ASK RALPH

A Great Opportunity

2014-07-27T18:53:00.001-04:00

Change in “Responsible Party” Must Be Reported to the IRS

2014-01-30T11:56:00.001-05:00

Change in “Responsible Party” Must Be Reported to the IRS

Pay for your Tax Preparation right from your Refund!

2014-01-30T09:17:00.003-05:00

Here is a great product we are now offering our clients.

Refund Transfer

If you are expecting a tax refund, the Refund Transfer product is a convenient way to receive your refund amount. Whether you hire a tax professional to prepare your tax return or you prepare it yourself online, with the Refund Transfer you can simply pay with your refund, with tax preparation fees withheld from your refund amount.

Why Use a Refund Transfer?

Pay With Your Refund!

By selecting a Refund Transfer you can pay for tax preparation with your refund, with tax preparation fees withheld from your refund amount.

As Fast as e-Filing

Selecting a Refund Transfer does not delay the speed of refund disbursement. Once the IRS accepts your e-filed return your refund is available when the IRS releases it - typically within 21 days according to the IRS website. Choose whether you want to receive your money via check, direct deposit or on a pre–paid debit card*. You receive your money upon IRS funding.

How Does it Work?

Tax Return is Prepared

Begin by either preparing your return online using an approved software company or hire a tax professional that is partnered with TPG. If you are expecting a refund you may select a Refund Transfer from TPG.

Your Return is e-Filed

Your tax return (including our bank information) is e-filed to the IRS, and the IRS is instructed to route the refund through our bank.

Receive Your Refund

Once we get your refund, TPG takes out all associated fees, giving you the balance of the refund amount either as a check, direct deposit or on a pre-paid debit card (check for availability).

The Refund Transfer offers a convenient and secure payment option that is not available to many taxpayers without using a tax refund-related bank product. If you don’t have a bank account, the Refund Transfer gives you access to the same benefits as taxpayers that have bank accounts. If you just want an alternative to paying up-front with cash or a credit card ask your tax preparer about the Refund Transfer.

*This card is issued by MetaBank™, member FDIC pursuant to a license from Visa U.S.A. Inc. TPG is a registered ISO of MetaBank.

Congratulations Carson Long

2014-01-25T21:42:00.001-05:00

My son Ryan Estep is a sophomore at the Carson Long Military Academy in New Bloomfield Pennsylvania. He is a leader at the school and his drill team today won a major competition placing first in all categories and will be heading to a national competition in New York next month. I am very proud of my son and his teammates. Here is a photo of him accepting the first place award.

For more information about the oldest American military boarding school visit carsonlong.org. We are also planning an open house in the Delaware area this summer if you are interested in enrolling your son in a school which will change his life and develop leadership.

TaxBot - This is a must have APP that may save you thousands.

2014-01-22T17:05:00.003-05:00

I know your time and money are very valuable so I want to make this short . I have found a tax tracking system that I know will save you both time and money when it comes to keeping track of your receipts and mileage logs.

You need accurate records more than ever!

As a business owner or independent contractor you are 4 to 6 times more likely to be subject to a IRS audit. The IRS has announced they want to hire over 10000 more agents once funding becomes available. More than every you need to make sure you have back up records for the deductions you are claiming.

This inexpensive, simple and easy solution is currently being used by tens of thousands of business people across North America. Please watch short video because I believe it will help me help you save big MONEY on your taxes.

Please take a look at the link below. I have secured a 50% discount for my clients on the service if you use the link below.

https://spendingtracker.infusionsoft.com/go/2pnsa/a7799/

Sincerely,

Ralph V. Estep, Jr.

IRS announces automation of taxpayer resources, start of business filing season

2013-12-24T11:05:00.002-05:00

IRS announces automation of taxpayer resources, start of business filing season

By Sally P. Schreiber, J.D.

December 23, 2013

The IRS announced on its website that, beginning in 2014, it will stop providing a number of taxpayer assistance services in person or over the phone and will shift those services online. The move is designed to free up IRS employees to help taxpayers deal with issues, such as identity theft, that cannot be resolved through other avenues. The changes are being made in the following areas: (1) tax return preparation, (2) transcript delivery, (3) tax law assistance, (4) refund inquiries, (5) employer identification numbers (EINs), and (6) the Practitioner Priority Service.

Return preparation: In recent years, the IRS has provided limited tax return preparation services at its walk-in offices. There have been restrictions on where and when the help is offered and the IRS has required taxpayers to have income below the earned income tax credit thresholds to get help. This help will be further reduced beginning next year, as taxpayers are directed to the more than 13,000 volunteer tax preparation sites instead of the 250 IRS walk-in offices. The IRS also noted that Free File is available to taxpayers on the IRS’s website.

Transcript delivery: Early in 2014, the IRS will debut its Get Transcript service, which will allow individual taxpayers to use their Social Security numbers to view and print a copy of their tax transcript. Get Transcript will be available for the following types of transcripts: tax account, tax return, record of account, wage and income, and verification of nonfiling. Taxpayers will still be able to request that a transcript be mailed to their address of record using the online tool or sending in Form 4506T, Request for Transcript of Tax Return.

Tax law assistance: Most tax law questions the IRS receives during filing season are basic questions such as who qualifies as a dependent and who can take an exemption. The IRS will continue to answer these types of questions, but it will refer more complex questions to resources on the IRS website.

Refund inquiries: The IRS says the most common questions taxpayers ask are related to the status of a refund. The IRS notes that for the first 21 days after a return has been filed electronically or for six weeks after paper filing, taxpayers should check the status of their refund on the IRS’s online tool, “Where’s My Refund?” Customer service representatives will be able to help only those taxpayers who filed electronically at least 21 days prior (six weeks or more in the case of a paper return) or who are directed to a representative by the Where’s My Refund? tool.

EINs: According to the IRS, the EIN Online Assistant has been very successful, with more than 4 million requests processed per year. Beginning with the 2014 filing season, the IRS will handle all EIN requests using the Online Assistant, with only those with a previously assigned EIN being referred to an IRS representative.

Practitioner Priority Service: The Practitioner Priority Service, which provides a way to resolve taxpayer account issues, is intended for tax professionals, but has been increasingly used by taxpayers. The IRS announced that, starting in January, use of the Practitioner Priority Service will be restricted to tax practitioners who are trying to resolve issues for their clients.

Filing season for business tax returns

Last week, the IRS announced that the filing season for individual returns would begin Jan. 31. This is later than the originally planned start date of Jan. 21 due to the government shutdown in October. Filing season for business tax returns, however, will not be similarly delayed. The IRS announced that on Jan. 13, 2014, it will begin accepting both paper and electronically filed business and excise tax returns, including Form 1120, U.S. Corporation Income Tax Return; Form 1120S, U.S. Income Tax Return for an S Corporation; Form 1065, U.S. Return of Partnership Income; Form 1041, U.S. Income Tax Return for Estates and Trusts; Form 720, Quarterly Federal Excise Tax Return; Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return; Form 941, Employer’s Quarterly Tax Return; and Form 2290, Heavy Highway Vehicle Use Tax Return.

The IRS emphasized that this date does not apply to unincorporated small businesses that report their income on Form 1040 on Schedule C, Profit or Loss From Business (Sole Proprietorship), Schedule E, Supplemental Income and Loss, or Schedule F, Profit or Loss From Farming, which are subject to the Jan. 31 delayed start.

—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

Great Letter from Jesus - I did not write this but it's right on point! Merry Christmas.

2013-12-19T14:41:00.002-05:00

Dear children,

It has come to my attention that many of you are upset that folks are taking my name out of the season. Maybe you’ve forgotten that I wasn’t actually born during this time of the year and that it was some of your predecessors who decided to celebrate my birthday on what was actually a time of a pagan festival. No worries, I do appreciate the sentiment though and being remembered anytime.

I don’t really care what you call the day. If you want to celebrate My birth just GET ALONG and LOVE ONE ANOTHER. Now, having said that, let Me go on.

If it bothers you that the town in which you live doesn’t allow a scene depicting My birth, then just get rid of a couple of the Santas and snowmen and put up a small Nativity scene on your own front lawn. If all my followers did that there wouldn’t be any need for a Town Square scene, because there would be hundreds of them all around town!

Please, stop worrying about the fact that people are calling the tree a “holiday tree” instead of a Christmas tree. It was I who made all trees. You can remember Me anytime you see any tree and at any time of the year. Decorate a grape-vine and leave it up all year if you wish and remember I am the true vine, and my Father is the gardener. I am the vine; you are the branches. If you remain in me and I in you, you will bear much fruit; apart from me you can do nothing.

If you want to give Me a present in remembrance of My birth here is my “wish list”. Choose something from it.

1. Instead of writing protest letters objecting to the way My birthday is being celebrated, write letters of love and hope to soldiers away from home. They are terribly afraid and lonely this time of year. I know, they tell Me all the time.

2. Visit someone in a nursing home. You don’t have to know them personally. They just need to know that someone cares about them.

3. Instead of standing by the water-cooler with your colleagues complaining about your boss and how stingy he was with the Christmas bonuses this year, why don’t you go into his office with a gift card and tell him that you’ll be praying for him and his family this year. Then follow-up. It will be nice hearing from you again.

4. Instead of giving your children a lot of gifts they really don’t need, spend time with them instead. Tell them a story of My birth, and why I came to live with you down here. Hold them in your arms and remind them how much I love them!

