Tax Preparation Business

TIPS FOR A SUCCESSFUL TAX BUSINESS

2012-09-06T16:48:00.002-07:00

KEYS TO A SUCCESSFUL TAX SEASON??
In the past few years, we have have been studying the tax preparation industry/market. We have analyzed the tax partner successes and found many interesting facts due to which many tax partners are successful. These tax partners, had between 200 - 250 returns. Many tax partners contribute their success to knowledge, software etc. However, here are a few tips we have studied that contributed to their successful tax year

TIP #1) EARLY SIGN UP
In our study we found out that 70% of tax partners who signed up early were able to have a greater financial success than the late comers. Of the 70% tax partners who did sign up early, 60% of the tax partners were able to have a smoother onboarding process where they had the time to be trained in the software, understand the processes much better and also spend time d in marketing strategies to build customer awareness in their geography. . A tax preparer who signed on in September had a 15%-20% higher earning potential than the than the tax partner who signed up in October . So, sign up early and increase your paycheck by 20%

TIP #2) MARKETING STRATEGY
This strategy goes hand in hand with the earlier tip of Early Sign on. The tax partners who signed up early were able to invest more time and resources to creating customer awareness of their services. They had more time to talk to family, friends and spread the word about their services through various other avenues like church, local businesses and through various other networking groups. Also, these partners had already started advertisng that they were giving a refund estimate in Thanksgiving using the last paycheck. Using these tactics, they were able to build a bigger customer base early on thus have more customers come to them during tax season.

TIP #3) TRAINING
Most tax partners who had higher tax returns were able to do so because of great preparation which included training. The training was for the software, process, check printing, IRS guidelines etc. These tax partners signed on early so that they could have access to our Training portal which contains tutorials and learning guides for every process. These tax partners not only took advantage of the portal but also reached out to us personally for one on one sessions. With time in their favor due to the early sign on process they were able to use their valuable time to educate themselves and also were able to provide better customer service. These tax partners also find themselves with a better customer retention rates. Their customers come to them year over year due to their knowledge.

FOR A SUCCESSFUL TAX SEASON CALL MAXIM TAX SERVICES AT 954-362-9927!!

Maxim Tax Services
954-362-9927
www.maximtaxservices.com

START PREPARING FOR 2012 TAXES

2012-05-07T21:26:00.002-07:00

You are finally breathing a sigh of relief after completing your 2011 taxes. However, you feel that you overpaid or were not able to take advantage of all the deductions. Well, you can avoid this next year when you are ready to file your taxes for 2012. However, to make sure you do not overpay or are not overlooking any deductions you have to get your ducks in a row this year. Here are the following strategies you need to follow to make sure you have a smoother tax filing:

1) Check your Withholding & Payroll Deductions - If your Refund check was big this year, you can adjust you paycheck withholding so that you can get a bigger paycheck. If your withholding is adjusted correctly you don't have to wait till the end of the year for your money rather right away. However, if you owed taxes, you can adjust your withholding to be higher so that you don't have to write a big paycheck to the IRS at the end of the year.Make sure your Paycheck deductions like Health Insurance, Retirement Contributions etc are being correctly withheld and reported by your employer. Any of these deductions reported incorrectly could make an impact on your Tax liability at the end of the year. It is easier to get this fixed early on than later.

2) Organize your 2011 Tax Returns and all future Tax Documentation & Receipts - Make sure your 2011 Tax Returns and all the supporting documents are kept in a secure place. In case, you get a notice from the IRS, if you have all your paperwork available to you it will be easier for correspondence. Also, for 2012 return it will prove as a good reference tool. Organization is the key to a better prepared 2013 Tax Return. Make sure you keep all your documents related to 2013 tax returns in one place. Make sure all family members know of this place as well so that all your documents are easier to find and you do not miss any important information for your record keeping. Ex. Charitable Contributions Receipts, Sales Tax Receipts etc. As long as it is all in one place it does not make a difference if it is in a file, shoe box or a drawer. Consistency and persistence pays off during tax time

3) Strategic Itemized Deductions & Credits - If you were not able to itemize your deductions this year or missed the itemized deductions by just a few dollars, now is a good time to plan ahead and make sure you are able to take full advantage of all the deductions and credits available to you. See Schedule A for all the expense categories applicable to you and make sure you are taking full advantage of it. For example, by making an extra mortgage payment before the end of the year, making sure you pay your medical bill ahead of time, charitable donations you can make sure you will take full advantage of Itemized Deductions.

4) Update yourself with any tax law changes - IRS updates its website the whole year about any tax law changes to affect your Tax Returns. Check the IRS website regularly to make sure if any change is applicable to you. For example, after 2012, the American Opportunity Tax Credit which is a credit for higher education expenses will no longer be valid. This credit allows you to get a maximum of $2500 of tax credit. To take full advantage it might be a wise idea not only to pay 2012 tuition but also pay 2013 tuition in advance to get the maximum advantage of this tax credit.

5) Let a Tax Professional guide you - Choose a tax professional early on who can help you be more prepared for doing your tax returns. If you work with a professional early in the process you will save yourself a lot of frustrations during tax time regarding strategies or last minute issue. Choosing a tax professional is a very serious issue and should be done very carefully. Let Maxim Tax Services help you with this decision. Call us at 954-362-9927 for more information or visit us at www.maximtaxservices.com.

MISSED TAX DEADLINE – APRIL 17, 2012 – OPTIONS AND HELP FOR TAXPAYERS

2012-04-24T10:32:00.000-07:00

The last date to file your tax returns was April 17, 2012 and if you missed the deadline here are some options that might help you:

File your taxes ASAP- If you owe taxes files your taxes right away. The longer you wait to file your taxes the more you have to pay the IRS in interest and penalties. So, to avoid the high fees the sooner the IRS receives the return the better
EFILE your taxes – To make sure the IRS receives your tax filing soon, EFILE your taxes which can be done till October 15, 2012
File your return for free – If your income was less than $57,000 you can qualify to file your return for free through IRS Free File. For taxpayers who earn more than $57,000 and can file their own tax returns, you can use the Free fillable forms on IRS' website which allows you to do basic math calculations to complete your taxes.
Pay the most you can of your taxes – For taxpayers who owe the IRS, it is wise if you can pay as much as possible even though it is less than what you owe. After you pay the most, apply for Installment Agreement for the remaining balance. Taxpayers who file and pay late have to pay a penalty and interest. This will keep your tax penalty low.
Installment Agreement – Taxpayers who owe money and cannot afford to pay the full amount at once, can request a payment agreement with the IRS. You can file by mail using form 9465 or you can do it online on irs.gov in the IRS Online Payment Agreement Application section. Although, the installment agreement will not waive the interest charges you owe but the IRS can reduce the interest and penalty charges if there was a reasonable cause associated with low payment.
You may be due a Refund - You may be due a Refund from the IRS even if your income in below the normal filing requirements due the amounts withheld from your wages, quarterly estimated payments or due to special credits. For taxpayers who are due a Refund, you will not be charged any interest and late payment penalties but can forfeit your refund if you do not file your return within three years.

