IRS Tax Help with Offers in Compromise, Federal Tax Liens

IRS e-mail requesting information

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 06 Aug 2010 20:01:00 +0000

Several clients have recently contacted me regarding an e-mail they received allegedly from the IRS. I can sssure you that the IRS does not send e-mails to taxpayer's requesting information. Should you receive an e-mail you believe Uncle Sam sent, delete it! If you are still uneasy about not responding, pick up the phone and call the IRS. The IRS never has and never will seek information from taxpayer's via e-mail. If you still aren't convinced, call your Power of Attorney and ask them if they also received an e-mail regarding you. By law the IRS must send copies of all correspondence to your Power of Attorney.

Donate Stocks, save $$$$$

noreply@blogger.com (Tax Representative and Enrolled Agent) — Mon, 02 Aug 2010 15:07:00 +0000

Many clients ask me how to avoid paying Capital Gains on stock sales. The short answer is you can't. However, what you can do and what I suggest is donating the stock to a charity. As an example, let's say you purchased IBM many years ago. The purchase price (or the cost basis) was $ 2,000. Today your stock is worth $ 10,000. If you were to donate your shares to a charity you could take an $ 8,000 deduction for charitable contributions and not have to claim the $ 8,000 as income. You wouldn't pay tax on your gains.

Hiring Your Children Can Be Beneficial

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 30 Jul 2010 17:55:00 +0000

I often advise my business clients who are sole proprietors to consider hiring their child who are under the age of 18. If your business is a proprietorship, you pay no payroll taxes on your (under 18 year old) child's wages. Moreover, if your child files as a single taxpayer status, and earns less than $5,700.00 during tax year 2010, your child will pay zero income taxes.

I strongly suggest you pay your child the minimum wage for your state. Also, make sure to keep accurate time sheets reflecting the hours worked as well as copies of the paychecks issued to your child. Should you ever be audited by the IRS, these records will be necessary to prove that you paid your child appropriately and these records will save you a great deal of potential grief.

Hiring Incentives to Restore Employment Act (HIRE)

noreply@blogger.com (Tax Representative and Enrolled Agent) — Tue, 27 Jul 2010 14:35:00 +0000

A number of my corporate clients have used this to their benefit. If you are an employer, think about taking advantage of this new law, by hiring new workers this year.

Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire workers after February 3, 2010 and before January 1, 2011. The employer may qualify for a 6.2 percent payroll tax incentive, in affect, exempting them from their share of Social Security taxes on wages paid to those workers after March 18, 2010. This reduced tax witholding will have no effect on the employee's future social security benefits. The employers would still need to withold the employee's 6.2 percent share of Social Security taxes, as well as other income taxes.

Additionally, for each new worker retained for at least one year, the employer may claim an addtional general business tax credit of up to $1,000 per worker, when they file their 2011 federal income tax returns.

What Can The IRS Really Seize?

noreply@blogger.com (Tax Representative and Enrolled Agent) — Mon, 26 Jul 2010 13:45:00 +0000

from EA Journal: www.NAEA.org
If the IRS is in a position to levy or seize, it is important to know what is at risk. No matter what the IRS may tell you or your representative or what you may have heard, it is very unlikely the IRS will levy on a house, car, furniture, or equipment. The assets that you may be the most concerned about-your "stuff" are the items the IRS is least likely to take. This is important to know in negotiating with the IRS.

In 2009, the IRS made 581 seizures of "hard" assets such as houses, cars and other personal property. By comparison, in the same year the IRS sent out almost 3,500,000 levies on "soft" assets, such as bank accounts and wages.

IRS attempts to seize "hard" assets are serious, make no mistake about it. But the IRS is clearly more intent on tying up cash.

The reason for the focus on cash, not personal property, are in the Internal Revenue Code (IRC) and the Internal Revenue Manual. Both provide that if an asset-for instance a house- lacks equity, the IRS is prevented from seizing it. This eliminates a vast majority of potential seizures. Even if an asset has equity, it cannot be taken if it is listed as exempt in the IRC and is protected from the IRS as a matter of public policy.

IRS Whistleblower Reward Program

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 23 Jul 2010 19:04:00 +0000

Whistleblower - Informant Reward
The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay tax. If the IRS uses information provided by the whistleblower, it may award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects from the non-compliant taxpayer.

Who qualifies for the reward?
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the non-compliant taxpayer.

What are the rules for receiving a reward?
There are two types of rewards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million (and a few additional qualifications are met), the IRS may pay 15 to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code (IRC) Section 7623(b) - Whistleblower Rules.

The IRS also has an reward program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The reward through this program are less, with a maximum reward of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at IRC Section 7623(a) - Informant Claims Program.

If you decide to submit information and seek a reward, use IRS Form 211. The same form is used for both award programs. -- Source - www.irs.gov

Five Tax Scams to Avoid this Summer

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 23 Jul 2010 19:00:00 +0000

Five Tax Scams to Avoid this Summer

The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list.

1. Phishing. Phishing (contra fishing) is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

2. Return Preparer Fraud. Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.

3. Hiding Income Offshore. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.

4. Abuse of Charitable Organizations and Deductions. The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.

5. Frivolous Arguments. Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.

McCain and Obama tax plans are criticized

noreply@blogger.com (Tax Representative and Enrolled Agent) — Thu, 24 Jul 2008 09:37:00 +0000

