The Income Tax School

IRS Progress Through Use of Technology

2011-10-13T18:16:30Z

The following Prepared Remarks of IRS Commissioner Douglas H. Shulman to the CERCA meeting on October 12th describe the progress made by the IRS through the use of technology since the inception of e-Filing to improve service to US taxpayers. The Commissioner also outlines plans for the full implementation of CADE 2 and Modernized eFile to move toward the IRS goal of creating a “real time tax system”.

http://www.irs.gov/newsroom/article/0,,id=247196,00.html

My Memory of the World Trade Center

2011-09-12T02:27:33Z

In the fall of 1981, 20 years before 9/11, I graduated from the XMBA program at Pace University in Manhattan (my birthplace). Our morning graduation was held in the Pace Schimmel Center at the foot of the Brooklyn Bridge. Several larger XMBA classes in addition to our small class of 17 were also graduating. Our commencement speaker was Peter Drucker, a personal friend of our entrepreneurship professor, Jack Flaherty (who inspired me to ultimately become an entrepreneur). Drucker and Flaherty had both been professors at nearby NYU. To celebrate our graduation, our class went to lunch at The Windows of the World in the World Trade Center a few blocks away. In the restaurant, I looked out the window at the incredible sight. The sun had moved to the west behind the Twin Towers, highlighting a clear panoramic view looking east over lower Manhattan, the East River and Brooklyn. I took out my camera and snapped a photo (link below) and was promptly chastised by the restaurant staff who informed me that taking photos was not allowed. In the photo, the left shadow of the Twin Towers covers the Pace campus at the foot of the Brooklyn Bridge. After 30 years, I still keep a framed print of this photo in my office. I cherish my time at Pace and my memory of the World Trade Center; and I mourn the loss of life and our symbols of freedom at the hands of terrorists. However, I am very confident that we will win this war on terrorism!

IRS RTRP Exam Update

2011-07-03T20:38:35Z

I spoke with Prometric in the Exhibit Hall at the IRS Tax Forum in Atlanta and they advised that the IRS Exam will be live this October. This was also confirmed in a seminar by the IRS. IRS has still not released the exact content of the exam; however, we understand it will cover Form 1040 series returns and most, if not all, related schedules and statements. I believe it will also cover IRS Due Diligence, Ethics and, possibly, the client Interview. All of these topics are taught in the Comprehensive Income Tax Course offered by The Income Tax School. www.TheIncomeTaxSchool.com

Should you get out of the “Fast Refund” business? If you are an independent tax business owner who is capable of preparing complex tax returns, the answer may be “Yes”.

2011-06-24T16:06:01Z

The latest proposal is for IRS to develop its own free tax preparation software to “cut-out the middle man” (tax preparers). I was serving on the IRS Electronic Tax Administration Advisory Council when the Free File alliance was formed as an alternative to IRS creating its own tax preparation software. It was a big topic of discussion. I don’t think it makes sense for IRS to create its own tax preparation software since Free File is meeting this need. In my experience, many taxpayers are reluctant to have their returns prepared by the IRS even if the service is free. If this proposal is given serious consideration, more research should be done to determine how many taxpayers would use IRS tax preparation software. In any event, I intend to continue to reduce my tax firm’s dependency on low–income and routine tax returns as we have been doing for the past 5 years. I expect more taxpayers will use Free File and IRS will provide more free bank accounts for them to use direct deposit as an alternative to a RAC.

IRS Urged to Provide Its Own Tax Software

2011-06-23T20:02:34Z

http://www.accountingtoday.com/news/IRS-Urged-Provide-Own-Tax-Software-58876-1.html

2011-06-21T19:11:31Z

The tax preparation business has changed significantly in recent years, and even more dramatic changes are coming in the future. To survive and grow, independent tax businesses must also change. These changes will include new marketing strategies and tactics, adoption of new technologies, new methods of recruiting and training tax preparers, new ways to operate a tax business and serve clients, and different policies & procedures. In short, we must reinvent our tax businesses to adapt to these changes and grow.

In the coming weeks and months I will commenting regularly on each of the topics mentioned above and also seeking input from other indepent tax business owners. By sharing our knowledge we will be able to innovate and operate on a level playing field with the national tax firms.

Small Business Owners and Tax Preparation

2011-03-10T16:12:31Z

Here is some interesting research about how small business owners feel about tax preparation. They says that it is both harder and more time consuming than last year. Adding or expanding services to small business clients can be an excellent way to grow year-round revenues for tax preparation firms.

Click here to read the research

FREE Broadcast from IRS Live – Requirements for Federal Tax Return Preparers

2011-02-23T16:10:36Z

Presented by the Return Preparer Office

Date: March 30, 2011 (archived* for later viewing)

Time: 2 p.m. Eastern

This FREE broadcast is for:

All Paid Tax Return Preparers

Since Jan. 1, 2011, a new registration requirement has been in place for federal tax return preparers. View this broadcast to hear about:

Early program accomplishments
Preparer Tax Identification Number (PTIN) guidelines
Upcoming competency testing and continuing education plans
Upcoming background check plans
Electronic filing requirements

Earn Continuing Professional Education credit:

Enrolled agents receive one CPE credit for participating for a minimum of 50 minutes from the start of the broadcast.
Other tax professionals may receive credit if the broadcast meets their organization’s or state’s CPE requirements.
To receive credit, you must attend the broadcast on March 30. Register for the broadcast using your e-mail address and use the same e-mail address to log in to attend. This will confirm your attendance and generate your Certificate of Completion. Groups can not register with one e-mail address and then receive separate Certificates. If certificates are needed, each person must register separately.
Only March 30, 2011 participants will receive credit. If you do not need a certificate to obtain CPE credit, you may choose to view the archived version of the broadcast.
Look for your Certificate of Completion by e-mail approximately one week after the broadcast. If you have met all requirements, you will receive your certificate automatically.