5. Pick someone who has hurt you in the past and forgive him or her.

6. Instead of griping about a retailer in town saying “Happy Holidays”, be patient with the people who work there. Give them a warm smile and a kind word and even if they aren’t allowed to wish you a “Merry Christmas” that doesn’t keep you from wishing them one. Think about those who have to work over the holidays and bring them a plate of cookies to tell them you appreciate them for their hard work. Take it one step further…when you go out to eat after church on Sundays, rather than look down your nose at all the people who “missed church” because they had to work, when that waitress takes your order, pray for her and thank her for her service to you and then leave her a good tip…not the chintzy ones you have been leaving. My children should always be generous!

7. There are individuals and whole families in your town who not only have no “Christmas Tree”, they have no presents to give or receive. If you want to make a difference this Christmas, support a local charity that provides clothes, food, and shelter to those who are homeless or who help families in crisis. Don’t just send them a cheque at Christmas either, support them year round. If you can’t afford to support them with a monetary donation, give them your time. Volunteering your time is just as helpful!

8. Support a missionary, especially one who takes My Love and Good News to those who have never heard My Name.

9. Finally, if you believe that I am the real “reason for the season”, how about spending more time with Me rather than spending time complaining about how commercial Christmas has become? Live every day like you believe that I am THE WAY, THE TRUTH and THE LIFE, and remember I am with you always!

All My Love,

Jesus

Tax Season Starts January 31

2013-12-19T08:59:00.001-05:00

Tax Season Starts January 31

Praise him today!

2013-12-08T08:28:00.001-05:00

http://youtu.be/yzqTFNfeDnE

2014 IRS MILEAGE RATES

2013-12-06T19:28:00.002-05:00

The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Insurance Cancellation

2013-12-03T21:43:00.001-05:00

Well, I figured this would happen eventually. It's official, we received our health insurance cancellation notice in the mail. This is after the insurance company told me that they would not cancel my policy until my renewal next August. I figured this would happen so I already went out to the open market and found another policy for the family. Of course my current company is willing to give me a new policy, but the rates and deductible are a little higher. Well, in fact, they rate is tripled and the deductible has increased to $12,000 per year. Got to love the affordability of the Obama Care. I have yet to meet anyone who is saving money under this new scheme - must have heard wrong when the President said we could keep our current insurance and also we would see cost savings.

Here's the best part of all. For the past 8 years we have budgeted our medical expenses taking a hard look at each and every expense, seeking generic medications and always making a second thought of whether to go to the doctor. That all changes January 1, 2014. Since I am forced into a "better" plan, I plan to take full advantage of it from the very start. My deductible will only be $1800 for the year so it's going to be a race to get to my out of pocket maximum. I have already spoken to my Doctor and let them know that we will now require only brand-name medications, should probably get all those elective tests and when the sniffles hit on the weekends, here comes the Emergency Room. I just hope their are still doctors to meet my increased demand. If I have to pay for it, I will be using it.

Let the games begin!

Happy Thanksgiving!

2013-11-28T10:31:00.001-05:00

On this day we give thanks for the many blessings we all have in our lives. I am thankful first to our Lord for loving us even as we are his enemy and the scourge of sin remains with us, but we have the blessed assurance that if we believe in him we will be washed white as snow when we stand before the father. I am thankful for our United States where the dreams of our forefathers still resound loudly throughout the streets of America and as we may never have a perfect union, we strive for life, liberty and the pursuit of happiness for all. I am thankful for my wife who has dedicated her life to me, our children, and our new little (well not so little) German Shepherds. Her love for us is a daily reminder of the commitment she made when we stood before God and vowed to love each other until we live no more. I am thankful for my sons who I cherish daily and though they may not realize it, I am in profound honor to be called their father and I strive each day to live up to the responsibility which God has placed in my hands. I am thankful for my family, who have shown me love and demonstrated christian discipleship in the home. I am thankful for my friends, my clients, my employees, and my neighbors. Today I give thanks to all and pray that The Lord of mercy and strength will sustain us all and wrap his loving arms around us and protect us from the storms of life until we reach those beautiful shores of roads paved in gold and worship in thunderous acclaim at the feet of the master. May almighty God bless you and keep you and may his face always shine upon you.

2014 Tax Deposit Requirements

2013-11-11T10:53:00.000-05:00

We have many clients receiving notices from the Internal Revenue Service in reference to the tax deposit requirements for 2014. Normally clients are required to make their federal tax deposits the 15th of the month following the payroll month, but when your annual tax deposits reach $50,000 in the look-back period, the IRS requires that taxes be paid semi-weekly. This means that tax deposits must be made within three business days of the posting of payroll. For example, if you have payroll posted to your employees on Friday, then your payroll taxes are due by Wednesday of the next week. These requirements are not negotiable and significant penalties may be assessed for not meeting the requirement. Please be on the look-out for these letters and forward to them as soon as possible.

If you not a client of Saggio Accounting+PLUS and have questions about payroll or payroll taxes, feel free to contact us for more information. As a full-service accounting firm, we prepare payroll in-house for our clients.

Does your QuickBooks file take a long time to open?

2013-11-07T08:49:00.002-05:00

This is commonly caused by having multiple windows and/or reports open within QuickBooks which must be loaded each time you open your file. To speed up the time it takes to open your file, you can change your settings in your preferences to not save your Desktop View when exiting. Doing so will close all the open windows/reports you have open when exiting QuickBooks.

Closing all your windows/reports close on exit helps QuickBooks open quickly and prevents reports from becoming corrupt.

To change the setting in your preferences select Edit>Preferences>Desktop View. Select Don't save the desktop and click Okay.

Obama Care - No Big Surprise

2013-10-25T08:30:00.001-04:00

Well, we are in the midst of the roll-out of Obama care and I have personally been affected by the new law. I figured that my premiums would rise once the law was approved, but I have to admit that I was totally amazed at the increase in premium. I figured I would call my insurance company after October 1st to determine what I needed to do in reference to my insurance coverage moving into 2014. We started with this plan back in 2005, at that time we selected a high deductible plan to attempt to limit our monthly expense. I recall the premium being about $300 per month for our family plan with an annual deductible of $3500. This year, for the same coverage, our premium has risen to near $500 per month and our annual deductible is now $10,500.00. So here's the Obama care news for us - to keep the same level of coverage our monthly premium has risen to $1100 per month and the annual deductible is now $12,000. The increase represents an increase of over 110%. Sticker shock!

None of this comes as a surprise based on the basic review of Obama care. Insurance is a business where the carriers need to make a profit, so when they are forced to carry the costs of more covered services it's not shocking that the rates would need to increase, but to double the premium - that is just nuts!

I would try to shop my other options on the Obama care web site, but I have tried repeatedly to gain access to no avail - another big shock there. It's all rather pointless anyway since I have already seen some of the expected premiums and they are also higher. I personally have not spoken to anyone who has seen a decrease in their premium.

My advice to my clients and friends, better check with your insurance carrier or your employer and see where this is going to affect you. Better plan a change to your budget because I guarantee your costs are going up. You may want to consider this for budget planning for 2014.

Feel free to contact my office with any specific Obama Care questions as they relate to tax issues.

Startup of the week / A tiny cloud computer can be yours for $45 - Start-up of the Week Israel News | Haaretz

2013-10-24T14:34:00.001-04:00

Startup of the week / A tiny cloud computer can be yours for $45 - Start-up of the Week Israel News | Haaretz

Fire Prevention

2013-10-24T08:41:00.001-04:00

October is Fire Prevention Month: All Is Not Lost If You’ve Lost Tax Records

by Claire Berlin | Oct 23, 2013

Fire, flood, tornados, or your own unorganized closet: Any number of disasters can mean you can’t find tax documents when it’s time to file.

The National Society of Accountants (NSA) offers this list of important documents you should track and what to do if they should ever be destroyed or lost.

Documents You May Need

Personal data such as Social Security numbers and dates of birth for yourself, spouse, and dependents; a child-care provider’s tax ID or Social Security number; and any changes to address, job title, phone number, etc.

Employment and income data such as forms W-2, K-1 and 1099; Employer Identification Numbers (EINs); alimony received and the Social Security number of the payor; and W2-G, 1099-MISC, 1099-G, 1099-SSA, 1099-INT, 1099-DIV, and 1099-B.

Homeowner/renter data, such as forms 1098, 1099-S, 1099-A, 1099-C or HUD-1; final escrow closing statements; property taxes paid; rent paid during the tax year and the landlord’s name, address and phone number; and lists and receipts for moving expenses.

Deductible items, such as forms 1098-E, 1098-T; alimony paid, including the amount paid and the name and Social Security number of the recipient; vehicle license fees from DMV renewals; letters from charities for cash contributions or a detailed log for non-cash contributions with the value of items donated, date donated, amount originally purchased for and date of original purchase; mileage logs and copies of reimbursements from employers; miscellaneous deduction receipts for such items as uniforms, union dues, investment expenses and job-hunting expenses; child-care expenses; and medical expense receipts.

Business, farm and rental information, such receipts or documentation for business-related expenses, inventory reports and payables and receivables ledgers; receipts for all major purchases such as machinery, equipment and furniture; business, farm or rental income and expenses; auto mileage logs; and documentation for self-employed health insurance premiums.