from www.latimes.com

McCain and Obama tax plans are criticized
The nonpartisan Tax Policy Center says that both candidates' proposals would increase the national debt by trillions and may make the system more complex.
By Stephen Braun, Los Angeles Times Staff Writer July 24, 2008
WASHINGTON -- The competing tax plans laid out by Sens. Barack Obama and John McCain would both add trillions of dollars to the national debt and could add to the tax system's complexity, a nonpartisan tax research group concluded Wednesday in a newly released report.Both campaigns assert that their plans to continue many Bush-era tax cuts and offer new reductions would aid the economy without massive new spending. But the Washington-based Tax Policy Center warned that under either candidate, "the debt would likely continue to rise as it has over the past eight years."Obama's plan -- cuts targeted to middle- and low-income Americans and increases for the wealthy -- would increase the national debt by an estimated $3.4 trillion in the next decade, the center said. Under a similar analysis, McCain's plan -- largely a continuation of Bush's tax reductions -- would add $5 trillion. The deficit is now $9.5 trillion.Both candidates would maintain the Bush tax cuts for the working poor and middle-income taxpayers. But they differ drastically on how to target the richest Americans. The report estimated that under McCain's plan, Americans who make between $38,000 and $66,000 a year would see average tax cuts of as much as $1,400 in 2012. But the Arizona Republican would aid the wealthiest 1% -- those who make more than $603,000 per year -- with annual tax reductions averaging $127,000.Under Obama's plan, the tax center said, middle-income taxpayers would have tax cuts averaging $2,100 in 2012. But the top 1% of taxpayers would see steep increases -- $38,000 a year, on average -- under the Illinois Democrat's plan.Leonard E. Burman, a Tax Policy Center senior fellow who was on the team that reviewed the candidates' plans, said in an interview that important portions of both plans had yet to be fleshed out.Both proposals are filled with "soft numbers" and sometimes play "fast and loose with their figures," Burman added."We had to make a lot of assumptions because there are big parts of their proposals that are still being fine-tuned," he said.Burman also said that although both candidates' plans attempt to streamline the tax system, they create potential new complexities. Both Obama and McCain would continue the alternative minimum tax, or AMT, long criticized for adding to the tax bite and complexity for middle-class and many upper-middle-class taxpayers.McCain would allow taxpayers to circumvent the AMT with an "optional alternative tax system" that could cause new chaos."If the new alternative tax system does not offer significant tax cuts, having to figure taxes under two systems and estimate which one would be better would add complexity, not reduce it," the center cautions.And although Obama seeks to aid low-income taxpayers by having the government prepare tax returns that the taxpayers would then approve, he has only committed vaguely to "fiscally responsible" reform of the AMT, the center notes.Another concern, Burman noted, is that Obama and McCain have presented "somewhat differing" versions of their plans on the campaign trail than what they have issued on the Web and in position papers."Sen. McCain's proposals on the stump are often far more sweeping than the more measured options outlined by his campaign," the center said. At the same time, "Sen. Obama also often proposes new taxes on high-income households to extend Social Security solvency, but his staff insists that no specific policy exists."stephen.braun@latimes.com

IRS Criminal Investigations increase

noreply@blogger.com (Tax Representative and Enrolled Agent) — Wed, 23 Jul 2008 12:03:00 +0000

from www.yahoonews.com

Thu Jul 17, 5:37 PM ET
WASHINGTON - The IRS Criminal Investigation Division completed more than 4,200 investigations in the 2007 budget year, with about one half resulting in conviction for a crime, according to a report issued Thursday.
The Treasury Inspector General for Tax Administration said the criminal division showed improvement in a number of key areas last year despite a decline in special agents. Those included cases initiated, completed, recommended for prosecution and those concluding in convictions.
The report also noted that investigations referred to the Department of Justice for prosecution stood at an eight-year high, and that for the first time since they began keeping statistics, the division had more investigations awaiting prosecution than open criminal investigations within the division. It said time needed to manage cases being prosecuted cuts into resources available to initiate and complete investigations.
On average, it took 412 days to complete an investigation in 2007.
It said the number of field special agents had declined 3 percent in 2007 to 2,435. "We believe that the continual loss of agents will negatively affect the division's productivity in the near future," said Inspector General J. Russell George.
He also reported that refund returns verified as containing false wage information under the IRS's Questionable Refund Program increased from 84,000 in the 2005 processing year to 211,000 in 2007. The average fraudulent claim in 2007 was $6,479, compared to $3,764 the previous year.

IRS Sending Stimulus Payment Information to Veterans, Retirees

noreply@blogger.com (Tax Representative and Enrolled Agent) — Wed, 23 Jul 2008 11:58:00 +0000

from www.irs.gov

IR-2008-91, July 21, 2008
Public Service Announcement: It's Not Too Late To Get Your Stimulus Payment
WASHINGTON — The Internal Revenue Service today reminded qualifying retirees and veterans that it is not too late to file for an economic stimulus payment and announced it will send a second set of information packets to 5.2 million people who may be eligible but who have not yet filed for their stimulus payment.
The packages will contain everything needed by a person who normally does not have a filing requirement but who must file this year in order to receive an economic stimulus payment. There will be instructions, an example Form 1040A return showing the few lines that need to be completed, and a blank Form 1040A. The packages will be mailed over a three-week period starting July 21.
“All it takes is a few simple steps, and the payment can be on its way. It’s not too late to file, but the sooner people file, the faster they’ll receive their money,” said Doug Shulman, IRS Commissioner.
The mailing is part of an IRS summer campaign to reach out to those people who have no requirement to file a tax return but who may be eligible for a stimulus payment of up to $300 ($600 for married filing jointly). For those eligible for a payment for themselves, there also is a $300 per child payment for eligible children younger than 17.
The IRS has accounted for about 75 percent of the approximately 20 million Social Security and Veterans Affairs beneficiaries identified as being potential stimulus recipients. All but 5.2 million of those have either filed a return, filed a joint return or were not eligible for a stimulus payment (for example, they were claimed as a dependent on another’s return).
To reach the remaining recipients, the IRS is working with national partners, members of Congress and state and local officials to ensure that assistance to eligible people is available.
The agency also reminded people that it has more than 400 local Taxpayer Assistance Centers operating normal business hours Monday through Friday. These centers can provide assistance to retirees and veterans trying to receive their payments. A list of addresses and office hours can be found at Contact My Local Office.
The Economic Stimulus Act of 2008 provided for payments of up to $600 ($1,200 for married filing jointly) for taxpayers who normally file a tax return and have a tax liability. It provided that stimulus recipients could receive another $300 for each eligible child younger than 17.
The Act also created a special category for people who had certain types of income but may not file a tax return because their income is too low or their income is nontaxable.
People in this category must have at least $3,000 in qualifying income to be eligible for the minimum amount of $300 ($600 married filing jointly). Qualifying income is the total of Social Security, Veterans Affairs and/or Railroad Retirement benefits plus earned income, including nontaxable combat pay
People receiving only Supplemental Security Income are not eligible. Eligible people must have a Social Security number (unless their spouse is a member of the military) and be neither a dependent nor eligible to be a dependent on another’s tax return.
Receiving the stimulus payment should have no impact on other federal benefits currently being received. The stimulus payment is not taxable. Absent any other filing requirements, filing a tax return to receive a stimulus payment does not mean that retirees and others will have to start filing tax returns again.
As of July 11, the IRS had issued 112.4 million payments totaling $91.8 billion. Payments are based on 2007 tax returns being filed this year. People must file by Oct. 15 in order to receive a payment in 2008. Those who do not file a tax return to obtain their stimulus payment this year may still receive their stimulus payments by filing a 2008 tax return next spring, but then their stimulus payment would be based on their 2008 qualifying income.
Related Item:
Stimulus Payments — It's Not Too Late

