Greatways Tax Service Inc

What do you need to know on your property tax bill?

2019-06-03T12:59:00.000-07:00

I would recommend everyone to check the property tax bill when it comes every year and make sure you are getting all the exemptions you are eligible for. Below are the different kinds of exemptions on the property tax bill.

Homestead Exemption AKA Homeowners Exemption

If you own and occupy your home as your principal place of residence, you may be eligible to claim an exemption of Certain amount (amount can be varied to county) from the assessed value. If you didn’t see any amount on the homeowner’s exemption column on the property tax bill, contact the county and apply for the exemption.

You don’t need to apply every year and county assessor's office, normally consider the property as a personal residence until you change the residency or ownership. If you change either the ownership or residency, you should let the county and remove the homeowner’s exemption. You are not allowed to claim the homeowner’s exemption more than one property at a time.

In general, Real Estate Attorney fill the application for the homeowner’s exemption at the time of closing and it’s a great idea to check with an attorney at the time closing about this exemption to avoid any delay in getting the exemption

Senior Exemptions

If you are above 65, you may elect to get an additional exemption (Age can be different for each state and check with county for the required age in the state you live)

Senior Freeze Exemption

In addition to the Senior Exemptions, you may eligible for Senior Freeze exemption too if your income is less than $65K (Income limit can be varied by county)

Disabled Veterans Exemption

Disabled veterans may elect to get an exemption based on the % of the disability and if you are coming under this category, please contact the county and make sure you are getting this exemption

Homestead Exemption for Persons with Disabilities

The homeowner with a disability may eligible for this exemption and need to apply with proof of disability to the Chief County Assessment Office and may need to renew every year.

Home Improvement Exemption

You may able to get the home improvement exemption for a total of 4 years from the date of completion of the home remodel. Remodel such as basement finishing, adding an additional room, etc. can be qualified for the home improvement exemption and the maximum deduction is limited to $25,000 of assessed value

“Check with your Accountant”

2019-05-29T10:32:00.000-07:00

Can we replace the Accountant with Payroll Software?

Some of the starters are thinking they can get the software to run the payroll and eliminate the need of an Accountant and they can use an accountant to do the tax return at the end. If you are very knowledgeable and experienced, yes it may help.

Most of the online software will cost an average of $60 per month and some of the banks even offer at lower than this rate. But none of the software or the payroll company can give you advice on any of the tax-related questions. If you ask anything to connect with tax, they will be advised you to check with your accountant. If you ask the same questions to your financial advisor or even to the IRS, they will say the same “Check with your Accountant”

What doesn’t mean “Check with your Accountant” and why can’t they answer your questions Because they are not authorized to give you tax advice. In order to give you Advice, that person must have an Authority or certificate from the government. That means those payroll service providers are not qualified, well I can’t answer that question and you should ask them why you can’t give the answers if you have enough experience.

Each business is unique, and the answers can be different for business to business and person to person and that’s why the experienced business owners always use an Accounting firm to do the payroll instead of an online software company. You will need proper guidance not only in the tax return but also needed in the payroll, which only an Accountant can provide

For any business, every penny is controlled, and I strongly agreed to control the expense and the question is which expense can be control and which should not. It depends on the type of business you are doing.

If you are doing a business where your client won’t need to meet you in person, you may not need an outside office until you grow. You may able to hire a virtual office space (which costs around $50 a month) and run from your home. Some of the expense like marketing can’t be eliminated.

Most of the starters pay an average $60 per month for payroll and which will cost at least $720 a year and anywhere from $500 to $1500 to prepare the corporate tax return at the year-end. If they need to make any amendment to the Payroll tax forms, you need to pay again to the payroll software company or hire an accountant to fix the issue.