Taxes paid, such as estimated tax payments with the date and amount of each tax payment made; and state taxes paid.

It’s quite a list, and working with a tax preparer can help ensure protection of these and other records or speed their recovery if they’re lost.

How to Retrieve Lost Documents

Despite your best efforts, documents are sometimes destroyed or lost. What do you do? Here’s some advice:

Earnings Statements – Copies of many wage statements can be secured from your employer. If you’ve misplaced your W-2, for instance, request another copy from your employer’s HR department as soon as possible (you may have to fill out a form to request the replacement). If you don’t receive your replacement W-2 even after reminding your employer, contact the IRS (800/829-1040) and have them prompt the company. You can also substitute IRS Form 4852 and refer back to your last pay stubs to fill in needed information.

Originals of the Form 1099 can go missing even easier than the W-2. You receive a 1099 from any company that paid you more than $600 during the tax year – and given the current economy’s love of freelance and contract work, some taxpayers may have more than a few 1099s to collect. Banks also send 1099s if account holders earn a certain amount in annual interest; many banks permit downloading 1099s from their customer service Web sites, and local branches also often issue copies.

Past Tax Returns – Last year’s tax return may be one of the easiest documents to recover. If you used a tax preparer, you can request it from that person. Or you can request a free transcript of your return (exact copies are $57) from the IRS by filing Form 4506 or 4506-t, by using the Service’s online “Order a Transcript” system (http://www.irs.gov/Individuals/Order-a-Transcript) or by calling the IRS (800-908-9946).

Student Tax Forms – Students’ tax forms, such as 1098-T forms or Tuition Statements, can be replaced. Schools often allow students to download an extra copy, and many will have a copy of your 1098-T online. Lenders are the best source for 1098-E Forms or the Student Loan Interest Statement, though if you paid less than $600 in interest, you will not be sent a 1098-E.

Stock Statements – Almost all holdings companies can help provide, via online, records of stock statements and cost-basis calculations (cost basis is an historical analysis and calculation to determine if a taxpayer who sold stock recognized a taxable gain or a loss in the sale). If you need a past stock price, Yahoo has an online research tool at http://biz.yahoo.com/r/.

Credit Card and Other Receipts – Receipts are the bread-and-butter documentation of a tax year’s deductions, especially for the self-employed and taxpayers who have a supplemental business besides their regular job. Receipts – which come in a maddening variety of shapes and sizes of paper – also seem to be the trickiest to completely pull together come tax time.

Technology and the Internet have made it much easier to recover receipts. If you can’t find a receipt for a certain expense, for example, see if you can use bank and credit card statements to prove the expense. The statements should show as many details as possible (recipient’s name, date, the amount) to maximize the validation of the expense as a deduction.

Some businesses also may be willing to issue copies of receipts. Most banks can also quickly mail copies of past checks if you know the approximate date, if not the actual check number, of the expense.

If you paid the expense using a debit card, check with your bank to see if they offer a receipt-replacement feature with your card. A growing number of banks offer this largely unknown service to cardholders.

Good Future Moves

Start working now to make next year’s document collection easier by preserving records with technology, knowing what to keep and what to toss, and consider hiring an experienced tax preparer who can archive your records for future reference.

Digitize receipts, tax returns and other important documents such as mortgage documents, property tax statements and acknowledgment letters from charities. Scan the documents as they come in and, if you’re worried about security on your hard drive, store the scanned documents on a thumb drive or a storage site such as Manilla.com or Dropbox.com. Most home tax-prep software also offers a feature for saving returns digitally. You can also snap photos of receipts with a smartphone, and some apps can then sort them as IRS-accepted images.

Keep, among other documents, all tax returns; records of your home’s purchase price and major home improvements for three years after you sell the home; records of stock and mutual fund purchases for as long as you own the stocks or participate in the mutual funds; Form 8606 (reporting non-deductible IRA contributions); and supporting tax documents for three years (six years if you have self-employment income). Also keep files with information on contributions and withdrawals from IRAs and 401(k) plans -- especially documents regarding nondeductible contributions, such as copies of IRS Form 8606, to avoid paying too much tax on withdrawals.

Toss most supporting tax documents (such as receipts) after three years; monthly bank and brokerage statements after you receive the year-end statements; ATM receipts and bank-deposit slips after they’re matched up with the monthly statement; pay stubs after matching them with W-2s. Shred all documents thrown out.

Sign up for online banking and bill paying, both of which create an electronic record of paid bills and banking documents.

Tax Season Delay

2013-10-23T09:59:00.001-04:00

Filing season will be delayed, IRS says

By Sally P. Schreiber, J.D.

October 22, 2013

The IRS announced on Tuesday a delay of one or two weeks in the start of the 2014 filing season as a result of the 16-day government shutdown to allow adequate time for the IRS to prepare and test systems. The return filing start date was originally going to be Jan. 21, 2014, but the IRS said it will now start accepting 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4. The IRS says it hopes to shorten the delay and will announce the official start date in December.

The government shutdown came at an inopportune time of year. Most of the work the IRS does to program, test, and deploy its return processing systems is done in the fall. “The adjustment to the start of the filing season provides us the necessary time to program, test, and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers,” Danny Werfel, the acting IRS commissioner, said in a news release. “We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”

No paper returns will be processed before the IRS begins accepting electronic filings.

Despite the delay in the beginning of filing season, the IRS also reiterated that the April 15 tax return filing and payment deadline is statutory and cannot be changed by the IRS but that six-month extensions to file can be obtained by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, electronically or on paper.

The IRS is apparently struggling to catch up after the shutdown. It says it received 400,000 pieces of correspondence during the shutdown, on top of the 1 million items that were already being processed. The IRS is urging taxpayers who need to contact it to wait if it is not urgent or to try to use automated systems on its website.

The IRS announced on Oct. 17 that 2014 renewals of preparer tax identification numbers (PTINs) are also being delayed because of the government shutdown. The IRS will notify current PTIN holders when the renewal season will start.

This will be the second tax season in a row to have a delayed start. Last year’s filing season was significantly delayed because Congress passed the American Taxpayer Relief Act of 2012, P.L. 112-240, which contained many retroactive provisions, in January 2013 and the IRS needed time to update forms and program and test its processing systems.

—Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

Updating to the New OSX Mavericks on the Mac

2013-10-22T16:33:00.002-04:00

Today is the launch day for OSX Mavericks on the Mac, so I am doing the update. We will see if Apple can get this right the first time out of the box. I certainly have more confidence in this program than Obama Care.

Very funny

2013-10-11T11:50:00.001-04:00

Virtual Desktop on Chrome Book

2013-10-03T20:23:00.001-04:00

You have to see this - virtual desktop on a Chrome Book

Virtual Desktop

2013-08-28T07:55:00.001-04:00

If you have never seen our Virtual Desktop, this is something you have got to try. Free 7 day trial when you go to www.virtualesuccess.com

Simplified Home Office Deduction

2013-07-24T13:56:00.001-04:00

Children and Money

2013-06-05T16:51:00.001-04:00

The summer is a great time to teach your children the value of money. Let them start an allowance, but make them earn it and then make sure they cover all of their discretionary expenses. It will teach them the value of work and money at the same time.

Fwd: Status of Refund Issuance

2013-06-05T16:15:00.001-04:00

Update from the State of Delaware

Ralph V. Estep, Jr.

Saggio Management Group, Inc.

Sent from my iPhone

Begin forwarded message:

From: "Moffett-Batty, Angela (Finance)" <Angela.Moffett-Batty@state.de.us>
Date: June 5, 2013, 4:04:22 PM EDT
To: Undisclosed recipients:;
Subject: Status of Refund Issuance

Dear Tax Preparer,

You are most-likely already aware that this year the IRS delayed opening their EFile System by a full week. This delay also put the Delaware Division of Revenue a week behind our normal start-up date. As a large number of Delaware returns are processed through the IRS system first – 68% this year – the average time to issue a Delaware refund has risen.

As of June 3^rd, the average time for Delaware to issue refunds is 19.5 days compared to last year's 14.7 days. Please know that the Division of Revenue is working diligently to process all refunds as quickly as possible.

Check out Saggio Accounting+PLUS

2013-06-05T12:37:00.001-04:00

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Hosting....update

2013-05-05T14:41:00.002-04:00

In the final test of the new hosting server...great results thus far. Hoping to move all clients before the end of the day. Seeing improved performance.

Back to blogging....

2013-05-05T09:41:00.000-04:00

There was a time when I was working to put something on this blog each day, but looking at the history of the blog it appears that I have not been doing such a great job.

Now that we are past the "tax season" it's time to focus on working with clients in developing their businesses. One of the key business areas that I want to focus on moving forward is working with small to medium size business clients in building their business. I have learned that it's not necessarily the great accounting services that we offer that assist in client's business advancement, but rather the "business coaching" that assists clients in developing greater revenues, customer development, and other business enhancements.

With my varied experience in the business realm, I have effective strategies to employ that will grow any business, refocus the concentration on core competencies and improve the business bottom-line. If you are interested in starting a dialogue about how to improve your business, whether you are an existing client or potential new clients, let me know and let's sit down together and build a success strategy. The only thing you have to loose is an opportunity to grow and improve your business, if you want to remain stuck in the mire of just holding on, then don't call me.

To everyone, have a great Sunday, take some time to say Thank You and spend some quality time with your family. Then let's hit the groung running Monday morning. I am ready to assist you when you are ready for some successful coaching.