Form 1040X – A Band-Aid for Incorrect Form 1040.

2012-04-20T09:53:00.002-07:00

Form 1040X – A Band-Aid for Incorrect Form 1040.

Last minute tax filing stress, lack of information or plain oversight causes taxpayers to flounder on their Form 1040. But it’s okay to make mistakes, provided you correct them in time, within 3 years, in this case.

IRS gives you a chance to correct your tax filing mistakes on Form 1040X. Form 1040X will be your new tax return. It can be used to

· Correct forms 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ.

· Make certain elections after the prescribed deadline.

· Change amounts previously adjusted by the IRS.

· Make a claim for a carryback due to loss or unused credit.

Explain your mistakes:

The IRS needs to know why you are filing Form 1040X. The possible answers could be you received another W-2 after filing the return, forgot to claim child tax credit, forgot to claim a tuition and fees deduction, changed your filing status, did not add sales tax on your new car etc. Part III of Form 1040X gives you the chance to explain your mistake.

How to file:

All schedules and forms should be attached to Form 1040X in the order of the “attachment sequence no.” shown in the upper right corner of the schedule or form. IF there are supporting documents, they should be arranged in the same order as they were in the last return.

If you owe tax, enclose your check or money order in the envelope with the amended return.

Amended Tax returns cannot be e-filed. They have to be mailed in. If you are filing Form 1040X:

1. In response to IRS notice, mail it to the address shown in the notice.

2. Received reimbursement for a hurricane-related loss, mail it to Department of the Treasury, Internal Revenue Service Center Austin TX 73301-0255.

3. With Form 1040NR or 1040NR-EZ, mail it to Department of the Treasury, Internal Revenue Service Center Austin TX 73301-0215.

Fact:

In 2010, the reported national average of time burden was 7 hrs, and cost was $100 per 1040X taxpayer.

Filing 1099-Misc for Independent Contractors

2012-04-20T08:32:00.000-07:00

Small business owners guide to Independent Contractor taxes.

Many a times, small business owners hire outside contractors to work on a temporary, short-term, peripheral tasks. IRS defines them as owners or contractors who provide services to other businesses. Some examples include janitorial service, website developers, tax consultants, interior decorators etc.

Independent contractors are external consultants or subcontractors who are not on your company’s payroll. They are just paid the amount mutually agreed upon. No FICA taxes (social security and Medicare taxes) are withheld from payments and you do not file their taxes.

However, you cannot, still, sit back and relax after cutting out that check!

You are required to issue a Form 1099-Misc to the contractor by the end of January each year. It includes information on the compensation paid in the previous calendar year. Make sure that all independent contractors have given you a signed form W-9, that provides taxpayer ID (TIN). If they do not provide you with a valid taxpayer id (TIN), be prepared for Backup withholding.

Anatomy of a 1099-Misc

The 1099-Misc has 5 vital parts, each with its own significance:

· Part 1 is called copy A, is sent to the IRS.

· Part 2 is called copy 1, is sent to the state tax dept.

· Part 3 is called copy B, is sent to the recipient.

· Part 4 is called copy 2, is for the recipient to file.

· Part 5 is called copy C, your copy.

Printed or Electronic?

If you have more than 249 vendors for whom you must file 1099-misc forms, IRS regulations require that you submit the forms electronically, go green!

However, if you file printed Form 1099-Misc with the IRS, you might as well use some more paper and also file Form 1096 (Annual Summary and Transmittal of US information returns). Form 1096 is the summary of information from all 1099 forms.

Threshold values for 1099 contractors:

Do you really need to file 1099-MISC?

If the vendor is paid less than $600, you really do not have to file 1099-Misc.

Also, according to William Perez, Guide to Tax Planning, you do not need to file 1099-Misc for payments made by credit card or other third-party processor.

Here are some more guidelines to filing 1099-Misc:

File Form 1099-Misc for each person to whom you have paid:

1. At least $10 in royalties or broker payments in lieu of dividends or tax exempt interest.

2. At least $600 in rents, services, prizes, awards or other income payments, medical, health care payments.

3. Any fishing boat proceeds.

4. Direct sales of at least $5000 of consumer products to buyer for resale.

5. Accrued wages, vacation pay, and other compensation paid to an estate or beneficiary after the date of death of a deceased employee.

6. At least $600 in remuneration to independent contractors.

7. At least $600 in remuneration to directors.

8. From whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

In case, you decide to employ any of the wonderful people who worked for you as independent contractors, and have them work exclusively for you, refer my earlier post:

Employers Guide to Payroll taxes

Tax Preparation Business: Employers Guide to Payroll Taxes

Checking on your Payroll Provider

2012-04-05T15:31:00.001-07:00

Outsourced Payroll, but did you check on your Payroll Providers?

The easiest way to do payroll, quite frankly is to sign up with a third party payroll provider, even if you have an accountant. In addition to processing your employees’ paychecks on time, your federal tax liabilities and state tax liabilities are paid as part of the service.

Behind the scenes…

Filing the right forms

To stay in compliance, at the end of each quarter your payroll provider will file your federal and state payroll tax forms with the appropriate agencies. A separate Form 941 is filed for each quarter. The first quarter is January through March. The second quarter is April through June. The third quarter is July through September. The fourth quarter is October through December. Form 941 is generally due by the last day of the month following the end of the quarter. For example, wages you pay during the first quarter, January through March, must generally be reported on Form 941 by April 30th.

In addition to 941 Federal and Quarterly state forms, the yearly forms that are required to be filed are:

1. 944 Federal: To reduce the burden on small business taxpayers, IRS allows employers with small payrolls (liability < $1,000), including government employers to file an annual Form 944.

2. W-2 and W-3

3. 940 Federal

4. Annual State Reconciliations

The copies of these forms, that your payroll provider files, should be available to you by May 5, August 5, November 5, February 5 and March 5 of the respective quarter.

Depositing the taxes

The payroll providers withdraw money from your bank account to pay the appropriate Federal or State government agency.

· If tax liability < $2,500 per quarter, deposit tax with return filing.

· If tax liability > $2,500 per quarter, deposit tax according to the deposit schedule i.e. monthly or semiweekly.

Beginning January 1, 2011, all deposits must be made by electronic funds transfer using the Electronic Federal Tax Payment System (EFTPS). Late deposits are subject to penalties.

You should verify with the Payroll provider if they support payment of the local payroll taxes, workers compensation on your behalf, because these payments are the responsibility of the employer.

Visit http://www.maximtaxservices.com/services.html to find out the latest offerings in payroll services from Maxim Tax Services.