Our company formed in 2002 and have enough experience in small business payroll and accounting and our fees are fixed and affordable to any small business. Please visit our website for more information on our fee schedule

Our accounting package ( Payroll and Corporate Tax Return) starting at $85 per month for one State and up to 5 Employees and/or contractors and when you complete the full year of payroll service you are eligible to get a Free Corporate Tax Return (Normally charged $250- $750 ) and one Free business consultation (Normally charged $250 - $500). Yes, that is correct $1020 a year can cover all the tax and accounting costs for your small business. For more information please contact us at 630-663-1500

Tax Due date is April 15th and we paid all the tax on the last day and why are we still getting a bill?

2019-05-24T08:12:00.001-07:00

So many taxpayers get a letter from internal revenue service this year asking them to pay some additional tax and interest. Most of them never have this situation before and like to know what is underpayment penalty and how to avoid this for next year

Underpayment penalty

You must pay at least 90% of the tax you owed for the current year or 110 % of the last year tax, what ever is smaller before December 31^st on a timely manner.

How do I avoid this for next year?

Its very hard to find out what is 90% of current year until we do the tax, but it is very easy to calculate the 110% of last year tax liability.

If you are employed/Salaried person its very easy to adjust the withholding tax by submitting a proper W4 and if you are not sure what is the correct number of exemptions, get your accountant help and if you are expecting any additional income like bonus, Third party sick pay etc. make sure the employer deduct enough tax from the paycheck

We always noticed that most of the third-party sick pay and unemployment benefits are not deducting no tax or very less tax. We would recommend keeping the same or more income tax deduction on these payments to avoid the big tax bill at the end.

If you are self employed person, its little hard to find out what will be your taxable income unless otherwise you use a professional to keep your books. If you are running a small business, I would recommend using our bookkeeping service to maintain your books Update all the time.

Bookkeepers will go thru your business bank statements and prepare the Profit and loss statement, Balance Sheet and Bank reconciliation on a monthly basis and that will help you to make the estimated payment of income tax to the IRS and State

Our Bookkeeping service starting $75 a month depends on how much transactions a month to enter and please call 630-663-1500 X 5 for more information

October 2013 Newsletter

2019-05-24T07:03:00.000-07:00

How will the Affordable Care Act “Obamacare” Impact you?

The Affordable Care Act contains new health insurance coverage and financial assistance options for individuals and families, it also contains new benefits and responsibilities for employers. In 2014 most people will have to have health insurance or pay a fee. The Health Insurance Marketplace found at www.healthcare.gov helps uninsured people find health insurance. Open enrollment for the Marketplace ends on March 31, 2014 and if you enroll by December 15, 2013, your coverage can begin as soon as January 1, 2014. When you fill out an application at the Marketplace you will find out what you qualify for including private insurance plans, Medicaid, and the Children's Health Insurance Program (CHIP).

The IRS will be administering the tax provisions. There is a premium tax credit that may help make the cost of purchasing health insurance coverage. In January of 2014 you must either have health care coverage, have an exemption from coverage, or make a payment when you file your 2014 tax return in 2015. If you do not have health insurance in 2014 you will pay a penalty of $95.00 per adult, $47.50 per child, or 1% of your income (whichever is greater).

All information in regards to the Affordable Care Act was found at www.healthcare.gov or www.irs.gov.

November Newsletter: IRS Scam Alert

2013-11-04T14:00:00.001-08:00

The IRS is warning people about a phone scam targeting taxpayers, including recent immigrants, throughout the country. Victims are receiving phone calls saying that they owe money to the IRS and it must be paid immediately via wire transfer or a pre-loaded debit card. If the victim does not pay, they tell the victim they will be arrested, deported, or will have their business or driver’s license suspended.

The IRS will not ask for credit card numbers over the phone, or a pre-paid debit card or a wire transfer. This scam has been happening in every state. The IRS will first contact people via mail, they will not call and demand payment over the phone. These scammers use fake names and IRS badge numbers, have the victim recite last four of their Social Security Number, have a spoof IRS toll-free number, send bogus emails, victims also hear background noise to mimic a call site. If a victim refuses to pay the scammers will also call back pretending to be from the police, or DMV and will have a spoof caller ID to appear valid.