Online Payment Agreement

2013-04-26T15:51:00.001-04:00

Here is a great video on Payment Plans with the IRS.

Why Taxpayers Love Their Accountants

2013-03-19T11:39:00.001-04:00

Why Taxpayers Love Their Accountants

Tax Relief Act - Here's a great write-up and Review

2013-01-08T21:34:00.001-05:00

Here is a great write-up and brief on the new tax act. Please feel free to contact the office with any questions.

Summary

American Taxpayer Relief Act (ATRA)

Table of Contents

NOTE:

This Summary does not include all provisions of the American Taxpayer Relief Act. It primarily includes individual and small business provisions. It is intended for the use of ClientWhys customers and any

other use or distribution is prohibited.

The following are highlights of the Act that impact individuals and small businesses:

Tax Rates - For tax years beginning after 2012, the 10% rate has been made permanent. Thus income tax rates for individuals will stay at 10%, 15%, 25%, 28%, 33% and 35%, but with a 39.6% rate applying for income above the threshold of $450,000 for joint filers and surviving spouses; $425,000 for heads of household; $400,000 for single filers; and $225,000 for married filing separately. These dollar amounts are inflation-adjusted for tax years after 2013. The 2013 tax brackets are as follows:

	Single	HH Joint MS
10.0%	8,925	12,750	17,850	8,925
15.0%	36,250	48,600	72,500	36,250
25.0%	87,850	125,450	146,400	73,200
28.0%	183,250	203,150	223,050	111,525
33.0%	398,350	398,350	398,350	199,175
35.0%	400,000	425,000	450,000	225,000
39.6%

Personal Exemption Phaseout (PEP) for High Income Earners – For tax years beginning after 2012, the Personal Exemption Phaseout (PEP), which had previously been suspended, is reinstated with a starting threshold for those with AGI of $300,000 for joint filers and a surviving spouse; $275,000 for heads of household; $250,000 for single filers; and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. These dollar amounts are inflation-adjusted for tax years after 2013.

Historical Exemption Phase Out - AGI Thresholds
Year	*2008*	*2009*	*2010*	*2011*	*2012*	2013*
Single	159,950	166,800	N/A	N/A	N/A	250,000
HH	199,950	208,500	N/A	N/A	N/A	275,000
Jt, SS	239,950	250,200	N/A	N/A	N/A	300,000
MS	119,975	125,100	N/A	N/A	N/A	150,000

* Inflation adjusted after 2013.

Itemized Deduction Phaseout - For tax years beginning after 2012, the “Pease” limitation on itemized deductions, which had previously been suspended, is reinstated with a starting threshold for those with AGI of

$300,000 for joint filers and a surviving spouse, $275,000 for heads of household, $250,000 for single filers,

and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. Thus, for taxpayers subject to the “Pease” limitation, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer's adjusted gross income (AGI) exceeds the threshold amount, with the reduction not to exceed 80% of the otherwise allowable itemized deductions. These dollar amounts are inflation-adjusted for tax years after 2013. The following is a historic table listing the phase-out threshold values by year.

*Tax Year*	*2008*	*2009*	*2010-12*	*2013
Single	159,950	166,800	N/A	250,000
HH	159,950	166,800	N/A	275,000
Joint, SS	159,950	166,800	N/A	300,000
MS	79,975	83,400	N/A	150,000

* These amounts are inflation adjusted after 2013.

Capital Gains and Dividends - For tax years beginning after 2012, the top rate for long-term capital gains and qualified dividends will permanently rise to 20% (up from 15%) for taxpayers with incomes exceeding

$400,000 ($425,000 for head of household, $450,000 for married joint, and $225,000 for married separate taxpayers). For taxpayers whose ordinary income is generally taxed at a rate below 25%, long-term capital

gains and qualified dividends will permanently be subject to a 0% rate. Taxpayers who are subject to a 25%- or-greater rate on ordinary income, but whose income levels fall below the thresholds listed above, will continue to be subject to a 15% rate on capital gains and dividends. The table below summarizes the capital gains rates in effect beginning with the 2013 tax year.

Ordinary Income Bracket Long-Term

To the extent bracket is 10/% or 15% 0%

To the extent the bracket is 25%, 28%, 33% or 35% 15% To the extent income exceeds 39.6% bracket threshold* 20%

(2013: $450K Joint, $425K HH, $400K Single, $225 MFS)

Recaptured Sec 1250 Gain 25%

Qualified Small Business Stock - 50% of Gain Max 28% (AMT Pref) Collectibles 28%

* thresholds are subject to inflation adjustment after 2013

Caution:

Capital gains are included in investment income and may be subject to the 3.8% surtax on net investment income.

Marriage Penalty Relief - The ATRA extends the marriage penalty relief for the standard deduction, the 15% bracket, and the EITC for taxable years beginning after December 31, 2012. For example, had this provision not been extended the standard deduction for married taxpayers filing jointly (and qualified surviving spouses) would have been 167% (rather than 200%) of the standard deduction for single taxpayers.

Dependent Care Credit - The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increased the amount of eligible expenses from $2,400 for one child and $4,800 for two or more children to

$3,000 and $6,000, respectively and increased the applicable percentage from 30% to 35%. The Act permanently extends these increased amounts.

Adoption Credit – The Act permanently extends the increased adoption tax credit and the adoption assistance programs exclusion. Taxpayers that adopt children can receive a tax credit for qualified adoption expenses. A taxpayer may also exclude from income adoption expenses paid by an employer. The EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employer-assistance programs, with both amounts inflation-adjusted. The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable. The ATRA extends, for taxable years beginning after December 31, 2012, the increased adoption credit amount and the exclusion for employer-assistance programs as enacted in EGTRRA.

Employer Expenses for Child Care Assistance – The act permanently extends the credit for employer expenses for child care assistance. The EGTRRA provided employers with a credit of up to $150,000 for acquiring, constructing, rehabilitating or expanding property which is used for a child care facility. The ATRA extends this provision for taxable years beginning after December 31, 2012.

Child Credit – The Act permanently extends the 2001 modifications to the child tax credit. Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17. The EGTRRA increased the credit from $500 to

$1,000 and expanded refundability. The amount that may be claimed as a refund was 15% of earnings above

$10,000. These rates become permanent.

However the refund provision (15% of earnings above $10,000) is temporarily set at 15% of earnings above

$3,000 through 2017.

EITC –Under prior law, working families with two or more children qualified for an earned income tax credit equal to 40% of the family’s first $12,570 of earned income. The American Recovery and Reinvestment Act of 2009 (ARRA) increased the earned income tax credit to 45% for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) to lessen the marriage penalty. The Act temporarily extends the third-child/45% credit rate and marriage penalty relief provisions through 2017.

Coverdell Accounts – The Act permanently extends the expanded Coverdell Accounts provisions which allow an annual $2,000 (was $500) contribution and includes elementary and secondary school expenses.

Employer-provided Educational Assistance – The Act permanently extends the expanded exclusion for employer-provided educational assistance. An employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance.

Student Loan Interest Deduction - The Act Permanently extends the expanded above-the-line deduction for student loan interest deduction for qualified education loans up to $2,500. It also makes permanent the elimination of the 60 month deduction limit and the increased income phase-out of $55,000 to $70,000 ($110,000 and $140,000 for joint filers).

Scholarship Exclusions – The Act permanently extends the exclusion from income of amounts received under certain scholarship programs. The National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program provide education awards to participants on the condition that the participants perform certain services. The EGTRRA allowed the scholarship exclusion to apply to these programs.

American Opportunity Tax Credit - Temporarily extends the American Opportunity Tax Credit. Created under the ARRA, the American Opportunity Tax Credit is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this tax credit, taxpayers receive a tax credit based on 100% of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25% of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). The ATRA extends the American Opportunity Tax Credit for five additional years, through 2017.

Refund and Tax Credit Disregard for Means-Tested Programs – The Act permanently extends refund and tax credit disregard for means-tested programs. The receipt of a tax credit would put a substantial number of families over the income limits for these programs in the month that the tax refund is received.

Permanent AMT Patch - Without this change, effective in 2012, a taxpayer would have received an AMT exemption of $33,750 (individuals) and $45,000 (married filing jointly, and would not have been allowed nonrefundable personal credits to be used against the AMT. The ATRA increases the exemption amounts for 2012 to $50,600 (individuals) and $78,750 (married filing jointly) and indexes the exemption and phaseout amounts thereafter. The Act also allows the nonrefundable personal credits against the AMT. The changes are effective for taxable years beginning after December 31, 2011.

Gift & Estate Tax - The Act prevents steep increases in estate, gift and generation-skipping transfer (GST) tax that were slated to occur for individuals dying and gifts made after 2012 by permanently keeping the exemption level at $5,000,000 (as indexed for inflation). However, the Act also permanently increases the top estate and gift tax rate from 35% to 40%.

Portability of Unused Estate Tax Exemption - The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRUIRJCA) allowed the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse for estates of decedents dying after December 31, 2010 and before January 1 2013. The ATRA makes permanent this provision and is effective for estates of decedents dying after December 31, 2012. CAUTION – A Form 706 (Estate Tax Return) must be timely filed to obtain the portability.