Registered Tax Return Preparer Competency Test 2012

2012-03-22T12:34:00.004-07:00

To ensure competency and professional standards in the tax preparation industry, IRS has announced a new designation: Registered Tax Return Preparer (RTRP)

The test consists of 120 questions and has a perfect score of 500. Minimum score to receive a passing grade is 350. In addition to the test, it is also required to pass the tax compliance check performed by the IRS, which is generally completed within a couple of weeks after the test score is issued.

The test can be scheduled at IRS.gov/ptin and can be taken at more than 260 sites at Prometric test centers in most major metropolitan areas.

The testing fee is $116 and the results are available immediately after completion of the test at the test center. The testing will be suspended for a two week period between April 1, 2012 and April 15, 2012.

Refer IRS.gov/taxpros/tests

RTRP Exemption Criteria:

· Certified Public accountants, attorneys, enrolled agents

· Non-signing preparers who are supervised by Certified Public accountants, attorneys, enrolled agents

· Preparers who do not prepare Form 1040 series.

RTRP Test Content Outline

The test domain areas consist of :

1. Preliminary Work and Collection of Taxpayer Data

2. Treatment of Income and Assests

3. Deductions and Credits

4. Other Taxes

5. Completion of the Filing Process

6. Practices and Procedures

7. Ethics

Pre-test study material for RTRP 2012:

• Circular 230, Regulations Governing Practice before the Internal Revenue Service (Rev. 8-2011)

• Form 1040, U.S. Individual Income Tax Return (2010)

• Form 1040 Instructions (2010)

• Form 2848, Power of Attorney and Declaration of Representative (Rev. 6-2008)

• Form 2848 Instructions (Rev. 6-2008)

• Form 6251, Alternative Minimum Tax – Individuals (2010)

• Form 6251 Instructions (2010)

• Form 8821, Tax Information Authorization (Rev. 8-2008)

• Form 8867, Paid Preparers Earned Income Credit Checklist (Rev. 12-2009)

• Form 8879, IRS e-File Signature Authorization (2010)

• Publication 17, Your Federal Income Tax* (2010)

• Publication 334, Tax Guide for Small Business (2010)

• Publication 596, Earned Income Credit (EIC) (2010)

• Publication 970, Tax Benefits for Education (2010)

• Publication 1345, Handbook for Authorized IRS e-file Providers (2010)

• Publication 4600, Safeguarding Taxpayer Information Quick Reference Guide for

Businesses (Rev. 10-2008)

IRS Releases the Dirty Dozen Tax Scams for 2012

2012-03-20T09:08:00.000-07:00

Recently The Internal Revenue Service issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

We have seen so many tax customers of ours being a victim to one of these so wanted to ensure we highlight the publication from IRS. So wanted to ensure we relay the message

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

The following is the Dirty Dozen tax scams for 2012: Here is a link to the original

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.

An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized.

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft. Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the special identity theft page at www.IRS.gov/identitytheft.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

    Do not sign the return or place a Preparer Tax identification Number on it.
    Do not give you a copy of your tax return.
    Promise larger than normal tax refunds.
    Charge a percentage of the refund amount as preparation fee.
    Require you to split the refund to pay the preparation fee.
    Add forms to the return you have never filed before.
    Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

Source - IRS

2012 Payroll Tax Tables

2012-03-16T11:05:00.001-07:00

Tax tables are the method used by federal, state and local tax agencies to determine withholding amounts. It is used to determine the rates and limits for federal, state and specific local taxes.

There are frequent changes to payroll tax regulations at both federal and state level.

To ensure compliance with changing payroll tax withholding regulations, keep track of the tax table revisions to withhold the correct amount of tax from each employee’s wages.

2012 will be challenging year to be in compliance with the changes. Federal and state agencies are ramping up audits and penalties imposed may be substantial.

What changed?

There were multiple changes to the employee portion of the Social Security rate in the last few months.

Middle Class Tax Relief and Job Creation Act of 2012 extend the reduced employee Social Security tax rate of 4.2% through December 31, 2012.

2012 Tax Rates and Income Brackets by Filing Status


Taxable income range			2012 Tax Rate and Liability
Married Individuals Filing Joint Returns and Surviving Spouses
$11,900			Standard Deduction
$0	to	$17,400	10% of the taxable income
$17,401	to	$70,700	$1,740	+ 15% of the excess over	$17,400
$70,701	to	$142,700	$9,735	+ 25% of the excess over	$70,700
$142,701	to	$217,450	$27,735	+ 28% of the excess over	$142,700
$217,451	to	$388,350	$48,665	+ 33% of the excess over	$217,450
over		$388,350	$105,062	+ 35% of the excess over	$388,350
Head of household
$8,700			Standard Deduction
$0	to	$12,400	10% of the taxable income
$12,401	to	$47,350	$1,240	+ 15% of the excess over	$12,400
$47,351	to	$122,300	$6,483	+ 25% of the excess over	$47,350
$122,301	to	$198,050	$25,220	+ 28% of the excess over	$122,300
$198,051	to	$388,350	$46,430	+ 33% of the excess over	$198,050
over		$388,350	$109,229	+ 35% of the excess over	$388,350
Single
$5,950			Standard Deduction
$0	to	$8,700	10% of the taxable income
$8,701	to	$35,350	$870	+ 15% of the excess over	$8,700
$35,351	to	$85,650	$4,868	+ 25% of the excess over	$35,350
$85,651	to	$178,650	$17,443	+ 28% of the excess over	$85,650
$178,651	to	$388,350	$43,483	+ 33% of the excess over	$178,650
over		$388,350	$112,684	+ 35% of the excess over	$388,350
Married Individuals Filing Separate Returns
$5,950			Standard Deduction
$0	to	$8,700	10% of the taxable income
$8,701	to	$35,350	$870	+ 15% of the excess over	$8,700
$35,351	to	$71,350	$4,868	+ 25% of the excess over	$35,350
$71,351	to	$108,725	$13,868	+ 28% of the excess over	$71,350
$108,726	to	$194,175	$24,333	+ 33% of the excess over	$108,725
over		$194,175	$52,531	+ 35% of the excess over	$194,175

Refer http://www.irs.gov/pub/irs-pdf/p15.pdf for more information.

Energy efficient tax credits for 2011

2012-03-14T15:52:00.000-07:00

If you installed energy efficient equipment or made improvements in your home in the past years, you can claim energy efficient tax credits. The best way to find out if an energy efficient improvement product qualifies is to check the manufacturer’s tax credit certification statement. It can be found on the manufacturer’s website or with the product packaging. These credits will reduce the amount of tax owed, dollar for dollar. They can be claimed regardless of whether you itemize Schedule A deductions or not.