IRS Offers Last Minute Reminders

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 11 Apr 2008 21:39:00 +0000

from www.irs.gov

IR-2008-59, April 11, 2008
Podcast: Last Minute Reminders
WASHINTON — Now that the April 15 tax return filing and tax payment deadline is nearing, the Internal Revenue Service offers the following last-minute tips for those taxpayers who haven’t yet filed, paid what they owe or taken the necessary steps to ensure they receive the economic stimulus payment they qualify for.
Taxpayers can speed their receipt of their economic stimulus payment by choosing IRS e-file and direct deposit and by filing by the due date. They also can minimize possible interest assessments and late filing or late payment penalties by filing and paying by the due date.
File Electronically
Take advantage of e-filing, which is fast, accurate and easy. Most available tax preparation programs check for errors and necessary information, increasing the accuracy of the return and reducing the need for correspondence with the IRS to clarify errors or omissions. With most programs taxpayers can usually file a state tax return at the same time they electronically file their federal return. Once the return is accepted for processing, the IRS electronically acknowledges receipt of the return. Generally, when someone files electronically, their refund will be issued in about half the time it would take if they had filed a paper return. Those who choose direct deposit will get their refund in even less time and receive their economic stimulus payments sooner as well.
Use IRS Free File
Free electronic filing from nearly 20 companies is available to taxpayers whose 2007 adjusted gross income was $54,000 or less. That means 70 percent of all taxpayers, 95 million filers, can take advantage of the IRS-sponsored Free File program. The only way to access this program is through the IRS’s secure, official Web site, IRS.gov. Free File is also available for individuals who are filing a tax return solely to receive their economic stimulus payment. There is no charge for this service.
Economic Stimulus Payments
Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of qualifying income and file a 2007 federal income tax return. The IRS will take care of the rest. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. Millions of retirees, disabled veterans and low-wage workers who normally do not need to file a tax return must do so this year in order to receive a stimulus payment. People filing only to receive the economic stimulus payment do not have to file by April 15 and they do not have to file a Form 4868 for an extension. These people must file Form 1040A, though, by Oct. 15 to receive the payment in 2008. Taxpayers normally required to file who cannot meet the April 15 deadline should file a Form 4868 to obtain an extension to file until Oct. 15.
Avoid Scams
If you receive unsolicited email or telephone calls from anyone purporting to be from the IRS, it’s probably a scam. Don’t click on any links; don’t answer any questions. Forward the emails or report the calls to phishing@irs.gov.
Earned Income Tax Credit
Earned income of less than $39,783 in 2007 may qualify a taxpayer (married filing jointly with more than one qualifying child) to claim the earned income tax credit. This credit could be worth up to $4,716 (depending on the number of qualified children and level of earned income). When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. An electronic special “EITC Assistant” is available to help taxpayers determine whether they are eligible. Taxpayers can access more information on this credit by clicking on “1040 Central” on the front page of IRS.gov.
Make Sure Your Paper Return is Error-Free
Those who file a paper return can avoid most potential delays in processing the return and avoid additional correspondence with the IRS to clarify errors should make certain they:
Double-check their figures,
Sign their form,
Attach all required schedules,
Send their return or request an extension by the April 15 filing deadline.
Pay Electronically
Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or by credit card. Electronic payment options are convenient, safe and secure methods for paying taxes or user fees. Taxpayers can charge taxes on their American Express, MasterCard, Visa or Discover cards, using an IRS-authorized service provider listed on IRS.gov. The service providers charge a convenience fee based on the amount of tax the taxpayer is paying. Taxpayers should not add the convenience fee to their tax payment. For those who can’t file or pay on time, the IRS provides extensions of time to file and payment plans.
Request an Extension of Time to File
Taxpayers who can't meet the deadline to file their tax return can get an automatic six-month extension of time to file from the IRS, but they must submit the request by April 15. The extension gives taxpayers until Oct. 15 to file the tax return. However, an extension of time to file does not give the taxpayer an extension of time to pay, which must be separately requested. Those who owe taxes can make a payment when they file the extension either by mailing a check made out to the U.S. Department of the Treasury or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, Automatic Extension of Time to File. Taxpayers can e-file the extension request from a home computer or through a tax professional who uses e-file. Taxpayers can e-file their extensions at no cost. Several companies offer free e-filing of extensions through the Free File Alliance; these companies are listed on IRS.gov.
Request an Extension of Time to Pay
Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. However, interest and certain penalties may apply. A taxpayer can request an extension from 30 to 120 days depending on the specific situation. Taxpayers qualifying for an extension of time to pay of 30 to 120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement. Taxpayers can request an extension of time to pay using the Online Payment Agreement option available. If you owe tax but cannot pay the full amount, you should pay as much as you can by the April 15 due date in order to minimize any interest and penalty charges.
Apply for an Installment Agreement
The IRS may allow taxpayers to pay any remaining balance in monthly installments through an installment agreement. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Alternatively, taxpayers may attach a Form 9465, Installment Agreement Request, to the front of his or her tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges a $105 fee for setting up an installment agreement. The fee is reduced to $52 for those who establish a direct debit installment agreement and $43 for those with an income below a certain level (more information is available on Form 13844). Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.
For more information about filing and paying taxes, choose “1040 Central” or refer to the Form 1040 instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from the official IRS Web site, IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 4/3/07 and 4/4/08
Individual Income Tax Returns
2007
2008
% Change
Total Receipts
88,581,000
96,821,000
9.3%
Total Processed
84,215,000
90,064,000
6.9%

E-filing Receipts:

TOTAL
61,345,000
67,437,000
9.9%
Tax Professionals
44,210,000
47,184,000
6.7%
Self-prepared
17,135,000
20,253,000
18.2%

Web Usage:

Visits to IRS.gov
109,353,000
132,444,000
21.1%

Total Refunds:

Number
73,622,000
75,136,000
2.1%
Amount
$174.165
Billion
$183.043
Billion
5.1%
Average refund
$2,366
$2,436
3.0%

Direct Deposit Refunds:

Number
49,935,000
53,694,000
7.5%
Amount
$136.605
Billion
$147.164
Billion
7.7%
Average refund
$2,736
$2,741
0.2%