Gift & Estate Exemption Reunification - Prior to the EGTRRA, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests. The EGTRRA decoupled these systems. The TRUIRJCA reunified the estate and gift taxes. The ATRA permanently extends unification and is effective for gifts made after December 31, 2012.

Mortgage Debt Relief – A Principal Residence Acquisition Debt Relief Exclusion was established by the Mortgage Debt Relief Act of 2007 and provided a COD exclusion of $2 million ($1 million MFS) limited to acquisition debt. Equity debt is considered the first debt relieved. This exclusion is available even if the taxpayer is solvent. The 2012 Taxpayer Relief Act extends this exclusion for one year so that it applies to home mortgage debt discharged before 2014.

Teachers’ Above-the-line Expense Deduction – The Act revives the deduction allowing up to $250 of a teacher’s qualified classroom expenses for 2012 and extends it through 2013.

Mortgage Insurance Premiums as Qualified Residence Interest - Premiums for mortgage insurance contracts entered into after Dec. 31, 2006 on a qualified residence have been deductible as qualified residence interest. The ATRA extends the ability to deduct the cost of mortgage insurance on a qualified personal

residence for two additional years, through 2013. The deduction is phased-out ratably by 10% for each

$1,000 by which the taxpayer’s AGI exceeds $100,000. Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000.

Tax Free Employer Mass Transit Benefits –The excludable employer-provided mass transit benefit is revived to $240 per month for 2012 and continues through 2013.

State & Local Sales Tax - The Act extends for two years the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes.

The option to deduct State and local general sales taxes, which expired at the end of 2011, is revived for 2012 and continued through 2013.

Contributions of Capital Gain Real Property Made for Conservation Purposes - The special rule allowing a 50% (instead of 30%) of AGI limitation for contributions of conservation easement capital gain property and the 15 year carryover period if the conservation easement contribution exceeds the 50% of AGI limitation, which expired at the end of 2011, is now revived for 2012 and continued through 2013.

Above-The-Line Tuition Deduction - The above-the-line deduction for qualified tuition and related expenses, which expired at the end of 2011, is now revived for 2012 and continued through 2013.

Tax-Free IRA to Charity Contributions - Tax-free distributions (up to $100,000) made by taxpayers over age 70.5 from individual retirement plans for charitable purposes, which expired at the end of 2011, is now revived for 2012 and continued through 2013. Because 2012 has already passed, a special rule permits distributions taken in December 2012 that are transferred to charities before February 1, 2013 to be treated as a charitable distribution and therefore not taxed in 2012. Another special rule permits charitable distributions made in January 2013 to be deemed made on Dec. 31, 2012.

Research Credit Reinstated and Liberalized - The research credit equals the sum of: (1) 20% of the excess (if any) of the qualified research expenses for the tax year over a base amount, (unless the taxpayer elected an alternative simplified research credit); (2) the university basic research credit (i.e., 20% of the basic research payments); (3) 20% of the taxpayer's expenditures on qualified energy research undertaken by an energy research consortium. Under pre-Act law, the research credit didn't apply for amounts paid or accrued after Dec. 31, 2011. The 2012 Taxpayer Relief Act retroactively extends the research credit for two years so that it applies for amounts paid or accrued before Jan. 1, 2014.

For tax years beginning after Dec. 31, 2011, the Act also liberalizes the research credit rules for persons that acquire the major portion of either a trade or business or a separate unit of a trade or business of another person. It also revises the rules for allocating the research credit among members of a controlled group or members of a group of commonly controlled trades or businesses.

Low-Income Housing Tax Credit - 9% Credit Rate Freeze for the Low-Income Housing Tax Credit Program. The low-income housing tax credit program provides a tax credit over a period of ten years after the housing facility is placed-in-service. The credit provided each year is determined by present-value formula based on the federal cost of borrowing. Over the past few years, as the federal cost of borrowing has declined, so has the amount of tax credits that can be used to build a LIHTC project. To deal with this, in 2008, Congress adjusted the formula and set a minimum credit amount of 9%, which is based on the original credit rate when the program was created and was effective for facilities placed-in-service before December 31, 2013. This ATRA extends the expiration date by changing the deadline to projects that have received an allocation before January 1, 2014.

Treatment of military basic housing allowances under low-income housing credit. The ATRA extends a provision whereby a member of the military’s basic housing allowance is not considered income for purposes of calculating whether the individual qualifies as a low-income tenant for the low income housing tax credit program. The provision, which expired at the end of 2011, is continued for two additional years.

Indian Employment Credit Reinstated and Extended - The Indian employment credit for businesses is 20% of the excess, if any, of the sum of qualified wages and qualified employee health insurance costs (not in excess of $20,000 per employee) paid or incurred (other than paid under salary reduction arrangements) to qualified employees (enrolled Indian tribe members and their spouses who meet certain requirements) during the tax year, over the sum of these same costs paid or incurred in calendar year '93. The 2012 Taxpayer Relief Act retroactively extends the Indian employment credit for two years. It now applies to tax years beginning before Jan. 1, 2014.

New Markets Tax Credit Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends the new markets tax credit two years, through 2013. It provides that a $3.5 billion cap applies for 2010, 2011, 2012, and 2013, but no amount can be carried over to any calendar year after 2018.

Differential Wage Payment Credit for Employers Reinstated and Extended - Eligible small business employers (less than an average of 50 employees during the year), with a written plan, that pay differential wage payments to qualified employees (been an employee during the 91-day period immediately preceding the period for which any differential wage payment is made) for periods that they are called to active duty with the U.S. uniformed services (for more than 30 days) that represent all or part of the wages that they would have otherwise received from the employer can claim a credit equal to 20% of up to $20,000 of differential pay made to an employee during the tax year. The 2012 Taxpayer Relief Act retroactively extends the credit for two years. It applies for differential wages paid through Dec. 31, 2013.

Work Opportunity Tax Credit Extended - The work opportunity tax credit (WOTC) allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of first-year wages up to $6,000 per employee ($3,000 for qualified summer youth employees). Where the employee is a long- term family assistance (LTFA) recipient, the WOTC is a percentage of first and second year wages, up to

$10,000 per employee. Generally, the percentage of qualifying wages is 40% of first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. For

LTFA recipients, it includes an additional 50% of qualified second-year wages.

The maximum WOTC for hiring a qualifying veteran generally is $6,000. However, it can be as high as

$12,000, $14,000, or $24,000, depending on factors such as whether the veteran has a service-connected disability, the period of his or her unemployment before being hired, and when that period of unemployment occurred relative to the WOTC-eligible hiring date.

The 2012 Taxpayer Relief Act retroactively extends the WOTC so that it applies to eligible veterans and nonveterans who begin work for the employer before Jan. 1, 2014. Thus, the Act grants a two-year lease on life for the WOTC for eligible nonveterans, and a one-year lease on life for the WOTC for qualifying veterans.

7-Year Write-off for Motorsport Racing Track Facilities Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends the 7-year straight line cost recovery period for motorsports entertainment complexes for two years. The quick write-off applies to qualifying motorsports entertainment complexes placed in service through Dec. 31, 2013.

Business Property on Indian Reservations – The accelerated depreciation for business property on an Indian reservation is retroactively extended through 2013.

Contributions of Food Iinventory - The Act extends for two years (through 2013) the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory.

Section 179 Expensing Increased for 2012 and 2013 – Under prior law the Section 179 expensing cap for 2012 was $139,000 and dropped to $25,000 in 2013. The 2012 Taxpayer Relief Act extends 2011 caps to both 2012 and 2013. Thus for both years the cap will be $500,000 with a $2,000,000 investment ceiling. The Act also provides that:

Off-the-shelf computer software is expensing-eligible property if placed in service in a tax year beginning before 2014 (a one-year extension).

For tax years beginning before 2014 (also a one-year extension), an expensing election or specification of property to be expensed may be revoked without IRS's consent. But, if such an election is revoked, it can't be reelected.

For any tax year beginning in 2010, 2011, 2012, or 2013 (a two-year extension) up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) is eligible for expensing.

For tax years beginning after 2013, the maximum expensing amount is scheduled to drop to $25,000 and the investment-based phaseout amount is scheduled to drop to $200,000.

	2008-9	2010-13	2014
Cap	250,000	500,000	25,000
MS Cap	125,000	250,000	12,500
Investment Limit	800,000	2 Million	200,000

Special Expensing Rules for Certain Film and Television Productions - The Act extends for two years, through 2013, the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States).

Qualified Small Business Stock Exclusion – Normally 50% of the gain from QSBS is excluded from taxation (but is an AMT preference). Under prior law the 50% was increased to 100% for the exclusion of gain on certain small business stock acquired after Sept. 27, 2010 and before Jan. 1, 2012. The 2012 Taxpayer Relief Act retroactively extends this provision for two years, through 2013.

CAUTION – For California (CA) purposes the requirement that 80% of the business be conducted in CA to benefit from the CA exclusion and reinvestment was recently found to be discriminatory and all exclusions or reinvestments since 2009 have been invalidated. The FTB will be sending out tax due notices to affected taxpayers.

S Corporation Charity Basis Adjustment Provision Extended – Prior to the Pension Protection Act of 2006 (PPA) shareholders made their pro-rata ownership basis adjustment based upon the FMV of property donated to charity. PPA temporarily changed that to the adjusted basis of the property for tax years beginning before Jan. 1, 2010. The provision was later extended to years beginning before Jan. 1, 2012. The 2012 Taxpayer Relief Act retroactively extends the PPA rule for two years so that it applies for contributions made in tax years beginning before Jan. 1, 2014.