If you receive one of these calls and you think you owe taxes call the IRS at 800-829-1040. If you receive one of these calls and you do not think you owe taxes please call 800-366-4484. You can also contact the Federal Trade Commission at FTC.gov to report this scam.

Please remember the IRS will not contact via electronic communication, including email and text messages to request personal or financial information. If you receive this type of communication do not open any attachments, and forward it to phishing@irs.gov.

All information in regards to this scam was found on the IRS.gov website.

October Newsletter Details: How will the Affordable Care Act impact you?

2013-10-15T12:33:00.000-07:00

The Affordable Care Act contains new health insurance coverage and financial assistance options for individuals and families, it also contains new benefits and responsibilities for employers. In 2014 most people will have to have health insurance or pay a fee. The Health Insurance Marketplace found at www.healthcare.gov helps uninsured people find health insurance. Open enrollment for the Marketplace ends on March 31, 2014 and if you enroll by December 15, 2013, your coverage can begin as soon as January 1, 2014. You will be considered covered if you are insured through an employer, an insurance plan bought on your own, Medicare, Medicaid, CHIP, COBRA, retiree coverage, TRICARE, or VA health coverage.

On the Marketplace website when you complete an application you will find out what you qualify for including private insurance plans, Medicaid, and the Children's Health Insurance Program (CHIP). The Marketplace will tell you if you qualify for lower costs based on your household size and income. Plans cover essential health benefits, pre-existing conditions, and preventive care. If you do not qualify for lower prices you can still buy insurance at the standard price on the Marketplace website. If you qualify for Medicaid or the Children’s Health Insurance Program (CHIP), the Marketplace will share that information with your state agency, many states are expanding Medicaid to cover more people in 2014. If you are eligible for insurance through an employer you have the option to switch to a marketplace plan, however you will not qualify for lower costs based on your income unless the job-based insurance is not affordable or does not meet the minimum requirements.

The IRS will be administering the tax provisions. There is a premium tax credit that may help make the cost of purchasing health insurance coverage. In January of 2014, you must either have health care coverage, have an exemption from coverage, or make a payment when you file your 2014 tax return in 2015. If you do not have health insurance in 2014 you will pay a penalty of $95.00 per adult, $47.50 per child, or 1% of your income (whichever is greater). This fee is called the Individual Shared responsibility payment and these fees will increase every year, these fees will be due when you make your tax payment. You may qualify for an exemption from paying the fee, there is a list on the Marketplace website, some of them include: if you were uninsured for less than 3 months of the year, the lowest-priced coverage available to you would cost more than 8% of your household income, you don’t file a tax return because your income is too low and different types of hardships that may have affected your ability to purchase an insurance plan. You can apply for an exemption on the Marketplace website or when you file your 2014 federal tax return. If you get insurance through the Marketplace you may be able to claim a premium tax credit, which you can have advance payments sent directly to your insurer during 2014 or you can claim them when you file your tax returns. If you choose payments in advance you will have to reconcile the payments on your 2014 tax return.

If you are a business owner, depending on the size of your business will determine if you are eligible for tax credits, health care options, and your responsibilities as a business owner. If you have less than 25 full-time equivalent employees may be eligible for a Small Business Tax Credit to help cover the cost of providing coverage. If you have less than 50 employees you might be eligible to buy coverage through the Small Business Health Options Program. If you have 50 or more employees an annual return will need to be completed to state what insurance was offered their employees and they may also be subject to the Employer Shared Responsibility provisions.

All information in regards to the Affordable Care Act was found at www.healthcare.gov or www.irs.gov.

Role of Accountant in your small business

2012-06-19T07:36:00.001-07:00

It is very important for you to understand the role accountants play in the success of today’s small business?

Even with the best tax software, without being an expert on accounting, tax, and finance, you need an accountant. A professional accountant is well trained and should be able to help you save money as well as add value to your starting or existing business.