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Orginizing your Quarterly Tax Payments

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 22 Feb 2008 12:00:00 +0000

from www.banks.com

By Chris Bibey February 20th, 2008
If you are self- employed, you need to pay income tax just like everybody else. The best way to do this is to send quarterly payments on both the federal and state level. By doing this, you will keep up with the rest of the tax payers who have this money deducted from their paycheck each month.
Staying organized is essential if you are going to pay your quarterly tax payments on time. Once you get used to paying these taxes it will more or less become a part of your business. But even then, you always need to be organized.
The amount of quarterly taxes that you pay is based on the income that you earn during that particular period. For this reason, it is essential that you keep close track of every dollar that you earn. This will allow you to know just how much money you are supposed to pay. Remember, if you do not pay each quarter you will have to pay at the end of the year. The bottom line is that paying quarterly taxes is a way of life for self-employed workers.
To set up quarterly payments for the first time, visit a tax professional or certified public accountant. They can give you the proper forms, as well as tips on what percentage of your income to pay, etc. After your first year of filing, you will begin to receive the proper paperwork in the mail for paying federal and state income tax.
All in all, staying organized will make it much easier for you to pay your quarterly taxes with success. As you can imagine, this is not something that you want to get behind on.

2008 Economic Stimulus Act Provides Tax Benefits to Businesses

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 22 Feb 2008 11:56:00 +0000

from www.irs.gov

2008 Economic Stimulus Act Provides Tax Benefits to Businesses

IR-2008-22, Feb. 21, 2008
WASHINGTON — In addition to providing stimulus payments to individuals, the Economic Stimulus Act of 2008 provides incentives to businesses. These incentives include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.
50-Percent Special Depreciation Allowance
Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over several years. It is an annual allowance for the wear and tear, deterioration or obsolescence of the property.
Under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted basis of certain qualified property during the year that the property is placed in service. This is similar to the special depreciation allowance was previously available for certain property placed in service generally before Jan. 1, 2005, often referred to as “bonus depreciation.” To qualify for the 50 percent special depreciation allowance under the new law, the property must be placed in service after Dec. 31, 2007, but generally before Jan. 1, 2009.
To reflect the new 50-percent special depreciation allowance, the IRS is developing a new version of the depreciation and amortization form for fiscal year filers. The new form will be designated as the 2007 Form 4562-FY.
Section 179 Expensing
In general, a qualifying taxpayer can elect to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property, after the relevant section in the Internal Revenue Code.
Under the new law, a qualifying business can expense up to $250,000 of section 179 property purchased by the taxpayer in a tax year beginning in 2008. Absent this legislation, the 2008 expensing limit for section 179 property would have been $128,000. The $250,000 amount provided under the new law is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.
The new law does not alter the section 179 limitation imposed on sport utility vehicles, which have an expense limit of $25,000.
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IRS Will Send Stimulus Payments Automatically

noreply@blogger.com (Tax Representative and Enrolled Agent) — Sat, 16 Feb 2008 23:29:00 +0000

from www.irs.gov

IRS Will Send Stimulus Payments Automatically Starting in May; Eligible Taxpayers Must File a 2007 Tax Return to Receive Rebate

IR-2008-18, Feb. 13, 2008
WASHINGTON — The Internal Revenue Service today advised taxpayers that in most cases they will not have to do anything extra this year to get the economic stimulus payments beginning in May.
“If you are eligible for a payment, all you have to do is file a 2007 tax return and the IRS will do the rest,” said Acting IRS Commissioner Linda Stiff.
The IRS will use information on the 2007 tax return filed by the taxpayer to determine eligibility and calculate the amount of the stimulus payments.
The IRS will begin sending taxpayers their payments in early May after the current tax season concludes. Payments to more than 130 million taxpayers will continue over several weeks during the spring and summer. A payment schedule for taxpayers will be announced in the near future.
Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Taxpayers who have already filed with direct deposit won't need to do anything else to receive the stimulus payment. For taxpayers who haven't filed their 2007 returns yet, the IRS reminds them that direct deposit is the fastest way to get both regular refunds and stimulus payments.
Most taxpayers just need to file a 2007 tax return as usual. No other action, extra form or call is necessary. This Web site will be the best information source for all updates and taxpayer questions.
In most cases, the payment will equal the amount of tax liability on the tax return, with a maximum amount of $600 for individuals ($1,200 for taxpayers who file a joint return).
The law also allows for payments for select taxpayers who have no tax liability, such as low-income workers or those who receive Social Security benefits or veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007. These taxpayers will be eligible to receive a payment of $300 ($600 on a joint return) if they had at least $3,000 of qualifying income.
Qualifying income includes Social Security benefits, certain Railroad Retirement benefits, certain veterans’ benefits and earned income, such as income from wages, salaries, tips and self-employment. While these people may not be normally required to file a tax return because they do not meet the filing requirement, the IRS emphasizes they must file a 2007 return in order to receive a payment.
Recipients of Social Security, certain Railroad Retirement and certain veterans’ benefits should report their 2007 benefits on Line 14a of Form 1040A or Line 20a of Form 1040. Taxpayers who already have filed but failed to report these benefits can file an amended return by using Form 1040X. The IRS is working with the Social Security Administration and Department of Veterans Affairs to ensure that recipients are aware of this issue.
“Some people receiving Social Security and veterans’ benefits may not realize they will need to file a tax return to get the stimulus payment,” Stiff said. “To reach these people, the IRS and Treasury will work closely with the Department of Veterans Affairs, the Social Security Administration and key beneficiary groups on outreach efforts.”
Eligible taxpayers who qualify for a payment will receive an additional $300 for each child who qualifies for the child tax credit.
Payments to higher income taxpayers will be reduced by 5 percent of the amount of adjusted gross income above $75,000 for individuals and $150,000 for those filing jointly.
Taxpayers must have valid Social Security Numbers to qualify for the stimulus payment. If married filing jointly, both taxpayers must have a valid Social Security Number. And, children must have valid Social Security Numbers to be eligible as qualifying children.
Taxpayers who file their tax returns using an Individual Taxpayer Identification Number issued by the IRS or any number issued by the IRS are ineligible. Also ineligible are individuals who can be claimed as dependents on someone else’s return, or taxpayers who file Form 1040-NR, 1040-PR or 1040-SS.
To accommodate taxpayers who file tax returns later in the year, the IRS will continue sending payments until December 31, 2008. The IRS also cautions taxpayers that if they file their 2007 tax return and then move their residence that they should file a change of address card with the U.S. Postal Service.
The IRS will mail two informational notices to taxpayers advising them of the stimulus payments. However, taxpayers should be alert for tax rebate scams such as telephone calls or e-mails claiming to be from the IRS and asking for sensitive financial information. The IRS will not call or e-mail taxpayers about these payments nor will it ask for financial information. Scam e-mails and information about scam calls should be forwarded to phishing@irs.gov.Related Items:
FS-2008-15, Facts about the 2008 Stimulus Payments
FS-2008-16, Stimulus Payments: Instructions for Low-Income Workers and Recipients of Social Security and Certain Veterans’ Benefits