Energy efficient tax credits can be claimed for:

(A) Energy efficient improvements

The 2011 tax credit for energy efficient improvements are 10% of the cost (up to $500). Qualifying improvements include:

1. adding insulation,

2. energy efficient exterior windows and doors,

3. energy efficient roof,

4. high efficiency heating and air-conditioning systems,

5. water heaters, and

6. stoves that burn biomass fuel.

Installation Costs:

Installation costs for (1), (2), and (3) should be excluded from the calculation of this tax credit. Installation costs for (4), (5), and (6) can be included for the calculation.

(B) Alternative energy equipment

The alternative energy equipment tax credit is 30% of the cost of the qualified property. It runs through 2016 and there is no limit on the amount of credit available.

The alternative energy equipment that qualifies is:

1. solar water heaters,

2. solar electricity equipment, and

3. wind turbines.

Installation Costs:

Installation costs can be included to calculate the credit and any unused portions of the credit can be carried forward.

Refer Form 5695, Residential Energy Credit

Child Care Credit 2011

2012-03-14T07:35:00.000-07:00

IRS cares!

If you paid someone to care for your child under age 13, so you could work or look for work in 2011, you may be eligible to take the credit for the expenses.

Rules for Divorced or Separated parents:

If you drove away those scary monsters in the closet for more nights in 2011, than the other parent, you are the custodial parent and can claim the credit. It pays, to drive away monsters!

However, if the child lived equal number of nights of 2011, with each parent, the custodial parent is the one with higher adjusted gross income and claims the credit.

Note: Child support payments received by you are not included in your gross income and are not considered as earned income for figuring this credit.

Which expenses qualify and which do not?

· Services needed to care for the child as well as run the home for example, cook, maid, babysitter, housekeeper, cleaning person. Chauffeur or gardeners, DO NOT qualify.

· Employment taxes paid on wages for child care services qualify.

· Cost of clothing or entertainment DOES NOT qualify.

· Cost of a day camp, even if it specializes in a particular activity, such as soccer qualifies.

· Expenses for sending your child to an overnight camp, summer school or tutoring program DO NOT qualify.

· Medical expenses can be itemized and if so claimed, they DO NOT qualify.

Details in Numbers:

The child care credit can be up to 35% of your qualifying expenses, depending upon your adjusted gross income.

For 2010, you may use up to $3,000 of expenses paid in a year for one qualifying child or $6,000 for two children to figure the credit.

The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you deduct or exclude from your income.

If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer and may have to withhold and pay social security and Medicare tax and pay federal unemployment tax.

Refer Publication 501 Exemptions, Standard Deduction, and Filing Information for more details.

Working from Home? Claim Tax Deductions!

2012-03-10T08:40:00.000-08:00

A recent growing breed of pajama workers in bunny slippers can claim the home office tax deduction.

Refer publication 587 for claiming deductions for Business Use of Your Home . http://www.irs.gov/pub/irs-pdf/p587.pdf

Are you qualified for this deduction?

For the self-employed:

The home office must be the principal place of business, used regularly to interact with clients in the normal course of your trade of business.

For employees:

If you are an employee, the business use of home must be strictly for the convenience of the employer and not merely because it is helpful and appropriate.

Figuring the Deduction

Once you meet the qualifying tests, you will need to figure how much you can deduct.

To find the business percentage, compare the size of the part of your home used for business to the whole house. The resulting percentage determines the business part of the expenses for operating your entire home.

Example:

The area of office is 240 sq. ft and home is 1,200 sq. ft.

So, the office is 20% (240 divided by 1,200) of the total area .

The business percentage is 20%.

Deduction Limit

If the gross income from business use of your home >= total business expenses (including depreciation), you can deduct all business expenses related to the use of your home.

If the gross income from business use of your home < total business expenses, the deduction for certain expenses is limited.

Type of Expenses

Direct Expenses like painting or repairs only in the area used for business are deductible in full.

Indirect Expenses like home insurance, utilities and general repairs are deductible based on the business percentage of your home.

Unrelated expenses like lawn care or painting a room not used for business are strictly not deductible.

Depreciation Deduction

This is an allowance for the wear and tear on the part of home office.The value of land, however cannot be deprecated. To calculate the depreciation deduction for 2011, depreciate the home office part as nonresidential real property under the modified accelerated cost recovery system (MACRS) which uses the straight line method. (Refer publication 946).

Business Furniture and Equipment

Depreciation and section 179 deductions determine if you may be entitled to take deductions on furniture and equipment used in the home office.

IRS defines Listed property like computers , photographic, phonographic and video recording equipment. Special rules apply for this type of property.

More-than-50%-use test

The listed property must be used more than 50% for business or work as employee to claim a section 179 deduction or an accelerated depreciation deduction. This deduction can be claimed for the cost of depreciable tangible personal property bought for use in trade or business.

And the most important of all, Record keeping!

There is no prescribed method of record keeping, but overall the records must show:

· The part of home used for home office.

· It is used exclusively for work.

· Depreciation and expenses for the business part.

Keep your records for as long as they are important for any tax law. This is usually the later of the following dates:

· 3 years from the return due date or the date filed

· 2 years after the tax was paid.

So go ahead, grab a form 8829 and file Expenses for Business Use of Your Home!

PAST YEAR REFUNDS...YOU SNOOZE YOU LOOSE...CLAIM YOUR 2008-2012 REFUND

2012-03-01T05:59:00.000-08:00

IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

Haven't Filed a Tax Return in Years?:
IR-2012-26, Feb. 23, 2012
WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.
The IRS estimates that half of these potential 2008 refunds are $637 or more.
Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.
For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.
The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.
By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

$38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
$33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
$12,880 ($15,880 if married filing jointly) for those with no qualifying children.
For more information, visit the EITC Home Page on IRS.gov.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2008, 2009 or 2010 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering it on IRS.gov, filing Form 4506-T, or by calling 800-908-9946.
Individuals Who Did Not File a 2008 Return with a Potential Refund