Our Monthly service Charge starts from $85 and which includes the payroll, quarterly tax returns, annual tax return, and tax consultation. Our payroll service includes direct deposit, online access to the payroll records, paystubs as pdf in the email, E-Payment and E-filing the payroll tax and reports, Payroll Audit, and Insurance Audit. When you use our monthly accounting service, $1020 a year will cover all the accounting, Payroll, and year-end corporate tax returns.

If you are not using our monthly service, you will be charged $250 for each consultation by phone, email or in person and $250 for the annual tax return preparation. Most of the business owners contact their accountant at least 4 times a year and which will cost $1000 plus the annual tax return fee and the payroll software charges

If you have not yet set up your business, find out the role accountants play and endeavor to talk to an accountant before you start. All businesses have to produce annual accounts for the tax preparation Most jurisdictions have a threshold or guidelines, for which kind of business qualifies for audit exemption. Whatever form (Corp, S Corp, LLC) your business is going to take; business accountants can offer you a range of valuable services.

The accountant can advise you on how to start your business.

· What form your business should take — sole trader, partnership, limited liability partnership or limited company.

· The role accountant play involves assisting with your business plan.

· Assist you with the Legal and tax aspects of registering your new small business

· Professional accountants will provide all the accounting and book-keeping expertise you need including :

· The setting-up of manual or computerized book-keeping systems — sales ledger, purchase ledger, cash book, petty cash book, debtors ledger, creditors ledger, fixed-asset register.

· The preparation of financial statements — profit and loss account, balance sheet, cash flow statement and related notes.

· Tax returns and corporation tax, VAT, PAYE, and National Insurance contributions, and income tax for sole traders and partnerships.

· Tax planning — minimizing your tax bill.

They can give you general financial advice.

· This may include recommendations on the financing of your business through overdrafts, loans, leasing, hire purchase, factoring, venture capital (including business angels) or grants.

· They can be instrumental at advising and introducing you to viable sources of finance and also help with drafting and presenting your business case to them.

The role accountants play towards the success of your small business or personal financial planning can only be compared to a doctor-patient relationship.

If you like to start your monthly accounting service from us please give us a call @ 630-663-1500

Whats new in 2011 tax return

2012-01-21T13:50:00.000-08:00

Personal Exemptions

The personal and dependent exemption for tax year 2011 is $3,700, up $50 from 2010.

Standard Deductions

In 2011 the standard deduction for married couples filing a joint return is $11,600, up $200 from 2010 and for singles and married individuals filing separately it's $5,800, up $100. For heads of household the deduction is $8,500, also up $100 from 2010.

The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50.

Income Tax Rates

Due to inflation, tax-bracket thresholds will increase for every filing status. For example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000 for a married couple filing a joint return, up from $68,000 in 2010.

Alternative Minimum Tax (AMT)

AMT exemption amounts for 2011 are slightly higher than those in 2010 at $48,450 for single and head of household fliers, $74,450 for married people filing jointly and for qualifying widows or widowers, and $37,225 for married people filing separately.

Flexible Spending Accounts (FSA)

The Affordable Care Act, enacted in March, established a new uniform standard, effective January 1, 2011, that applies to FSAs and health reimbursement arrangements (HRAs).

Under the new standard, the cost of an over-the-counter medicine or drug cannot be reimbursed from the account unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer's plan.

A similar rule went into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).

Long Term Capital Gains

In 2011, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket. For taxpayers in lower tax brackets, the long-term capital gains rate is 0%.

Individuals - Tax Credits

Child and Dependent Care Credit

If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit
The $1,000 child tax credit has been extended through 2012. A portion of the credit may be refundable, which means that you can claim the amount you are owed, even if you have no tax liability for the year. The credit is phased out for those with higher incomes.

Energy Tax Credits for Homeowners

Energy tax credits for homeowners expire at the end of 2011 and are not as generous as in previous years. In addition, a taxpayer who has claimed an amount of $500 in any previous year is not eligible for this tax credit.