IRS warns of rebate scams

noreply@blogger.com (Tax Representative and Enrolled Agent) — Sat, 02 Feb 2008 15:23:00 +0000

from CNNMoney.com

Identity thieves use economic stimulus plan to steal personal information over the phone, Internet.
January 31 2008: 8:16 AM EST

WASHINGTON (AP) -- Even before Congress passes an economic stimulus package, identity thieves are using promises of tax rebates to trick people into revealing financial and personal data, the Internal Revenue Service warned Wednesday.
Under one scheme, the IRS said, people are receiving phone calls telling them they can only receive a rebate if they provide bank account information for a direct deposit.
The tax agency stressed that it does not collect information by telephone and that no legislation has been enacted that would allow it to provide advance payments to taxpayers or that specifies the details of those payments.
The House last week, as part of an economic stimulus package, approved tax rebates of $600 and $1,200 respectively for most individuals and couples, with another $300 per child. The Senate is now considering a slightly different version.
The IRS also repeated past warnings of e-mails, supposedly coming from the agency, where people are asked to enter personal information on a form needed to obtain a tax refund.
Don't spend your rebate just yet
A new scam, it said, involves an e-mail notification that a person's tax return will be audited with instructions to click on links to complete forms with personal and account information.
Businesses and accountants are also getting e-mails with instructions to download information on tax law changes. Clicking on these links could download "malware" onto the recipient's computer that gives the scammer remote access to the computer hard drive.
In another telephone scam, a caller claims to be an IRS employee who says the taxpayer has not cashed a refund check and asks the person to verify his or her bank account number.
On Tuesday, at a Senate Finance Committee confirmation hearing for Douglas Shulman, the nominee to be IRS commissioner, Sen. Charles Schumer, D-N.Y., expressed concern that taxpayers would be victimized by tax prepares and lenders who charge high interest rates for short-term advances on their stimulus rebates.
The IRS advised people not to click on any link from an e-mail purporting to come from the tax agency. People receiving questionable e-mails can contact the IRS through phishing@irs.gov.
Senate Democrats: Add checks for seniors

IRS Fiscal Year 2007 Enforcement and Service Results

noreply@blogger.com (Tax Representative and Enrolled Agent) — Thu, 17 Jan 2008 23:54:00 +0000

from www.irs.gov

Fiscal Year 2007 Enforcement and Services Results

The IRS continues to make strong progress in a number of key enforcement areas. The IRS is showing consistent improvements in areas critical to maintaining a fair, efficient tax system while bringing billions of additional dollars into the Treasury. At the same time, the agency continues to improve service to taxpayers.
The IRS enforcement efforts increased again in fiscal year 2007. For instance, during 2007 the IRS audited 84 percent more returns of individuals with incomes of $1 million or more than during 2006. Overall, enforcement revenue reached $59.2 billion, up from $48.7 billion in 2006 and nearly $34.1 billion in 2002.
Highlights of the enforcement and services numbers for fiscal year 2007, which ended on September 30, include:
Individuals
Audit rates increased in 2007, both for overall individual rates and for higher-income taxpayers.
Audits of individuals with incomes of $1 million or more increased from 17,015 during fiscal year 2006 to 31,382 during fiscal year 2007, an increase of 84 percent. One out of 11 individuals with incomes of $1 million or more faced an audit in 2007.
Overall, the total individual returns audited increased by 7 percent to 1,384,563 in 2007 from 1,293,681 in 2006. That’s the highest number since 1998.
Audits of individuals with incomes over $200,000 reached 113,105 returns, up 29.2 percent from the prior year total of 87,885.
The IRS increased audits of individual returns with income of $100,000 or more, auditing 293,188 of these returns in 2007, up 13.7 percent from last year’s total of 257,851.
The IRS filed 3.8 million levies and almost 700,000 liens during 2007, an increase from the previous year and a substantial increase from five years earlier.
Businesses
In the business arena, the IRS continued efforts to review more returns of flow-through entities – partnerships and S Corporations. Our business numbers reflect that we have placed more emphasis in the growing area of these flow-through returns. While large corporate audits are down slightly, we have increased our focus on mid-market corporations – those with assets between $10 million and $50 million dollars. The IRS enforcement budget in 2007 was similar to the budget in 2006, and in times of flat budgets, the agency cannot increase activity across the board but must address the areas where there is growth and potential risk.
Audits of S Corporations increased to 17,681 during 2007, up 26 percent from the prior year’s total of 13,984.
Audits of partnerships increased to 12,195 during 2007, up almost 25 percent from the prior year’s total of 9,777.
Audits of mid-market corporations increased to 4,473, up 6 percent from last year’s total of 4,218.
Audits of businesses in general rose to 59,516, an increase of almost 14 percent from the prior year’s total of 52,223.
Although the audits of large corporations dipped slightly in 2007 to 9,644 audits, the number of audits is up 14 percent from the fiscal year 2002 level.
Taxpayer Services
More taxpayers chose to file electronically in 2007 than during the prior year, with 57 percent of individual tax filers choosing to e-file in 2007, up from 54 percent in 2006.
More people visited the IRS internet site, IRS.gov. The IRS site was accessed more than 217 million times in 2007, up more than 10.5 percent from the same period in 2006.
The IRS helped more taxpayers find out about their refunds through the agency’s internet-based system ‘Where’s my Refund?’ The system was accessed 32.1 million times during 2007, up 30 percent from last year’s usage of 24.7 million.
As in the prior year, the IRS accuracy was 91 percent on tax law questions answered through its toll-free telephone service.
The agency held a 94 percent customer satisfaction rating for its toll-free telephone service.
More detailed information is available in the FY 2007 IRS Enforcement and Services Tables and the FY 2007 Enforcement Revenue and Individual Audits Chart.