State	Individuals	Median Potential Refund	Total Potential Refunds ($000)*
Alabama	18,400	$641	$15,738
Alaska	5,800	$641	$5,952
Arizona	29,000	$558	$24,913
Arkansas	9,600	$620	$8,152
California	122,500	$595	$112,201
Colorado	20,500	$589	$18,909
Connecticut	12,500	$697	$13,893
Delaware	4,200	$644	$3,784
District of Columbia	4,000	$642	$3,791
Florida	70,400	$650	$66,974
Georgia	35,800	$581	$30,661
Hawaii	7,600	$714	$8,307
Idaho	4,700	$541	$3,878
Illinois	40,800	$692	$40,712
Indiana	21,800	$664	$19,590
Iowa	10,600	$658	$9,295
Kansas	11,500	$631	$10,084
Kentucky	12,300	$640	$10,501
Louisiana	20,500	$662	$18,859
Maine	4,000	$579	$3,248
Maryland	24,600	$641	$22,591
Massachusetts	23,900	$699	$22,957
Michigan	33,300	$660	$30,903
Minnesota	15,200	$584	$12,772
Mississippi	9,900	$591	$8,254
Missouri	21,600	$593	$18,213
Montana	3,600	$599	$3,192
Nebraska	5,100	$623	$4,371
Nevada	14,500	$619	$13,381
New Hampshire	4,300	$733	$4,518
New Jersey	31,300	$716	$31,185
New Mexico	8,000	$611	$7,420
New York	60,300	$686	$61,240
North Carolina	30,800	$558	$24,997
North Dakota	2,000	$625	$1,895
Ohio	36,400	$622	$31,018
Oklahoma	16,800	$620	$14,787
Oregon	18,500	$527	$14,819
Pennsylvania	38,700	$695	$35,565
Rhode Island	3,400	$674	$3,040
South Carolina	12,200	$547	$10,158
South Dakota	2,300	$669	$2,234
Tennessee	18,400	$626	$16,130
Texas	96,200	$689	$97,057
Utah	7,800	$536	$6,676
Vermont	1,700	$647	$1,410
Virginia	30,800	$624	$28,670
Washington	29,900	$705	$32,138
West Virginia	4,300	$687	$4,068
Wisconsin	14,100	$592	$11,885
Wyoming	2,600	$773	$2,919
Grand Total	1,089,000	$637	$1,009,905

*Excluding the Earned Income Tax Credit and other credits.

Who Must File Form 2106?

2012-02-28T14:28:00.000-08:00

Employee Business Expenses

Employees can claim deduction for unreimbursed expenses for their field of trade, business or profession, provided there are records to prove time,amount, place, business purpose and business relationship. Generally, it is required to have receipts for all lodging expenses (regardless of the amount) and any other expense of $75 or more.

Standard Mileage Rate for 2011

The 2011 rate for business use of the vehicle is 51 cents a mile.

Depreciation limits on vehicles for 2011

For most vehicles, first-year limit special depreciation allowance and section 179 deduction is $11,060.

For trucks and vans, first-year limit special depreciation allowance and section 179 deduction is $11,260.

Decide to find out if you can file:

Who Must File Form 2106

2012 Deadlines for Filing Tax Returns

2012-02-28T09:33:00.000-08:00

Why April 17^th2012?

The original slated deadline is April 15 of each year, but April 15 2012 is a Sunday and the next day i.e. April 16, 2012 is Emancipation Day in the District of Columbia. So April 17^th is the last tax day.

Deadlines for filing return on taxes paid/ income earned in Year 2011

Tax Day	Type of IT Return	Filing date details
April 17, 2012	2011 Federal Tax Return	Filing deadline and due date for Federal income tax return
State Deadlines	2011 State Tax Return	Due dates for State Income Tax Returns.
April 17, 2012	2011 Federal Tax Extension	Due date for Tax Extensions for 2011 Federal Income Tax Returns
State Deadlines	2011 State Tax Extension	Due dates for State Income Tax Extension
October 15, 2012	2011 Federal Tax Return	Last day to efile 2011 Income Tax Return for Tax Extension filers and late Tax Return filers
April 15, 2015	2011 Tax Amendment	To claim a refund on Amended Return, file anytime within 3 years from the original due date
Anytime filing	Previous Year Tax Returns	File a Tax Return for previous tax year anytime within 3 years of the original tax deadline

State Deadlines

State	Tax Return due date	Tax Return with Extensions due date
Alabama	04/17/2012	10/15/2012
Alaska	N/A	N/A
Arizona	04/17/2012	10/15/2012
Arkansas	04/17/2012	10/15/2012
California	04/17/2012	10/17/2012
Colorado	04/17/2012	10/15/2012
Connecticut	04/17/2012	10/15/2012
Delaware	04/30/2012	10/15/2012
District of Columbia	04/17/2012	10/15/2012
Florida	N/A	N/A
Georgia	04/17/2012	10/15/2012
Hawaii	04/20/2012	10/15/2012
Idaho	04/17/2012	10/15/2012
Illinois	04/17/2012	10/15/2012
Indiana	04/18/2012	11/15/2012
Iowa	04/30/2012	10/31/2012
Kansas	04/17/2012	10/15/2012
Kentucky	04/17/2012	10/15/2012
Louisiana	05/15/2012	10/15/2012
Maine	04/17/2012	10/15/2012
Maryland	04/17/2012	10/15/2012
Massachusetts	04/17/2012	10/15/2012
Michigan	04/17/2012	10/15/2012
Minnesota	04/17/2012	10/15/2012
Mississippi	04/17/2012	10/15/2012
Missouri	04/17/2012	10/15/2012
Montana	04/17/2012	10/15/2012
Nebraska	04/15/2012	10/15/2012
Nevada	N/A	N/A
New Hampshire	04/17/2012	10/15/2012
New Jersey	04/17/2012	10/15/2012
New Mexico	04/17/2012	10/15/2012
New York	04/17/2012	10/15/2012
North Carolina	04/17/2012	10/15/2012
North Dakota	04/17/2012	10/15/2012
Ohio	04/17/2012	10/15/2012
Oklahoma	04/17/2012 efile: 04/20/2012	10/15/2012
Pennsylvania	04/17/2012	10/15/2012
Rhode Island	04/17/2012	10/15/2012
South Carolina	04/17/2012 Efile: 05/01/2012	04/17/2012
South Dakota	N/A	N/A
Tennessee	TBD	TBD
Texas	N/A	N/A
Utah	04/17/2012	10/15/2012
Vermont	04/17/2012	10/15/2012
Virginia	05/01/2012	11/01/2012
Washington	N/A	N/A
West Virginia	04/15/2012 check **	10/15/2012
Wisconsin	04/17/2012	10/15/2012
Wyoming	N/A	N/A

Federal Tax Extension

If you owe taxes and do not file a tax return on time, you might be subject to late payment penalties. If you are not ready to file your tax return, file for an extension AND pay at least 90% of the tax bill to avoid late payment penalties. Filing for an extension gives you 6 months to file a tax return.

If you do not owe taxes and are expecting a refund, you may not need to file and extension.

Cannot afford to pay taxes?

Even if you do not have enough money to pay the total tax, a tax return should be filed before the due date. The IRS can assist in setting up an alternative payment plan, once the return is filed. This will avoid penalties for failure to file. The 3 payment options provided by the IRS are:

Additional Time: A brief additional time to pay can be requested through online payment agreement application or by calling 800-829-1040.

Installment Agreement: The IRS web-based online payment agreement application (OPA) http://www.irs.gov/individuals/article/0,,id=149373,00.html allows taxpayers who owe less than $25,000 in combined tax, penalties and interest to self-qualify, apply for and receive immediate notification of approval. This OPA provides with simple and convenient method to establish an installment agreement without personal interaction with IRS and reduces paper processing.