Homeowners can claim an Energy Star window tax credit of up to $200 maximum as well as a water heater tax credit, which includes electric, natural gas, propane, or oil, up to a maximum of $300. The same maximum ($300) applies to air conditioners, but insulation, doors, and roof credits are capped at $500. The furnace tax credit (includes natural gas, propane, oil, or hot water) and is capped at $150 maximum and efficiency must be at 95%.

Earned Income Tax Credit (EITC)

The maximum EITC for low and moderate income workers and working families is $5,751, up from $5,666 in 2010. The maximum income limit for the EITC has increased to $49,078, up from $48,362 in 2010. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals - Education Expenses

Coverdell Education Savings Account

For two more years, you can contribute up to $2,000 a year to Coverdell savings accounts. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit (Higher Education)

The expansion of the Hope Scholarship Credit by the American Opportunity Tax Credit has been extended through 2012. For 2011, the maximum Hope Scholarship Credit that can be used to offset certain higher education expenses is $2,500, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Lifetime Learning Credit

A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2011, the credit is fully phased out at $122,000 adjusted gross income for joint filers and $61,000 for others.

Student Loan Interest

For 2011 and 2012, the $2,500 maximum student loan interest deduction for interest paid on student loans is not limited to interest paid during the first 60 months of repayment. The deduction begins to phase out for higher-income taxpayers.

Tuition and Related Expenses Deduction

For 2010 and 2011, there is an above-the-line deduction of up to $4,000 for qualified tuition expenses. This means that qualified tuition payments can directly reduce the amount of taxable income, and you don't have to itemize to claim this deduction. However, this option can't be used with other education tax breaks, such as the American Opportunity Tax Credit, and the amount available is phased out for higher-income taxpayers.

Individuals - Retirement

Roth IRA Conversions

There is no longer an income limit for taxpayers who want to convert regular IRAs into Roth IRAs. The difference is that taxpayers who convert to Roth IRAs in tax year 2011 must pay taxes on the conversion income now instead of deferring it in later years as was the case in 2010.

Greatways Tax Service Inc: 2012 Tax Season Deadline Extended to April 17 2012...

2012-01-15T16:00:00.000-08:00

Greatways Tax Service Inc: 2012 Tax Season Deadline Extended to April 17 2012...: The Internal Revenue Service today opened the 2012 tax filing season by announcing that taxpayers have until April 17 to file their tax re...

2012 Tax Season Deadline Extended to April 17 2012

2012-01-14T16:42:00.000-08:00

The Internal Revenue Service today opened the 2012 tax filing season by announcing that taxpayers have until April 17 to file their tax returns.

Taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16. According to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year. Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns.

Wage Compensation for S Corporation Officers

2012-01-14T16:40:00.000-08:00

Corporate officers are specifically included within the definition of employee for FICA (Federal Insurance Contributions Act), FUTA (Federal Unemployment Tax Act) and federal income tax withholding under the Internal Revenue Code. When corporate officers perform services for the corporation and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to shareholders.

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.

The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes. S corporations should not attempt to avoid paying employment taxes by having their officers treat their compensation as cash distributions, payments of personal expenses, and/or loans rather than as wages.

This fact sheet clarifies information that small business taxpayers should understand regarding the tax law for corporate officers who perform services.

Who’s an employee of the corporation?

Generally, an officer of a corporation is an employee of the corporation. The fact that an officer is also a shareholder does not change the requirement that payments to the corporate officer be treated as wages. Courts have consistently held that S corporation officers/shareholders who provide more than minor services to their corporation and receive or are entitled to receive payment are employees whose compensation is subject to federal employment taxes.

The Treasury Regulations provide an exception for an officer of a corporation who does not perform any services or performs only minor services and who neither receives nor is entitled to receive, directly or indirectly, any remuneration. Such an officer would not be considered an employee.

What's a Reasonable Salary?

The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state "Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation."

The amount of the compensation will never exceed the amount received by the shareholder either directly or indirectly. However, if cash or property or the right to receive cash and property did go the shareholder, a salary amount must be determined and the level of salary must be reasonable and appropriate.