IRS audits of millionaires on the rise.

noreply@blogger.com (Tax Representative and Enrolled Agent) — Thu, 17 Jan 2008 21:45:00 +0000

from the AP newswire.

IRS audits of millionaires on the rise
Associated Press
.
Jim Abrams
January 17, 2008
Associated Press Writer / January 17, 2008
WASHINGTON—There's at least one advantage to not being a millionaire -- less chance of being audited by the Internal Revenue Service.
The tax agency said Thursday that in the 2007 budget year it audited one out of every 11 with incomes of $1 million or more. Among those with incomes of $100,000 or less, 99 out of every 100 escaped further IRS scrutiny.
Still, the IRS said its auditing rates were generally up for people of all income levels. The rates were 9.25 percent for those with incomes of more than $1 million, up from 6.3 percent in 2006; 2.87 percent for those with incomes above $200,000, up from 2.57 percent; and 0.93 percent for those earning under $100,000, compared to 0.89 percent the previous year.
Overall, the IRS looked at 1,384,563 returns in fiscal 2007, 1.03 percent of the total individual returns of 134.4 million in the previous calendar year. The audit rate was up 7 percent from the previous year.
There were 31,382 audits of those with $1 million incomes, up 84 percent from the 17,015 audited in 2006.
On the business side, the IRS said the audit focus was on partnerships and mid-market corporations, those with assets between $10 million and $50 million.
The returns of 59,516 businesses were audited in 2007, 0.66 percent of the total and compared to 52,223 in 2006. About one out of six large corporations with assets of $10 million and higher was audited, 9,644 out of 57,357, were audited, down slightly from the previous year.
The tax agency said its enforcement budget in 2007 was largely unchanged from 2006, so it had to focus on areas of growth and potential risk.
It said enforcement revenues in fiscal 2007, from collections and appeals activities, were $59.2 billion, up from $48.7 billion the previous year.
The IRS also noted that 57 percent of individual tax filers filed electronically last year, up from 54 percent in 2006.
© Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
More from Boston.com

IRS Names Four New Frivolous Claims to Avoid

noreply@blogger.com (Tax Representative and Enrolled Agent) — Wed, 16 Jan 2008 15:44:00 +0000

from www.irs.gov

IR-2008-8, Jan. 14, 2008
WASHINGTON — The Internal Revenue Service today issued a notice that lists four additional erroneous legal positions that taxpayers should refrain from using as an excuse to avoid paying their taxes.
An individual or group may not avoid paying their fair share of taxes by making “frivolous” legal arguments such as those listed in this notice. The IRS publicizes these frivolous claims to help taxpayers understand the law and avoid penalties.
Notice 2008-14 lists positions identified as frivolous for purposes of the penalty under section 6702 of the federal tax code for filing a frivolous tax return or submitting to the IRS a frivolous request for a collection due process hearing or application for an installment agreement, offer-in-compromise, or Taxpayer Assistance Order.
Taxpayers who file a tax return or make a submission based on a position listed in this notice are subject to a $5,000 penalty. This notice adds to the positions listed in Notice 2007-30, 2007-14 I.R.B. 883. The positions that have been added are found in paragraphs 9(g), 11, 14, and 25.
The four new frivolous claims pertain to the following:
Misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending.
Erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States or the IRS.
A nonexistent “Mariner’s Tax Deduction” (or the like) related to invalid deductions for meals.
Certain instances of misuse or excessive use of the section 6421 fuels credit.
In 2006, Congress increased the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.
Notice 2008-14 along with additional information providing the truth about frivolous arguments can be found on IRS.gov.

Advocate: IRS should pay if it delays a taxpayer

noreply@blogger.com (Tax Representative and Enrolled Agent) — Thu, 10 Jan 2008 11:13:00 +0000

from www.boston.com

New York Times News Service / January 10, 2008
Taxpayers who endure excessive expense or drain on their time when the Internal Revenue Service mishandles a case should receive "apology payments" of up to $1,000 each, the National Taxpayer Advocate told Congress yesterday.
more stories like this
The advocate, a position Congress created in 1998, also said a new taxpayer bill of rights should be enacted, one that requires taxpayers to conduct themselves honestly and to cooperate with auditors and tax collectors.
Nina E. Olson, the taxpayer advocate, also said the IRS could use technology to apply the tax system to the underground or cash economy, where small entrepreneurs work for unreported pay.
She said that by tracking credit card spending, state sales tax reports, and other records, the IRS could identify who collects this cash.
Olson estimated the IRS could collect $100 billion more each year from those who evade taxes by dealing in unreported cash. That would be enough for honest taxpayers to receive a 10 percent cut in their income tax bills.
The proposed apology payments of $100 to $1,000, adjusted for inflation, would go to taxpayers who endure "excessive expense or undue burden" on their time. Britain and Australia already make such payments. The money would not be subject to tax.
"A fair and just tax system should acknowledge IRS mistakes and delays" in resolving issues, Olson said. She proposed that her office have the authority to authorize such payments up to $1 million a year.
Olson also told Congress that the use of private debt collectors is costing more than the money brought in. Private debt collection "is failing in most respects," she said.
She also said that the IRS had become much too aggressive in charging fees. One manager of a nonprofit organization who asked how to list some unusual income on its tax return was told that an answer would cost $2,700.
The IRS had expected private companies to collect $88 million but has now lowered that to as little as $23 million. The collectors are paid almost a fourth of the money they bring in.
If Congress authorized more money for IRS staff and equipment, the agency said it could bring in $20 for each dollar it receives, five times the Bush administration's official estimate of private debt collector efficiency.
Republicans oppose hiring more IRS workers, and the administration favors private collection even though it acknowledged it is far less efficient than having the IRS handle collections.
But the proposal most likely to draw opposition is one that would require partnerships, limited liability companies, and S corporations - all of which pass tax obligations on to their owners - to report more about their income.
© Copyright 2008 Globe Newspaper Company.