Reduction in S Corporation Recognition Period for Built-in Gains Tax - If a taxable corporation converts into an S corporation, the conversion is not a taxable event. However, following such a conversion, an S corporation must hold its assets for a certain period in order to avoid a tax on any built-in gains that existed at the time of the conversion. The American Recovery and Reinvestment Act reduced that period from 10 years to 7 years for sales of assets in 2009 and 2010. The Small Business Jobs Act reduced that period to 5 years for sales of assets in 2011. The ATRA of 2012 extends the reduced 5-year holding period for sales occurring in 2012 and 2013. In addition, this Act clarifies rules for carryforwards and installment sales.

Empowerment Zone Tax Incentives - The Act extends for two years the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

Bonus First-Year Depreciation Extended for One Year – Under prior law, a bonus first-year depreciation was 50% of the adjusted basis of qualified property acquired and placed in service after Dec. 31, 2011, and before Jan. 1, 2013 (before Jan. 1, 2014 for certain longer-lived and transportation property). Bonus depreciation applies for both regular tax and AMT purposes, but is not allowed for purposes of computing earnings and profits. A taxpayer may elect out of additional first-year depreciation for any class of property for any tax year. The 2012 Taxpayer Relief Act extends 50% first-year bonus depreciation so that it applies to qualified property acquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 for certain longer- lived and transportation property).

First-Year Depreciation Cap for 2013 Autos and Trucks Boosted by $8,000 – As a result of the one- year extension of the 50% bonus depreciation the yet-to-be determined luxury auto dollar limits for 2013 are increased $8,000 when the bonus depreciation is used.

15-Year Writeoff for Qualified Leasehold and Retail Improvements and Restaurant Property Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends for two years the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class. Such property qualifies for 15-year recovery if it is placed in service before Jan. 1, 2014.

Energy-efficient Improvements to Existing Homes - The nonbusiness energy property credit under Code

Sec. 25C for energy-efficient existing homes is retroactively extended for two years through 2013. A taxpayer can claim a 10% credit on the cost of: (1) qualified energy efficiency improvements, and (2) residential

energy property expenditures, with a lifetime credit limit of $500 ($200 for windows and skylights).

Alternative Fuel Vehicle Refueling Property Credit - The alternative fuel vehicle refueling property credit under Code Sec. 30C is retroactively extended for two years through 2013 so that taxpayers can claim a 30% credit for qualified alternative fuel vehicle refueling property placed in service through Dec. 31, 2013, subject to the $30,000 and $1,000 thresholds.

Plug-in Electric Vehicles Credit - The credit for 2- or 3-wheeled plug-in electric vehicles under Code Sec. 30D is modified and retroactively extended for two years through 2013.

Credit for Energy-efficient New Homes - The credit for energy-efficient new homes under Code Sec. 45L is retroactively extended for two years through 2013.

Pension Provision Roth Transfers - For transfers after Dec. 31, 2012, in tax years ending after that date, plan provisions in an applicable retirement plan (which includes a qualified Roth contribution program) can allow participants to elect to transfer amounts to designated Roth accounts with the transfer being treated as a taxable qualified rollover contribution under Code Sec. 408A(e).

Roth Conversions for Retirement Plans - Under current law, a deferral plan under section 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan can have Roth accounts that allow participants to save on a Roth basis. That is, they can make after-tax contributions to the plan and all the principal and earnings are tax-free when distributed. Plans can currently allow participants to convert their pre-tax accounts to Roth accounts, but only with respect to money they have a right to take out of the plan, usually because they have reached age 59½ or separated from service. The ATRA allows any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable. The amount converted would be subject to regular income tax.

NOTES

Congress Approves Fiscal Cliff Deal

2013-01-02T08:39:00.001-05:00

Congress Approves Fiscal Cliff Deal

AMT Letter from the IRS

2012-12-20T11:47:00.001-05:00

COMMISSIONER

DEPARTMENT OF THE TREASURY

INTERNAL REVENUE SERVICE WASHINGTON, D.C. 20224

November 13, 2012

The Honorable Sander M. Levin Ranking Member

Committee on Ways and Means

U.S. House of Representatives Washington, DC 20515

Dear Mr. Levin:

In response to recent requests, I am writing to update you on how the IRS is preparing for the 2013 tax filing season in light of the uncertainty related to several tax provisions that expired at the end of 2011 -principally the income thresholds for the Alternative Minimum Tax (AMT)- but also a number of temporary tax benefits generally known as "extenders."

Each year, the IRS conducts in-depth planning during the summer to ensure that we are prepared for all aspects of the upcoming filing season- from training our customer service employees, to modifying forms and publications, to programming our technology systems to reflect changes in the tax law. This year has been particularly challenging due to several unresolved tax issues. When Congress takes action well after this planning process is underway, there is potential for substantial disruption to the filing season ahead.

As Congress returns this week, Iwanted to provide you with a detailed description of

the effects on IRS operational planning if the current uncertainty regarding the AMT and extenders continues.

Alternative Minimum Tax (AMT)

The AMT applies to individual taxpayers with incomes above specific thresholds set by law. For many years, Congress has been enacting "patches" to index these income thresholds for inflation in order to prevent millions of taxpayers from being subject to the AMT. The last such patch expired on December 31, 2011.

More specifically, for tax year 2011, the AMT exemption amount (as indexed for inflation) was $48,450 for individuals and $74,450 for married taxpayers filing jointly.

Because of these thresholds, only about 4 million taxpayers paid AMT for tax year 2011.

Under current law, however, the thresholds revert to much lower levels for 2012-

$33,750 for individuals and $45,000 for married taxpayers filing jointly. At these levels, approximately 33 million taxpayers would pay AMT for tax year 2012 (with returns filed

in the spring of 2013). T 1is is about 28 million more taxpayers who would pay the AMT than if the exemption amounts were increased as in the past.

In addition, the AMT patch has historically been accompanied by a special tax credit ordering rule that applies to all taxpayers claiming certain tax credits- whether they owe AMT or not. The ordering rules change the order in which a number of popular tax credits are applied against tax liability, and how they may be used to offset both regular and alternative minimum tax.

Taken together, the changes to the AMT exemption amount and the special tax credit ordering rules could affect more than 60 million taxpayers- nearly half of all individual income tax filers. In addition, the changes to the tax credit ordering rules that result from a lapse in the AMT patch are highly complex and cut deeply into the core tax processing logic of IRS's critical filing season technology systems.

In prior years- most recently 2007 and 2010- Congress allowed the AMT patch to lapse for more than 11 months, but then retroactively reinstated it. In both 2007 and 2010, the IRS consulted with Congress and was provided with bipartisan, bicameral assurances that Congress was working expeditiously to enact a patch. The IRS, in turn, made a risk-based decision to leave its systems programmed assuming that Congress would continue its historical practice and again enact extensions of both the increased AMT exemption amount and the special tax credit ordering rules.

Consistent with past practice, I have instructed IRS staff again this year to leave our core systems "as-is" with respect to the AMT, and hold off on the substantial design and engineering work that would be required in order to revert the core tax systems back to 1998 law (which will otherwise apply for 2012 in the absence of any action by Congress). Therefore, if Congress enacts an AMT patch, including both increased exemption am aunts and the special tax credit ordering rules, before the end of the 2012 calendar year, the IRS would likely be able to open the 2013 tax filing season with minimal delays for most taxpayers.

However, if there is no AMT patch enacted by the end of the year, the IRS would be forced to operate the 2013 tax filing season based on the expiration of the AMT patch. There would be serious repercussions for taxpayers.

Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional

income tax for 2012, leaving them with a balance due return or a much smaller refund than expected. For millions of other taxpayers, refunds would be delayed.

Finally, because the AMT patch already expired at the end of 2011, there is no ability to consider partial year extensions of the AMT (since by the end of 2012 it would have already lapsed for an entire year).

Tax "Extenders"

A number of other tax provisions affecting individuals also expired at the end of 2011. These include tax deductions for educators' out-of-pocket classroom expenses, tuition and related fees for higher education, and state and local sales taxes. The last provision is of particular importance to taxpayers in states with no income tax.

These tax law changes are generally not as complex and do not present anything near the operational risk associated with the AMT patch. Two years ago, Congress enacted legislation extending these provisions retroactively in mid-December 2010. As a result, the IRS made the necessary changes to its forms and systems, and delayed the opening of the 2011 filing season by four weeks for approximately 9 million affected taxpayers.

If the IRS were presented with a similar scenario of late enactment of tax extenders legislation this year, I would anticipate a similar outcome. There would be some inconvenience and delayed refunds for a substantial number of taxpayers, but the overall risk to the tax filing season would be manageable.

I hope this information is helpful, and I would be happy to discuss any of these issues in more detail. I am also writing to Chairman Camp, Chairman Baucus, and Ranking Member Hatch. If you have questions, please contact me or have your staff contact Catherine Barre, Director, Legislative Affairs, at (202) 622-3720.

Sincerely,

_/s-'/

Steven T. Miller

Acting Commissioner

Figuring Required Minimum Distributions

2012-11-29T13:35:00.000-05:00

If you are approaching retirement age, you should begin to consider when to take distributions from your qualified plans and IRAs. In addition to the IRS’s restrictions on when you can start taking money from your retirement accounts, there are additional requirements concerning distributions you must take. The Internal Revenue Code requires you to withdraw a certain amount each year so that it can tax a certain minimum amount each year.