Requests for installment agreement can also be made in writing in Form 9465 or calling 1-800-829-1040.

If you owe more than $25,000, you are required to complete a financial statement to determine a monthly payment amount for an installment plan. For more information, see Tax Topic 202.

Pay by Credit or Debit Card: IRS accepts all major cards (American Express, Discover, MasterCard, Visa) for no additional fee using the e-pay option. The processing companies charge a convenience or flat fee based on the amount paid. http://www.irs.gov/efile/article/0,,id=97400,00.html

Are you eligible for Mortgage Debt Forgiveness?

2012-02-28T09:32:00.000-08:00

You save tax on mortgage repayments. But if the debt is cancelled, do you pay taxes on the amount you have already received?

Normally, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable.

Example: You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.

Mortgage Debt Forgiveness Act of 2007 to the rescue!

Mortgage Forgiveness Debt Relief Act allows you to exclude certain cancelled debt (up to $2 million) on your principal residence from income. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. It applies to debt forgiven in calendar years 2007 through 2012.

Example:

Isabella paid $200,000 for her home. She paid $15,000 down and borrowed the remaining $185,000 from a bank.
Isabella is personally liable for the loan and the house is pledged as security for the loan.
In 2011, the bank foreclosed on the loan because Isabella stopped making payments.
When the bank foreclosed the mortgage, the balance due was $180,000, the FMV of the house was $170.000, and Isabella’s adjusted basis was $175,000 due to a casualty loss she had deducted.
At the time of the foreclosure, the bank forgave $2,000 of the $10,000 debt in excess of the FMV ($180,000 minus $170,000).
Isabella remained personally liable for the $8,000 balance.

In this case, Isabella has ordinary income from the cancellation of debt in the amount of $2000.
The $2000 income from the cancellation of debt is figured by subtracting the $170,000 FMV of the house form the $172,000 difference between Isabella’s total outstanding debt immediately before the transfer of property reduced by the amount for which she remains personally liable immediately after the transfer ($180,000 minus $8000).
Isabella is able to exclude $2000 of cancelled debt from her income under qualified principal residence indebtedness rules.

Gain or Loss?

Isabella must determine her gain or loss from the foreclosure. In this case, the amount that Isabella realizes is $170,000. This is the smaller of

(a) the $180,000 outstanding debt immediately before the transfer reduced by the $8000 for which she remains personal liable immediately after the transfer ($180,000-$8000 = $172,000) or

(b) the $170,000 FMV of the house.

Isabella figures her gain or loss on the foreclosure by comparing $170,000 amount realized with her $175,000 adjusted basis. She has a $5000 nondeductible loss.

How to claim it?

Collect form 1099-C from your lender, showing the amount of debt and fair market value of any property foreclosed.

Fill form 982 attach to the federal income tax return for the tax year in which the qualified debt was forgiven.

Refer IRS Publication 4681 Canceled, Debts, Foreclosures, Repossessions and Abandonments (for Individuals)

Which is the tax form fits you?

2012-02-21T20:44:00.000-08:00

1040, 1040A or 1040EZ

You should use the simplest tax form for your needs. This will save you time in preparing your return, and the IRS will be able to process your tax return more quickly.

Form 1040EZ is the shortest and easiest federal tax form.

Form 1040A, or "short form" allows you to claim the most common adjustments to income.

Form 1040 can be used by anyone. Even though it takes longer to fill out, it can handle any tax situation no matter how complex.

	1040	1040A	1040EZ
Filing Status	All	All	Single or married filing jointly
Dependents	All	All	None
Income	Total can be any amount	Total must be under $100,000 after deductions	Total must be under #100,000 after deductions and exemptions
Sources must be only	Same as 1040A and all other sources of taxable income including · Lottery and gambling winnings. · Self employment · Rental · Alimony received · Sale of property/stock	Same as 1040EZ and the following sources: · Interest (any amount) · Ordinary dividends · Capital gain distributions · IRA distributions · Pension income · Social Security	· Wages · Taxable scholarships · Interest income (totaling $1,500 or less) · Unemployment compensaton · Alaska Permanent Fund dividend
Adjustments	All	· Educator Expenses · IRA deduction · Student loan interest deduction · Tuition and Fees	None
Deductions and Exemptions	Itemized deductions or standard deductions and exemptions	Standard deductions and exemptions	Standard deductions and exemptions
Credits	All	· Earned income · Child and dependent care · Child tax · Elderly/Disabled · Education · Retirement savings contributions	Earned income

2011 Earned Income Tax Credit EITC..Do you qualify?

2012-02-21T20:06:00.001-08:00

Good news for people working hard to make ends meet!

EITC is a refundable tax credit for people earning wages $49,078 or less from self employment or farming in 2011. You may get money back even if you have no tax withheld.

How to get the credit?

Use EITC assistant on http://apps.irs.gov/app/eitc2011/SetLanguage.do?lang=en to check if you qualify. To get the credit, file a return and specifically claim the EITC, even if your aren’t required to file.

Many special rules apply to EITC, and can be found at http://www.irs.gov/pub/irs-pdf/p596.pdf

The instructions contain a worksheet and the earned income credit table to help you determine the amount of your credit.

General Rules:

· Must have earned wages, tips or income from running a business, farm or investment income limited to $3150.

· Have a valid SSN for self, spouse and qualifying children

· Filing status must be single, head of household, married filing jointly, widow/widower

(Note: Married filing separately do not get the credit)

· Must be a US citizen or resident alien

Income thresholds for (Both earned and adjusted gross income):

Annual Income must be less than:

$13,660 ($18,740 married filing jointly) with no qualifying children

$36,052 ($41,132 married filing jointly) with 1 qualifying child

$40,964 ($46,044 married filing jointly) with 2 children

$43,998 ($49,078 married filing jointly) with 3 or more children

Employers can help their low to moderate income employees boost their incomes at no cost!

Hang posters on your bulletin board or have EITC flyers or brochures placed in their wage statements.

Link your employees to important EITC information.

Network with other employers, government agencies, social service organizations etc. in your community who have vested interest in reaching and educating low income workers about EITC.

Employers Guide to Payroll Taxes

2012-02-17T08:15:00.000-08:00

Employers report payroll by calculating gross pay and various payroll deductions to arrive at net pay. Payroll taxes must be withheld from an employee’s paycheck and handed over to various tax agencies.