IRS may curb loans against tax refunds

noreply@blogger.com (Tax Representative and Enrolled Agent) — Fri, 04 Jan 2008 13:30:00 +0000

from www.latimes.com

IRS may curb loans against tax refunds
The agency suspects that some tax preparers may inflate refunds to increase the size of the loans they make, and thus their fees.
By Kathy M. Kristof, Los Angeles Times Staff Writer January 4, 2008
The Internal Revenue Service said Thursday that it was considering curbing tax refund loans offered by tax preparers such as H&R Block Inc. and Jackson Hewitt Tax Service Inc. More than 12 million people take out such loans each year to in effect get advances against their refunds, according to a study by consumer groups, which have long criticized the fees on the loans as excessive. The IRS suspects that some preparers may be inflating refunds to increase the size of the loans they make."A preparer who inappropriately inflates the amount of a refund is able, directly or indirectly . . . to collect a higher fee," the IRS said in a notice seeking public comment about the potential refund-loan regulations, which would not go into effect until next year. The news slammed the stocks of the two big tax preparers. Jackson Hewitt plunged $7.26, or 23%, to $24.13, a two-year low. H&R Block slumped 86 cents, or 4.6%, to $17.75.Kansas City, Mo.-based H&R Block said its tax preparers were compensated without regard to the amount of refund loans made and therefore had no incentive other than to serve the interests of clients. Executives at Parsippany, N.J.-based Jackson Hewitt did not return calls seeking comment.Refund loans generated $192.4 million in revenue for H&R Block last year, up from $177.9 million the year before, a spokesman said. A taxpayer typically signs up for a refund loan when having his or her taxes done and receives the money two days later. One or two weeks after that, when the expected refund comes in, the loan is paid off. The loans "provide refund money in 48 hours instead of eight to 15 days," H&R Block spokesman Dan Smith said. "People can't always wait eight to 15 days to get their money."But consumer advocates say the loans not only are usurious but also are marketed to the most vulnerable of taxpayers: low-income parents claiming a special tax break for the working poor. H&R Block, which reduced its fees on refund loans last year under an agreement with consumer groups, currently charges an interest rate of 39% a year on its refund loans. But because the loans are so short-term, the cost averages about 2% of the loan amount, or less than the typical fee on a credit-card advance, the company said.For example, the fee on a $3,000 refund loan from Block averages $62, Smith said.Jean Ann Fox, director of financial services for Consumer Federation of America, called the IRS' action a step in the right direction. But she said the agency should have formally proposed a rule Thursday rather than just say it was thinking about it. "This is an expensive, unnecessary product," she said. "The folks who are having trouble making ends meet don't need to share their refund with the bank and a tax preparer." The move being considered by the IRS would bar tax preparation firms from sharing taxpayer return information with lenders, even with the consumer's consent. That would be a detriment to taxpayers who want the loans, H&R Block's Smith said.Without refund loans, he said, "taxpayers may still need funds quickly but may be forced to use higher-cost lenders -- assuming they even have access to credit -- since they will not have the ability to secure their loan with a tax refund." The IRS proposal now undergoes a public comment period, which lasts until early April. After that, the rule can be revised and then formalized. It then would need to go through another comment period. That makes it unlikely that any rule would go into effect until sometime next year, if at all."We are not making a definitive statement here," said David Williams, director of electronic tax administration for the IRS."We are trying to determine whether there is a problem, and if there is a problem, whether this would be a way to solve it."kathy.kristof@latimes.com

Alternative Minimum tAx fix means delays for million$

noreply@blogger.com (Tax Representative and Enrolled Agent) — Sun, 30 Dec 2007 22:25:00 +0000

from www.money.cnn.com

AMT fix means tax-refund delays for millions
IRS says Congress' late fix to alternative minimum tax could hold back about 3 million refund checks until February.
WASHINGTON (AP) -- More than 3 million people will have to wait until February to get their tax refunds because of Congress' late fix to the alternative minimum tax, the IRS said Thursday.
Congress put a one-year freeze on growth of the alternative minimum tax last week, shielding many middle- and upper-middle income taxpayers from first exposure to the tax. But Congress' late action means the Internal Revenue Service won't be able to start processing five AMT-related forms until February, delaying potential refunds for those people until that month.
Between 3 million and 4 million people filed in January of last year using those forms, with many of those people expecting a refund, the IRS said.
The average refund in 2007 was $2,324, the agency said.
"We regret the inconvenience the delay will mean for millions of early tax filers, especially those expecting a refund," acting IRS Commissioner Linda Stiff said.
As many as 13.5 million people will have to wait until February 11 to start filing with the five AMT-related forms, but the IRS said filing patterns show only between 3 million to 4 million of those people file during the early tax season anyhow.
The IRS was able to reprogram its computers to begin accepting the seven other AMT-related forms when the tax season opens in early January.
But the tax packages that will start arriving in the mail beginning after New Year's Day were printed in November, before the AMT fixes were approved by Congress. The IRS has created a special section on its Web site, irs.gov, with updated copies of AMT forms.
The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families, who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers.
More than 4 million were subject to it in the 2006 tax year. Without the congressional fix, more than 20 million families would have been faced with an extra $2,000 tax hit on average.
The five forms affected by the delay are:
Form 8863, Education Credits.
Form 5695, Residential Energy Credits.
Form 1040A's Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
Form 8396, Mortgage Interest Credit and
Form 8859, District of Columbia First-Time Homebuyer Credit.
Any taxpayer using those forms will have to wait until February to file their taxes, the agency said. The IRS will begin processing those forms on Feb. 11, and the first refunds for those people will start going out 10 to 14 days later.
More than 100 million people got refunds during the last tax season.
An executive at Kansas City, Mo.-based H&R Block (HRB, Fortune 500), the nation's largest tax preparer, suggested there might be ways for people to increase the speed of their refunds.
"We can help taxpayers claiming the child and dependent-care credit avoid the delay by using alternative forms to file their return," said Tim Gokey, group president of H&R Block Tax Services. "Taxpayers can also file their return earlier by not claiming the credits being blocked until Feb. 11, and then filing an amended return later to claim the additional credits."
The Associated Press reported on Dec. 1 that the IRS Oversight Board was warning that taxpayers could expect refund delays because Congress hadn't acted on an AMT fix.
Congress passes legislation every year to keep the tax from expanding. The fix this year was delayed by an argument between Republicans and Democrats over whether some taxes should rise to offset the cost of correcting the AMT.
The House's Democratic majority demanded that the $50 billion cost of the tax relief be paid for, mainly by closing a loophole on offshore tax havens. But Republicans' argument that the AMT shouldn't be fixed with increased taxes prevailed, with the backing of a White House veto threat.
The Dec. 19 passage of the AMT fix threw the IRS's schedule off because it takes seven weeks to reprogram the agency's computers to adjust for congressional action, the agency said.
IRS officials suggest that people file electronically to get faster refunds. People who file electronically and get direct deposits into their accounts can expect refunds in 10-14 days, while those who file with paper forms can expect a wait of as long as six weeks.
The IRS is also working with tax professionals and the makers of tax preparation software to make sure their information is as up-to-date as possible.
"The IRS is going to continue to do everything it can to make this a fully successful filing season for the nation's taxpayers," Stiff said.