Why am I required to take distributions?

The distribution requirements were established to prevent you from accumulating funds tax free indefinitely. In the case of a qualified plan in which you participate, you are required to begin taking at least minimum distributions starting April 1 of the year following the year in which you reach age 70 1/2 or retire, whichever is later. In the case of your IRAs, you must begin distributions starting April 1 of the year following the year in which you turn 70 1/2, regardless of whether you have retired.

How much must I take out?

If you have enough other assets for your support, you probably want to minimize distributions from your retirement plans so that your plan assets can continue to accumulate tax-deferred as long as possible. The detailed workings of the required minimum distribution (RMD) rules are contained in IRS regulations issued in 2002 and 2004, and fine tuned later by further guidance. These regulations go far beyond the Internal Revenue Code provisions in providing the details that are needed to determine an RMD. Thus, as a practical matter, the regulations must be consulted when calculating an RMD. While voluminous, they required a calculation that is much more favorable to taxpayers than had previously been the case. (If you have a Roth IRA, the news is even better. Since contributions to a Roth IRA are the result of after-tax dollars, no tax is generally due on distribution after retirement age, and there is no requirement that you distribute your account balance according to any particular schedule.)

The minimum amount that must be distributed from your retirement accounts depends on your life expectancy, or the joint life expectancy of you and your spouse if your spouse is more than 10 years your junior. If the required amounts aren't distributed, a 50-percent excise tax is imposed on the amount that should have been distributed but wasn't.

In order to determine the amount of the minimum distribution you must receive for a year, you must locate your current age on one uniform table each year to obtain the updated number of years over which your benefits are expected to be paid. That number will then be divided into your account balance as of the end of the previous year to give you the amount that must be distributed to you for the current year. The table you will use is the same table that will be used by all retirement plan participants to calculate their required distributions. (In the only exception to this uniformity, a participant whose spouse is more than 10 years younger may use the old joint and last survivor table to stretch out and reduce annual payments even more.)

At the same time you are arranging your post-retirement finances, you can also incorporate some estate planning. Along with simplification in calculating your benefits, the recent rule changes will also bring greater flexibility and opportunity in the designation of your beneficiaries. You may now change beneficiaries as often as you like before your death, and it will not affect the amount of your annual contributions (unless, of course, you are moving into or out of a beneficiary relationship with a spouse more than 10 years younger). And if your heirs are faced with changed conditions following your death, there is an opportunity for them to rearrange your pre-death beneficiary choices so they can accommodate the new conditions.

If you would like to make sure your spouse's financial needs will be taken care of after your death, but you would also like to let your assets continue to accumulate on a tax-deferred basis and eventually provide an inheritance for your children or grandchildren, you should name your spouse the primary beneficiary and your younger heirs the secondary beneficiaries. If your spouse doesn't need your retirement plan assets for his or her support after your death, he or she has until the last day of the year that follows the year of your death to disclaim any interest in your account assets. This allows that amount to pass directly to your younger beneficiaries, over their longer life expectancy, as if your spouse had never been named a beneficiary at all.

After your death, your remaining plan assets will be paid to your beneficiary over his or her lifetime (unless you or your plan provide for a shorter distribution period). If you die before naming a beneficiary, but after the date the IRS says you must begin distributions from your plan, your remaining plan assets will be paid out over a period equal to your life expectancy immediately before your death unless your plan calls for a shorter period. If you die before that date without having named a beneficiary, your plan assets must be paid out within five years of your death.

Working within the distribution rules, you must make decisions about your post-retirement finances and planning your estate. If you want to know more about the rules and how they will work best in your situation, please don't hesitate to call our offices.

Job-Hunting Expenses

2012-11-28T13:32:00.001-05:00

The Tax Code allows you to deduct expenses that you may incur for searching for a job in your field. Some of these expenses may be obvious; others are not. The deduction may be especially valuable in today's tight job market. This letter describes those expenses.

The costs of typing and printing your resume are valid deductions. Postage and long distance telephone calls can be deducted. The cost of travel to a job interview can be deducted. Here, it is important to remember that the auto mileage expense changes every year. For 2012, it is 55.50 cents-per-mile. Air or rail fare also can be deducted. If you utilize the services of an employment agency, that cost can be deducted, as can the costs of job counseling and referral services. Remember to keep records of all these costs because although some may be minor, together they may add up to a significant amount. It does not matter if your job search is successful or not.

However, the above deductions cannot be taken if you are searching for a job in a new field. For example, a professional photographer who seeks to change his or her career path and pursue a new job in the health care industry cannot deduct any of his or her job-hunt expenses.

Just what constitutes a "new field" is not necessarily intuitive; the IRS has held that different types of jobs in the same employment sector are jobs in different fields and job search expenses were not deductible. Exceptions to this rule do apply, however. The IRS allows retired servicemen and women to search for jobs in new fields and still claim these job-search deductions. And temporary jobs you take while searching for permanent employment in your field will not affect the deductibility of your job search expenses.

Persons, such as college students, entering the job market for the first time cannot deduct their job-search expenses. If, however, a college student has worked in his or her chosen field while attending college, post-college job search expenses may be deductible. If a jobseeker has been out of the workforce for a long period of time, the costs of searching for a job are not deductible. This rule may particularly affect parents who take time off work to raise their children.

Job-search expenses are itemized deductions. You can deduct job search expenses as long as the amount of all of your miscellaneous itemized tax deductions is more than two percent of your adjusted gross income (AGI). If you take the standard deduction, you cannot claim them.

Medical Expense for Weight Loss Programs

2012-11-28T13:29:00.001-05:00

Medical Expense Deduction for Weight-loss Programs

Many people are unaware that the cost of weight-loss programs may qualify as a deductible medical expense when used to treat obesity or hypertension. The deduction is especially valuable for people with flexible spending accounts (FSAs). If your weight-loss program qualifies as a "deductible medical expense," you can pay for it with the pre-tax dollars you allocate to the medical expense portion of your FSA each year.

For many years, the IRS allowed people to deduct the cost of weight loss programs only if the patient had to lose weight as part of his or her treatment for another disease. Obesity, in and of itself, was not considered by the IRS to be a disease. The rationale was that many people lose weight merely for cosmetic, and not health, reasons. That's true, but not for everyone.

Some time ago, the IRS signaled it was changing course when it determined that people could deduct the costs of smoking-cessation programs. In addition, the costs of treating alcoholism and drug addiction were deductible. In both cases, the patient had to be directed by his or her physician to stop smoking or get help for alcoholism or drug addiction. Now, the cost of treating obesity is added to the list.

The IRS provided some examples. Both scenarios involve participation in weight-loss programs. Both taxpayers paid fees for admission into the programs and to attend periodic meetings. They also bought diet plans and booklets. One of the two received a diagnosis of obesity. The other person was diagnosed as suffering from hypertension partially caused by being overweight. Both participated in their programs as treatment for these medical conditions.

The IRS ruled that these two people can take deductions for the costs that are related to their weight-loss programs. However, the cost of buying reduced-calorie diet foods cannot be deducted since they are substitutes for normal living expenses.

If you plan on taking a medical deduction, the relevant costs can be deducted as an itemized medical expense deduction only if they are paid out-of-pocket and if they are neither compensated nor reimbursed (including through a flexible spending plan). Also, the amount of such costs that you can deduct have to be in excess of 7.5 percent of your adjusted gross income (10 percent for 2013 and beyond, unless the taxpayer or spouse is age 65). Also note that because of the Health Care Act, withdrawals from a medical flexible spending account starting in 2013 is limited to $2,500 for the entire year.

Keep in mind that there are still some unanswered questions. When does overweight end and obesity begin? How much overweight is needed to affect hypertension and to what level must hypertension reach in order to justify deductible weight-loss treatment? Does weight-loss include an exercise program, even though the IRS mentioned nothing in its ruling about exercise as a weight-loss treatment? Does a deductible exercise program include a heath club membership or an expensive home treadmill? Taxpayers have yet to test these questions on the IRS.

If you or a family member has considered entering a weight-loss program, please feel free to check with this office on whether your costs might be defrayed through a tax break. Creating a file in which you keep doctor's notes, bills and progress logs could also be important.

Finally, if you or a family member has undergone the expense of a weight-loss program within the past three years, you might want this office to check whether you ought to file an amended return to claim a tax refund.

Great Comic Today

2012-11-27T13:11:00.001-05:00

Standard Mileage Rates for 2013

2012-11-26T11:29:00.001-05:00

Standard Mileage Rates for 2013

IRS Warns AMT Could Affect 60 Million Taxpayers Unless Patched

2012-11-14T08:47:00.001-05:00

IRS Warns AMT Could Affect 60 Million Taxpayers Unless Patched

Will Itemized Deductions Be A Thing of the Past? | Saggio Accounting PLUS

2012-11-12T15:51:00.001-05:00

Will Itemized Deductions Be A Thing of the Past? | Saggio Accounting PLUS

2012 Year-End Tax Planning for Businesses - National Society of Accountants

2012-10-31T17:01:00.001-04:00

2012 Year-End Tax Planning for Businesses

Recently, end of year tax planning for businesses has been complicated by uncertainty over the future availability of many tax incentives. The 2012 year end is no different. In 2010, Congress extended many business incentives for one or two years. These incentives are about to expire. In addition, many of the “Bush-era” tax cuts are scheduled to sunset at the end of 2012. It is unclear if Congress will provide further extensions as they debate across-the-board spending cuts scheduled to take effect in 2013. In addition, businesses must prepare to comply with healthcare reform. This combination of events provides tax planning considerations unique to 2012 that requires a multi-year strategy taking into account a variety of scenarios and outcomes.