There are no specific guidelines for reasonable compensation in the Code or the Regulations. The various courts that have ruled on this issue have based their determinations on the facts and circumstances of each case.

Some factors considered by the courts in determining reasonable compensation:

Training and experience

Duties and responsibilities

Time and effort devoted to the business

Dividend history

Payments to non-shareholder employees

Timing and manner of paying bonuses to key people

What comparable businesses pay for similar services

Compensation agreements

The use of a formula to determine compensation

Medical Insurance Premiums treated as wages.

The health and accident insurance premiums paid on behalf of the greater than 2 percent S corporation shareholder-employee are deductible by the S corporation as fringe benefits and are reportable as wages for income tax withholding purposes on the shareholder/employee’s Form W-2. They are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. Therefore, this additional compensation is included in Box 1 (Wages) of Form W-2, Wage and Tax Statement, issued to the shareholder, but would not be included in Boxes 3 or 5 of Form W-2.

A 2-percent shareholder-employee is eligible for an AGI deduction for amounts paid during the year for medical care premiums if the medical care coverage is established by the S corporation. Previously, “established by the S corporation” meant that the medical care coverage had to be in the name of the S corporation.

In Notice 2008-1, the IRS stated that if the medical coverage plan is in the name of the 2percent shareholder and not in the name of the S corporation, a medical care plan can be considered to be established by the S corporation if: the S corporation either paid or reimbursed the 2percent shareholder for the premiums and reported the premium payment or reimbursement as wages on the 2percent shareholder’s Form W-2.

Payments of the health and accident insurance premiums on behalf of the shareholder may be further identified in Box 14 (Other) of the Form W-2.

Schedule K-1 (Form the 1120S) and Form 1099 should not be used as an alternative to the Form W-2 to report this additional compensation.

Individual Taxpayer Identification Number (ITIN)

2012-01-14T16:34:00.000-08:00

What is an ITIN?
An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit. Effective April 12, 2011, the range was extended to include 90-92 and 94-99 in the fourth and fifth digit, example 9XX-90-XXXX.
IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).
ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code.
Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception.

What is an ITIN used for?ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).
An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

Who needs an ITIN?IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.

Other examples of individuals who need ITINs include:
• A nonresident alien required to file a U.S. tax return
• A U.S. resident alien (based on days present in the United States) filing a U.S. tax return
• A dependent or spouse of a U.S. citizen/resident alien
• A dependent or spouse of a nonresident alien visa holder

How do I know if I need an ITIN?If you do not have a SSN and are not eligible to obtain a SSN, but you have a requirement to furnish a federal tax identification number or file a federal income tax return, you must apply for an ITIN.
If you have an application for a SSN pending, do not file Form W-7. Complete Form W-7 only if the Social Security Administration (SSA) notifies you that a SSN cannot be issued.
To obtain a SSN, see Form SS-5, Application for a Social Security Card. To get Form SS-5 or to find out if you are eligible to obtain a SSN, go to Social Security Administration Website or contact a SSA office. By law, an alien individual cannot have both an ITIN and a SSN.
IRS processes returns showing SSNs or ITINs in the blanks where tax forms request SSNs. IRS no longer accepts, and will not process, forms showing "SSA205c," "applied for," "NRA," blanks, etc.

How do I apply for an ITIN?Use the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply. Attach a valid federal income tax return, unless you qualify for an exception, and include your original, notarized, or certified proof of identity and foreign status documents.
Because you are filing your tax return as an attachment to your ITIN application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity and foreign status documents to:

Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

You may also apply using the services of an IRS-authorized Acceptance Agent or visit an IRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin. Taxpayer Assistance Centers (TACs) in the United States provide in-person help with ITIN applications on a walk-in or appointment basis. Applicants outside the United States should contact an overseas IRS office to find out if that office accepts Form W-7 applications. The IRS's ITIN Unit in Austin issues all numbers by mail.