How to register for the session:

Click on the link to register: http://www.visualwebcaster.com/event.asp?id=76788

General information:

Visit www.irs.gov and search Webinars for information on other programs available.
If you experience difficulty viewing the event, please use the e-mail option on the event page or call 866-956-4770.
The event will be archived for later viewing, approximately two weeks after the date of the event.

IRS Kicks Off 2011 Tax Season with Deadline Extended to April 18; Taxpayers Impacted by Recent Tax Breaks Can File Starting in Mid to Late February

2011-01-04T17:58:57Z

The following is a news release from the IRS.

WASHINGTON — The Internal Revenue Service today opened the 2011 tax filing season by announcing that taxpayers have until April 18 to file their tax returns. The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

The IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties.
“The IRS has made important strides at stopping tax avoidance using offshore accounts,” said IRS Commissioner Doug Shulman. “We continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”

The IRS also reminded tax professionals preparing returns for a fee that this is the first year that they must have a Preparer Tax Identification Number (PTIN). Tax return preparers should register immediately using the new PTIN sign-up system available throughwww.IRS.gov/taxpros.

Who Must Wait to File

For most taxpayers, the 2011 tax filing season starts on schedule. However, tax law changes enacted by Congress and signed by President Obama in December mean some people need to wait until mid- to late February to file their tax returns in order to give the IRS time to reprogram its processing systems.

Some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait to file. This includes taxpayers impacted by any of three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 enacted Dec. 17. Those who need to wait to file include:

Taxpayers Claiming Itemized Deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes (add link to Schedule A). In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.
Taxpayers Claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
Taxpayers Claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

In addition to extending those tax deductions for 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Actalso extended those deductions for 2011 and a number of other tax deductions and credits for 2011 and 2012 such as the American Opportunity Tax Credit and the modified Child Tax Credit, which help families pay for college and other child-related expenses. The Act also provides various job creation and investment incentives including 100 percent expensing and a two-percent payroll tax reduction for 2011. Those changes have no effect on the 2011 filing season.

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. In the interim, taxpayers affected by thesetax law changes can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes. Additional information will be available at www.IRS.gov.

For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers. The IRS urges taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax law changes and ensure accurate tax returns.
Except for those facing a delay, the IRS will begin accepting e-file and Free File returns on Jan. 14. Additional details about e-file and Free File will be announced later this month.

Many Ways to Get Assistance

The IRS is also continuing to focus on taxpayer service. Taxpayers with questions should check the IRS website at www.IRS.gov, call our toll-free number or visit a taxpayer assistance center.

This is also the first filing season that tax packages will not be mailed to individuals or businesses. There are still many options for taxpayers to get paper forms and instructions if they need them. In recent years, fewer and fewer taxpayers received these mailings. Last year, only 8 percent of individuals who filed tax returns received tax packages in the mail. Taxpayers can still get any forms and instructions they need online at www.IRS.gov, or they can visit local IRS offices or participating libraries and post offices.

In addition, individuals making $49,000 or less can use the Volunteer Income Tax Assistance program for free tax preparation and, in many cases, free electronic filing. Individuals age 60 and older can take advantage of free tax counseling and basic income tax preparation through Tax Counseling for the Elderly.

IRS Free File provides options for free brand-name tax software or online fillable forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $58,000 or less can choose from approximately 20 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms, which also includes free e-filing.

Check for a Refund

Once taxpayers file their federal return, they can track the status of their refunds by using the “Where’s My Refund?” tool, located on the front page of www.IRS.gov. Taxpayers can generally get information about their refunds 72 hours after the IRS acknowledges receipt of their e-filed returns, or three to four weeks after mailing a paper return.

Taxpayers need to provide the following information from their tax returns: (1) Social Security Number or Individual Taxpayer Identification Number, (2) filing status, and (3) the exact whole dollar amount of your anticipated refund. If the U.S. Postal Service returns the taxpayer’s refund to the IRS, the individual may be able to use “Where’s My Refund?” to change the address the IRS has on file, online.

Also, taxpayers may complete a Form 8822, Change of Address, and send it to the address shown on the form. They may download Form 8822 from www.IRS.gov or order it by calling 800-TAX-FORM. Generally, taxpayers can file an online claim for a replacement check if more than 28 days have passed since the IRS mailed their refund.

Payroll Tax Cut to Boost Take-Home Pay for Most Workers

2010-12-20T15:02:21Z

From the IRS Newsroom:

WASHINGTON ― On December 17th, 2010, The Internal Revenue Service released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.

Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.

The new law also maintains the income-tax rates that have been in effect in recent years.

Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011. Notice 1036, released today, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.

The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.

For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.

Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.

As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. Publication 919, How Do I Adjust My Tax Withholding?, provides more information to workers on making changes to their tax withholding.