Payroll taxes include:

1. Federal income tax withholding (Publication 15)

2. Social Security tax withholding

3. Medicare tax withholding

4. State income tax withholding

5. Various local tax withholdings (such as city, county, school district taxes, state disability or unemployment insurance)

Voluntary Payroll Deductions:

These deductions are withheld from an employee’s paycheck only if the employee has agreed to the deduction. They include:

1. Health insurance premiums (medical, dental and eyecare)

2. Life insurance premiums

3. Retirement plan contributions (401K plan)

4. Employee stock purchase plans (ESPP and ESOP plans)

5. Meals, uniforms, union dues and other job-related expenses.

Employer Payroll Tax Responsibilities:

Even after paychecks have been issued to employees, the employer or the company is responsible for paying employer’s share of payroll taxes, depositing tax dollars withheld from the employers’ paychecks, preparing reconciliation reports, accounting for the payroll expense and filing payroll tax returns.

What are Employer Payroll Taxes:

The employer portion of payroll taxes are an added expense over the expense of an employee’s gross pay. They include:

1. Social Security taxes

2. Medicare taxes

3. Federal Unemployment taxes (FUTA)

4. State Unemployement taxes (SUTA)

FICA Taxes

The Federal Insurance Contributions Act (FICA) tax consists of both Social Security and Medicare taxes. The employer and employees pay half of these taxes. Together both halves of the FICA taxes add up to 15.3%. The FICA tax is broken down into:

1. Social Security (Employee pays 6.2% and Employer pays 6.2%)

2. Medicare (Employee pays 1.45% and Employer pays 1.45%)

Payroll Tax Holiday: For 2011, the employee portion of Social Security was reduced to 4.2% instead of 6.2% as a part of Tax Releif Act of 2010. The employee-portion of Social Security will revert back to full 6.2% starting tax year 2012.

How Do Employers Report Payroll Taxes:

Employers are required to report their payroll tax obligations and deposit payroll taxes in a timely manner. The reporting requirements are:

1. Making federal tax deposits

2. Annual federal unemployment tax return (Form 940 or 940EZ)

3. Employer’s quarterly payroll tax return (F0rm 941)

4. Annual Return of Withheld Federal Income Tax (Form 945)

5. Wage and Tax statements (Form W-2)

Student Taxes

2012-02-17T08:06:00.000-08:00

Student Taxes

Won a scholarship or fellowship?

All or part of a scholarship or fellowship may be taxable, even if you did not receive Form W-2.

A scholarship is an amount paid for the benefit of student at an educational institution in a graduate or undergraduate program.

A fellowship grant is an amount paid for the benefit of an individual to aid in the pursuit of study or research.

What is excluded:

1. Tuition and fees required for enrollment or attendance.

2. Fees, books, supplies and equipment required for the courses.

What is taxable:

Any part of the grant used for other purposes, like room and board.

Payment for services: Sometimes there are conditions to provide a service, in return of a grant. All payments that are received for past, present or future such services are taxable. It also includes Fulbright students and researchers.

For more information on Taxable Scholarships and Fellowships visit
http://www.irs.gov/pub/irs-pdf/p970.pdf

Student Loan Interest Deduction:

This deduction can be claimed in addition to itemized deductions. Student loan interest on loans issued for self or spouse (if filed jointly) and for any dependants can be deducted from taxable income. The maximum amount of tax deduction that can be claimed is limited to $2500.

· For income ranges between $60,000 and $75,000, the deduction for student loan interest will be prorated. ($120,000 to $150,000 for married people filing jointly)

· For incomes > $75,000 (> $75,000 for married filing jointly) the student loan interest is not deductible at all.

Phase outs for Student loan interest deductions:

Starting with the year 2013, the deduction will revert to an older law in which student loan interest will be deductible only for the first 60 months of repayment.

How to claim the deduction:

No special forms are needed to claim the student loan interest deduction. The deductible amount is simply written on Line 33 of Form 1040, or line 18 of Form 1040A, and subtracted from the income.

Which Student Loans Qualify:

The loan must be taken to pay qualified higher education expenses which include cost of tuition, fees, room and board, books, equipment, and other necessary expenses such as transportation in any accredited post-secondary institution, including those conducting internship or residency programs in health care facilities.

These costs must be reduced by any employer-provided educational benefits received by the student, any non taxable distributions from a Coverdell ESA, any savings bond interest that was non taxable because it was used for education expenses, any non taxable scholarships or veteran’s education benefits.

Refer IRS publication 970 for more information.

IRS Tax Tip 2012-31: IRS Offers Four Tips on Unemployment Benefits

2012-02-16T07:54:00.001-08:00

IRS Offers Four Tips on Unemployment Benefits

Unemployment can be stressful enough without having to figure out the tax treatment of the unemployment benefits you receive.
Unemployment compensation generally includes, among other forms, state unemployment compensation benefits, but the tax implications depend on the type of program paying the benefits. You must report unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you receive in your total income for the year. You should receive a Form 1099-G, with the total unemployment compensation paid to you shown in box 1.

2. Other types of unemployment benefits include:

Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
Railroad unemployment compensation benefits
Disability payments from a government program paid as a substitute for unemployment compensation
Trade readjustment allowances under the Trade Act of 1974
Unemployment assistance under the Disaster Relief and Emergency Assistance Act

For complete information on each of the benefits listed, see chapter 12 in IRS Publication 17, Your Federal Income Tax, or Publication 525, Taxable and Nontaxable Income.

3. You must report benefits paid to you as an unemployed member of a union from regular union dues. However, if you contribute to a special union fund and your payments to the fund are not deductible, you only need to include in your income the unemployment benefits that exceed the amount of your contributions.

4. You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Tax will be withheld at 10 percent of your payment. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

For more information on unemployment compensation see IRS Publications 17 and 525. Forms and publications can be downloaded from the IRS Website at www.irs.gov or can be ordered by calling 1-800-829-3676

For further explanation feel free to contact your Maxim Tax Representative.

TOP TEN LIST Reasons to join Maxim Tax Services as a Tax Partner

2011-10-19T19:19:00.000-07:00

Our Tested Model and Formula for Success

Anyone who understands the opportunity in the tax business joins Maxim as a Tax Partner. It's that easy. Generating high-quality leads costs almost nothing. Our plan is completely proven and without comparison or competition! Come join the network of 1,200+ tax partners.

TOP TEN LIST
Reasons to join Maxim Tax Services as a Tax Partner ~
10. Your Ideal Business —This opportunity fulfills all the ideal requirements of starting a successful new business venture

9. Tax Industry Trends — 62% of Americans had their taxes prepared by a CPA, Tax Franchise or Preparer

8. Proven Performance Record —We have a solid ten-year history of high achievement and are proud of our spotless reputation.

7. Maximizing Efficiency —We assume tax preparation liability which gives you the ability to do more tax returns than the other franchises

6. Choice of Packages- We have a variety of packages to choose from based on your goals and resources

5. Turnkey Operation — You can make a profitable turnkey business within 3 months unlike other franchises that give you profit after 3 years

4. High Profit Margin — Our business is able to provide you with high profit margins and low investments in the tax preparation industry

3. Better Than Support —We provide every tax partner with 100% back end support through online and phone.

2. Interview Based Software—Our software is by far the best in the industry and takes away all complications from the business

1. Your Motivation —We can tell you at the outset whether it is worth your while to partner with us. If you have what it takes, let's talk!