When should I apply for an ITIN?
You should complete Form W-7 as soon as you are ready to file your federal income tax return, since you need to attach the return to your application.
If you meet one of the exceptions to the tax filing requirement, submit Form W-7, along with the documents that prove your identity and foreign status and the required supplemental documents to substantiate your qualification for the exception, as soon as possible after you determine that you are covered by that exception.
You can apply for an ITIN any time during the year; however, if the tax return you attach to Form W-7 is filed after the return's due date, you may owe interest and/or penalties. You should file your current year return by the prescribed due date to avoid this.

Where can I get help with my ITIN application?You may call the IRS toll-free at 1-800-829-1040 for information and help in completing your Form W-7 and your tax return, or to check on the status of your application six weeks after submitting Form W-7.
Assistance is also available at IRS Taxpayer Assistance Centers in the United States to provide in-person help with ITIN applications on a walk-in or appointment basis. Applicants outside the United States may contact an overseas IRS office to find out if that office accepts Form W-7 applications.
You may also use the services of an IRS-authorized Acceptance Agent.

How and when can I expect to receive my ITIN?If you qualify for an ITIN and your application is complete, you will receive a letter from the IRS assigning your tax identification number, usually within six weeks. If you have not received your ITIN or other correspondence six weeks after applying, you may call the IRS toll-free number at 1-800-829-1040 to request the status of your application.

Foreign Bank and Financial Accounts (Form 90-22.1)

2012-01-14T16:30:00.000-08:00

You may need to fill out Treasury Department Form 90-22.1 every year if you own, or have an interest in, any foreign bank accounts or other types of financial accounts based outside the United States. This report is separate from your income tax return, although the two reports can be interrelated.

Reporting Foreign Bank Accounts

You must report accounts you hold in foreign banks and other financial institutions if your total balance across all your accounts is $10,000 or greater at any time during the year. This is true both of accounts for which you are the owner and accounts over which you are not the owner but have authority to conduct transactions on behalf of the account owner.
Income generated inside of these foreign financial accounts is also reported on your income tax return in the year the income is earned. You'll report the foreign income based on the type of income being generated. For example interest and dividends would be reported on your Schedule B, capital gains on your Schedule D, and so forth. If you earn dividends or interest in these accounts, be sure to check the box in Part III Line 7a of Schedule B and indicate the country or countries where you have accounts. Additionally, any foreign taxes paid on your interest and dividends may qualify for the Foreign Tax Credit on Form 1116.
Additionally, report each foreign financial account you hold on Treasury Department Form 90-22.1 (PDF, 8 pages includes instructions). This form is pretty self-explanatory. You will provide information on all your financial accounts held in foreign countries, such as the name of the bank or financial institution where the account is held, your account number, and account balance. Be aware that the Foreign Bank Account Report is filed for each accountholder. Married couples would need to file separate reports, and accounts having multiple accountholders or persons with signature authority may have several persons or businesses reporting the same account on separate reports.

What Types of Foreign Financial Accounts are Reportable?

The following types of financial accounts would need to be reported on the Foreign Bank Account Report if you meet the filing requirement threshold:

Bank accounts (checking and savings)
Investment accounts
Mutual funds
Retirement and pension accounts
Securities and other brokerage accounts
Debit card and prepaid credit card accounts
Life insurance and annuities having cash value

What types of bank accounts and financial accounts need to be reported to the Treasury is discussed in detail in 31 CFR Part 1010 and in the Treasury Department's explanation of their revisions to these regulations that were published on February 24, 2011 in the Federal Register (http://edocket.access.gpo.gov/2011/pdf/2011-4048.pdf). I refer you to that document for a very detailed analysis concerning what types of financial accounts are reportable.

