Against Natural Disaster:

The IRS suggests that taxpayers should always keep a duplicate set of records including bank statements, tax returns, identification, and insurance policies in a safe place. Keeping an additional set of records is easier now that many financial institutions provide statements and documents electronically. Financial documents are available on the internet. Even if the original records are only provided on paper, these can be scanned into an electronic format. Taxpayers are encouraged to save the scanned records to electronic storage devices. IRS Publication 584, Casualty, Disaster, and Theft Loss may be helpful. (IR 2017-98) (TTT 05/23/17)

What to Do When an IRS Letter Arrives in the Mail?

The IRS mails millions of pieces of correspondence every year to taxpayers for a variety of reasons. First, do not panic. Second, open the letter and read it carefully. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and provides specific instructions on what to do. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Always keep copies of any notices received with tax records. For more information see (2017ARD 077-5) (TTT 5/16/17)