Toll Free Number: 1-(800)-604-6434
E-mail: support@maximtaxservices.com

1-2-3 Get Started Today With Your Own Part-Time Business

2011-10-09T21:45:00.000-07:00

Want to have a part time business which would have high probability of success along with your current job?

Want to create another offering in your current business using the same resources without much investment and no additional fixed cost?

If you fit in any of the above situations or actually are an entrepreneur looking to test the waters before you commit to the world of business, Now you can!!!

Maxim Tax Services can help you achieve your goals by showing you the right path to a very lucrative business of Tax Preparation. We have the right tools and processes to make sure you succeed in this business. You do not need to be a CPA and you do not need to invest the high cost franchise fees.

Tax Preparation Business is a great business for the following reasons:

The Current Economy has created significant stress and pressure on Working American Families as well as non working American Families
New Tax Credits and Expanding Existing Tax Credits equals Larger Tax Refunds for Working Americans
Every working and non working American needs to file their taxes
80% of the people filing taxes use some kind of help to file their taxes.

Here is what Maxim Tax Services has to offer

A low investment opportunity (in the range of $500 -$1500 ) to start your own business and be your own boss
The necessary training needed to start your tax preparation business
Reduce risk associated with the business.
Provide large returns based on investment of time
Get out of the rat race.

WE WILL SHOW YOU HOW. DON’T WASTE ANY MORE TIME

CALL/EMAIL US TODAY

For more details on our financial models to see how you can benefit from this please send an email to support@maximtaxservices.com. Call us at 1-800-604-6434.

Cross Sell Opportunity for Insurance Agencies – Increase Cash flow and Profits

2011-10-09T21:44:00.000-07:00

So you are a typical small business owner running an independent insurance agency or have stepped into a new insurance business and now are finding it difficult to grow your revenue, increase your client base or retain current customers. Even though you are having difficulty growing your business, you still have to pay for your rent, staff and all the operational costs to run your business.

WHAT ARE SOME STRATEGIES YOU NEED TO IMPLEMENT TO START GROWING YOUR BOTTOM LINE

The world is changing – Grocery stores are now offering BlockBuster rentals– The idea in this example is not that the grocery stores/gas stations want to sell movies/sandwiches but it is to increase the foot traffic into the stores and thereby, to sell more groceries. This cross selling technique is a great way to not only market to new customers but also to increase your current sales.

In today’s world, insurance agencies are losing their customers to online shopping techniques. Using cross selling technique from the above example, insurance agencies can increase sales by marketing to new customers and retaining existing ones.

So, how does any insurance agency use the same example as the grocery store and cross sell and compete in this changing environment. By offering complimentary services to their customers.

Let us give you a detailed scenario:

A small insurance agency in Miami was about to close his business. His agency was located in a typical neighborhood where the median income was less than $40k. He had enough foot traffic however, he was constantly competing against other agencies in the neighborhood offering his customers better rates. One day, he had called us after reading about us on our website. When we educated him about our model of offering Tax Services to his customers he was apprehensive and not sure if that would really make his business turnaround. However, we convinced him to try it out and he signed up with us. Prior to tax season he started marketing to his current customers about his new Tax Preparation offering. When tax season came, a lot of the customers who he had spoken to about this new offering started coming to him for their taxes. This not only helped him with additional revenue from taxes but also helped him retain his current customers. Also, it attracted new customers to his office who were tired of waiting at a nearby tax office and walked in due to signage. He was able to sell some type of insurance policies to a lot of these new customers.

That was his first season when he partnered with us, today he has recommended us to some more of his contacts who could also use our offering. The insurance agency is still in business today and looking to do a lot more tax returns in the 2012 tax season.

This could be the turnaround needed for your agency. With minimum investment and using your existing resources you could be doing the same. Your agency can not only grow from this additional offering but also attract more customers who would be loyal to you since you now provide additional services to them that keeps them there.

Maxim Tax Services can help you grow your business with minimum investment and no Tax experience. We provide you with the needed training and our experienced CPAs you can offer your customers Tax preparation with confidence.

WE WILL SHOW YOU HOW. DON’T WASTE ANY MORE TIME

CALL/EMAIL US TODAY

For more details on our financial models to see how you can benefit from this please send an email to support@maximtaxservices.com. Call us at 1-800-604-6434.

Tax Franchise vs. Tax Partnership

2011-10-09T20:43:00.000-07:00

Tax Franchise vs Tax Partnership

So, you are now experienced in the Tax Preparation industry and have a customer base that you think will like to do their taxes with you. With all this in mind you want to start your own Tax preparation business. While researching your options for starting this business you come across various models from tax franchises, tax partnership to independent tax locations. In this article, we will help you decide between tax preparation franchise and tax preparation partnership.

Cost/Pricing - Any business that you will start, you will need to invest some capital. However, when you do your research you will find that most tax franchises like H&R Block, Jackson Hewitt etc., have a significant franchise fees which can range from $20k-$75k, which makes it very difficult for an average person to enter this business. And most of the franchises project a return on investment after 3 years. However, in Tax Partnerships, the investment is significantly low and you can get your return in your first tax season. Therefore, for a person with some experience in this industry it becomes easy to invest and run a successful tax preparation business without worrying about recovering his/her capital.

Business Operations Flexibility - When you purchase a franchise, you have to operate the way the franchise wants you to. You loose the flexibility of choosing your own location you have to run your business based on their rules and regulations from timing, pricing etc. So, you feel you are no longer running YOUR OWN business but actually working for someone else’s business. When you sign up in a Tax Partnership you have more control of your business. Who knows the location and your customers better than you. So, why should you not be able to manage your business the way you know best and the way it can appeal to your customers.

Royalty and Splits - Tax franchises charge you not only initial start up capital investment but also a high royalty fee of your tax preparation fees. These fees eat into your profits and make it harder for you to recover your investment sooner. In Tax Partnerships, there is a split which is negotiable and not tied to gross revenue. Also, Tax partnerships do not ask an additional fees for their national marketing campaigns.

Contract Period - Most franchises have a contract period of 5 or more years and also do not allow you to add more services to your business. This limits your investment and recovery of investment longer. Tax partnership term is only 1 year and most tax partnerships also promote many other add on and ancillary services that allows you not only to to help you do taxes for your customers but also to sell other services to your customers. Tax Partnerships allow you to recover your investment faster than any other franchises. For more info on starting your own tax prep business contact us for more details at www.maximtaxservices.com or Raj at raj@maximmultiservices.com