When to File

Treasury Form 90-22.1 is due June 30th of each year to report foreign bank accounts owned in the previous year. The instructions for this form does not make this clear, but the foreign bank account report must be received by the Treasury Department by June 30th, instead of being postmarked by that date. Quoting from the Internal Revenue Manual section 4.26.16.3.7, "The FBAR is considered filed when it is received in Detroit, not when it is postmarked." (The Internal Revenue Manual is an internal document outlining how work is processed.)
What if you miss the filing deadline? You should file TD F 90-22.1 to report your foreign bank accounts even if you miss the June 30th deadline. Why? There are very stiff penalties for willfully failing to file this report.
Late filers should file their FBAR as soon as possible and should attach a brief explanation of why you are filing late. While there are stiff penalties for failing to file the form, those penalties could possibly be waived or reduced based on your particular situation. Under no circumstances should you not file Form TD F 90-22.1, since that would be a willful failure to fail. According to an IRS spokesperson in Washington, DC,

The law governing form TD F 90-22.1 "provides for a nonwillful penalty of up to $10,000 per violation for violations occurring after October 22, 2004. This penalty will be waived, however, if the person can show reasonable cause for the violation and if the person provides a late-filed [Form TD F 90-22.1] with the information that should have been reported earlier."IRS will consider the facts and circumstances of each case in determining whether penalties are appropriate. Persons who have not timely filed [Foreign Bank Account Reports] should attach a statement explaining why the [Form] was not timely filed."

In the time since I first sourced that hopeful-sounding quotation, the IRS has become increasingly austere in its enforcement of the foreign bank reporting requirements, and the IRS has started imposing very stiff penalties on taxpayers who have failed to file the FBAR and also failed to report their foreign-source income.
The IRS is currently conducting a voluntary disclosure initiative for people who need to file late foreign bank account reports and need to report previously undeclared foreign income. This Offshore Voluntary Disclosure Initiative has a deadline of August 31, 2011.
Persons who are considering this voluntary disclosure program should consult with a tax attorney before participating in this IRS program.

Where to File

Mail your completed and signed TD F 90-22.1 to the Treasury Department at the following address:

Department of the Treasury
Post Office Box 32621
Detroit, MI 48232-0621

Do not mail TD F 90-22.1 with your tax return, and do not mail the form to the IRS.

Form 8938 (Statement of Specified Foreign Financial Assets)

2012-01-14T16:10:00.000-08:00

Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”?

Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below).
Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010. For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season.
Upon issuance of regulations, FATCA may require reporting by specified domestic entities. For now, only specified individuals are required to file Form 8938.

If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.
If you are required to file Form 8938, you do not have to report financial accounts maintained by:
- a U.S. payer (such as a U.S. domestic financial institution),
- the foreign branch of a U.S. financial institution, or
- the U.S. branch of a foreign financial institution.

Refer to Form 8938 instructions for more information on assets that do not have to be reported.
You must file Form 8938 if:

1. You are a specified individual.

A specified individual is:

A U.S. citizen
A resident alien of the United States for any part of the tax year (see Pub. 519 for more information)
A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return
A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Pub. 570 for definition of a bona fide resident)

AND

2. You have an interest in specified foreign financial assets required to be reported.

A specified foreign financial asset is:

Any financial account maintained by a foreign financial institution, except as indicated above
Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
- Stock or securities issued by someone other than a U.S. person
- Any interest in a foreign entity, and
- Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.

Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset.
AND

3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:

Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Taxpayers living abroad. You are a taxpayer living abroad if:
- You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
- You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.

If you are a taxpayer living abroad you must file if:

You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets.
Reporting specified foreign financial assets on other forms filed with the IRS.
If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938. However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets.
Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more then the reporting threshold that applies to you.

Health Insurance Premium Tax Credit

2011-12-30T18:37:00.001-08:00

Health Insurance Premium Tax Credit

Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On Aug.12, 2011, the IRS issued proposed regulations that describe who will be eligible to receive the premium tax credit and how to compute the credit. The proposed regulations also describe how to reconcile any advance credit payments for health benefits purchased through an Exchange with the final credit amount. The proposed regulations provide numerous examples, solicit written comments and provide a notice of public hearing. Comments must be submitted by Oct. 31, 2011.

The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.

Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov.

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release