$ 65,100.00

noreply@blogger.com (Tax Representative and Enrolled Agent) — Sat, 22 Dec 2007 13:32:00 +0000

from www.boston.com

I have a number in mind and it should figure prominently in your tax decisions
My plans for substantial tax savings next year, including tax-free stock dividends and long-term capital gains, revolve around one figure: $65,100.
more stories like this
While not official yet, $65,100 is projected to be the top of the 15 percent tax bracket for spouses filing jointly in 2008, based on how brackets are adjusted annually for inflation. For single filers, it would be $32,550. For every extra dollar, Uncle Sam would take a progressively bigger cut (first 25 percent, then 28, 33, and 35).
That's reason enough for my wife, Georgina, and me - and all taxpayers - to try to stay within the 15 percent bracket (by contributing to deductible retirement plans, for example, and claiming deductions and adjustments to income).
But there is another incentive: From 2008 through 2010, current tax law calls for a "0 percent" rate - that's right, nada - on qualifying stock dividends and long-term capital gains on the sale of securities for people in the two lowest tax brackets.
"Now, that's a free lunch," said Mike Swenson, certified public accountant with Thomson Tax and Accounting. (Through Dec. 31, the tax rate for qualifying dividends and long-term gains in these two brackets is 5 percent.)
Unless the law is renewed, stock dividends will be taxed as ordinary income in 2011 and the rate on long-term gains will revert to a maximum 20 percent.
The uncertainty about what Congress may do next - including repealing the lower rates before 2011 - is prompting many advisers to suggest investors sitting on gains don't wait too long to sell.
Given the government deficit, "low rates for investors may disappear sooner rather than later," said Grace Allison, vice president and tax strategist for Northern Trust. Investors with large unrealized gains in concentrated portfolios (a lot of money in a few stocks) should consider selling and diversifying now, she said.
Even investors with diversified portfolios can benefit from selling, particularly if they can do it tax-free.
"While the low capital-gains rates appear safe for now, tax laws can be unpredictable," Swenson said. "The rule of thumb is to take advantage of the low rates while you can."
Tax reasons alone normally should not drive sell decisions. But in this case, you can buy the same securities right back - or if you have enough money, sell and buy simultaneously - without adverse tax consequences. (There is no "wash-sale" rule when selling at a gain, only when selling at a loss). Your only concerns may be transaction costs, possible fluctuations in share price from sale to repurchase, and whether your fund imposes a waiting period to buy again after you sell.
To qualify for long-term rates, securities must be held more than a year. Gains and dividends count as taxable income to determine your bracket. Next year, we plan to sell selected no-load fund shares for solid gains but not enough to push us beyond the 15 percent bracket (and nowhere near enough that the alternative minimum tax becomes an issue). We'll buy the same number of shares the same day, keeping our portfolio intact and establishing a new and higher tax basis. We'll also refrain from selling investments at a loss in taxable accounts because losses must first be used to offset gains, and the gains will be tax-free anyway.
Humberto Cruz is a columnist for the South Florida Sun-Sentinel. He can be reached at AskHumberto@aol.com
© Copyright 2007 Globe Newspaper Company.

Tax Advisors for Personal and Business Use

noreply@blogger.com (Tax Representative and Enrolled Agent) — Thu, 20 Dec 2007 12:49:00 +0000

from www.banks.com

By Chris Bibey December 18th, 2007
No matter who you are, being able to lean on a tax advisor may be a huge benefit in your life. This holds true no matter if you simply file individual income taxes, or you are in the midst of starting a business. The tax process in the United States can be very difficult to get along with. And if you are not sure of what you are doing, you could end up being hit with big penalties or worse from the IRS. For this reason, more and more people are hiring tax advisors to work with them.
What can a tax advisor do for you? The better question may be: what can’t a tax advisor do. The fact of the matter is that when you hire an advisor they are meant to help with anything and everything. Not only can they overlook your entire tax situation, but they can also answer your questions. Simply put, you are hiring an advisor to work for you so nothing tax related is off limits.
Do you need pay your tax advisor year round? This is a tricky question, and should be answered only after considering your situation. For instance, if you own a business you may need to have a tax advisor available to you at all times. Remember, you will probably have tax related questions that need answered on a daily basis. On the other side of things, as an individual you may not need to speak with your advisor more than once a year. Of course, if you have a large portfolio of investments this may not be the case.
Hiring a tax advisor to oversee your situation may be the best financial decision that you ever make.

IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit

noreply@blogger.com (Tax Representative and Enrolled Agent) — Sat, 08 Dec 2007 21:00:00 +0000

from www.irs.gov

IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit

IR-2007-196, Dec. 5, 2007
WASHINGTON — Purchasers of certain large trucks, buses or other heavy vehicles running on alternative fuel can claim a credit of up $32,000, and purchasers of certain large hybrid trucks and other heavy hybrid vehicles can claim a credit of up to $12,000 if they qualify for the Alternative Motor Vehicle Credit.
Qualified Alternative Fuel Motor Vehicles (QAFMV) are powered solely by alternative fuels, such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol. Vehicles powered by a combination of an alternative fuel and a petroleum-based fuel may qualify for a reduced credit. Purchases of new vehicles with special equipment, as well as ones converted for alternative power, may qualify.
A credit also is available for certain new qualified heavy hybrid vehicles with a gross vehicle weight rating in excess of 8,500 pounds. A qualifying heavy hybrid motor vehicle draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system. This credit should be not confused with the alternative motor vehicle credit for qualified hybrid passenger automobiles and light trucks.
The list of vehicles is updated periodically
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IRS Announces 2008 Standard Mileage Rates

noreply@blogger.com (Tax Representative and Enrolled Agent) — Wed, 28 Nov 2007 01:24:00 +0000

from www.irs.gov

IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile

IR-2007-192, Nov. 27, 2007
WASHINGTON — The Internal Revenue Service today issued the 2008 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.
The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS.
The mileage rate for charitable miles is set by law.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.
Revenue Procedure 2007-70 contains additional information on these standard mileage rates.
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