For instance, in recent years, Congress has used bonus depreciation to encourage economic growth. Currently, a special 50-percent first year bonus depreciation allowance is provided for qualified property. This allowance is scheduled to expire after 2012 (2013 in the case of certain longer production period property and certain transportation property). The equipment eligible for bonus depreciation must be placed in service and not merely purchased before the end of the year to be eligible for 2012. Placed-in-service generally requires installation and ready-for use in the business.

Bonus depreciation also relates to vehicle depreciation dollar limits. For 2012, the first-year depreciation allowed for vehicles subject to luxury-vehicle limits is increased by $8,000. Unless the bonus depreciation is extended, 2012 will be the final year in which substantial first-year write-offs for the purchase of a business vehicle may be available.

In addition to bonus depreciation, taxpayers may also take advantage of the generous dollar limitation and investment limitations for Code Sec. 179 expensing. For 2012, the dollar limitation is $139,000 with a $560,000 investment ceiling on the purchase of all otherwise qualifying property. These limitations drop to $25,000 and $200,000, respectively in 2013.

Purchased property may qualify for both Code Sec. 179 expensing and bonus depreciation. Code Sec. 179 expensing should be taken first, followed by bonus depreciation and then regular first-year depreciation. For example, a 2012 purchase of $400,000 in assets that qualify as five-year property would be entitled to a $139,000 Code Sec. 179 deduction, a $130,500 bonus depreciation and a $26,100 regular depreciation deduction assuming a half-year convention.

Repair Regulations

For tax years beginning on or after January 1, 2012, the rules for capitalizing improvements to tangible property are provided as part of a group of regulations known as the “repair regulations.” The regulations are broad and far-reaching - they apply to every business taxpayer that uses tangible property, whether owned or leased. Neither the form of entity that operates the business, nor the entity's foreign or domestic status, plays a role in determining their relevance. Manufacturers, wholesalers, distributors, and retailers – are all affected.

In general, these regulations attempt to provide standards for distinguishing repairs from capitalized improvements based on principals developed over the years in court cases and IRS rulings. A change by a taxpayer to conform to the repair regulations is an accounting method change, and a corresponding adjustment is generally required. This adjustment serves to put the taxpayer on the same accounting method for all amounts incurred both prior to and after the effective date of the regulations. Therefore, taxpayers adopting an accounting method change under the capitalization regulations must examine repairs and capitalized expenses for prior years in order to calculate the adjustment.

Taxpayers with an "applicable financial statement," such as a certified audited financial statement, may claim a current deduction for the cost of acquiring items of relatively low-cost property, including materials and supplies, if specific requirements are met. The aggregate cost which may be expensed annually under a taxpayer's expensing policy is subject to a ceiling equal to the greater of .1 percent of gross receipts or 2 percent of total depreciation and amortization reported on the financial statement.

“Bush-era” tax Cuts

The “Bush-era” tax cuts is the collective term for the tax measures enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). EGTRRA and JGTRRA made over 30 major changes to the Tax Code which are scheduled to sunset at the end of 2012. The following are highlights of the major changes for business and investment in 2013 resulting from the sunset –

· Reduced maximum capital gains rate expires

· Lower capital gain tax rates for qualified five-year gain will be revived

· Exclusion of gain on sale of small business stock treated as AMT preference item will increase

· Taxation of qualified dividends at capital gain rates will no longer apply

· Credit for employer-provided child care facilities and services expire

· Accumulated earnings tax rate increases to 39.6 percent

· Personal holding company tax rate increases to 39.6 percent

· Repeal of collapsible corporation rules expires

Health Care

On June 28, 2012, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable care Act (PPAC). As part of its primary purpose to facilitate health care reform, the PPAC includes key tax provisions that affect businesses. Many business and employers waited to fully implement these provisions until the Supreme Court determined the fate of the health care reform law. Now, however, businesses must comply with the rules under PPAC.

Although it was optional in 2011, Form W-2 reporting is mandatory for 2012 and thereafter. Employers must disclose the aggregate cost of applicable employer-sponsored coverage provided to employees annually on the employee’s Form W-2. Regardless of whether the employee or the employer pays for the coverage, the aggregate cost of the coverage reported is determined under rules similar to those used in determining applicable premiums for purposes of the COBRA continuation coverage requirements of group health plans.

Planning

Many taxpayers are wondering how they may be able to prepare for 2013 and beyond, and what to do before then. The short answer is to quickly become familiar with the expiring tax incentives and what may replace them after 2012, and to plan accordingly. We can help you align traditional year-end techniques with strategies for dealing with uncertainties created by Congress’s delay in addressing sunsetting tax rates and the extension of other major tax benefits. Please call our office for an appointment.

Carson Long Halloween 2012

2012-10-31T13:34:00.001-04:00

Taxes Will Rise Regardless of Congressional Action

2012-10-18T11:00:00.001-04:00

This is a good article and raises some really interesting points.

Taxes Will Rise Regardless of Congressional Action

Attending the political candidate forum

2012-10-04T18:42:00.001-04:00

I am eagerly awaiting the candidates forum at the Union Baptist Church in Dover, Delaware. I am eager to hear how the assembled candidates are going to bring back economic prosperity to the State and country. I certainly was pleased with the efforts of Mitt Romney last night and I hope we elect a Leader to get this country back on track.

Obama Voter Says Vote for Obama because he gives a free Phone

2012-09-27T16:23:00.001-04:00

YOU HAVE GOT TO BE KIDDING ME!

eFileCabinet Online Demo

2012-09-26T11:46:00.001-04:00

We have partnered with EFile Cabinet Online and we can offer this service to any client for only $15 a month, that is a 50% cost reduction if you were to contract with them directly. It's a great service for not only a business, but also for any individual wishing to organize their files and eliminate paper files. Contact us today if you are interested in more information. Once you start using this service, you will not want to ever be without it.

MUST WATCH THIS ASAP! United States Budget Dilemma.wmv

2012-09-26T09:12:00.001-04:00

Taxpayer Advocate Service changes criteria for accepting cases

2012-09-05T10:20:00.001-04:00

Taxpayer Advocate Service changes criteria for accepting cases

False internet rumors about “real estate transaction tax” worry taxpayers

2012-08-14T11:19:00.001-04:00

False internet rumors about “real estate transaction tax” worry taxpayers

Required Withdrawals From Your IRA

2012-08-10T14:16:00.001-04:00

Renting Your Vacation Home

2012-08-03T14:10:00.001-04:00

2012 Second Quarter Federal Tax Developments

2012-08-01T08:00:00.000-04:00

During the second quarter of 2012, there were many important federal tax developments. This letter highlights some of the more important developments for you. As always, please give our office a call or email if you have any questions.

Health care legislation

In a 5-4 decision, the U.S. Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA) and its companion law, the Health Care and Education Reconciliation Act (HCERA) on June 28, 2012 (National Federation of Independent Business et al. v. Sebelius). Chief Justice John Roberts, writing for the majority, held that the law’s individual mandate is a valid exercise of Congress’ taxing power. Four justices dissented and would have overturned the law.

Since 2010, the IRS has issued extensive guidance on the tax provisions in the health care legislation. Many of the tax provisions were effective in 2010, 2011 and 2012; but others are scheduled to take effect after 2012 and in subsequent years. These include an additional 0.9 percent Medicare tax for higher income individuals (tax years beginning after December 31, 2012), a Medicare tax of 3.8 percent on investment income for higher income individuals, trusts and estates (tax years beginning after December 31, 2012), and a higher threshold to claim an itemized deduction for unreimbursed medical expenses (tax years beginning after December 31, 2012 with a temporary waiver for individuals age 65 and older). Our office will keep you posted of developments.

Foreign accounts

The IRS announced in June streamlined procedures for U.S. citizens who are nonresidents, including dual citizens, who have failed to file U.S. income tax and information returns, such as Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The IRS also reported it has collected more than $5 billion from its 2009 and 2011 offshore voluntary disclosure initiatives (OVDI). The IRS reopened the 2011 OVDI in January 2012 but with less generous terms.

Corporations

In June, the IRS issued new temporary and proposed regulations on corporate inversions. The regulations remove the facts and circumstances test from regulations issued in 2009 and replace it with a bright-line rule describing the threshold of activities required for an expanded affiliated group (EAG) to have substantial business activities in the relevant foreign country. The regulations apply to transactions completed on or after June 7, 2012, the IRS explained.

Partnerships

The IRS unveiled in June a safe harbor under which it will not challenge a determination by a publicly traded partnership that income from discharge of indebtedness (cancellation of debt "COD" income) is qualifying income (passive-type income) under Code Sec. 7704(d). To benefit from the safe harbor, the COD income must result from debt incurred in activities that produce qualifying income.

Mortgage interest deduction

In May, the U.S. Tax Court found that a taxpayer who filed as married filing separately was limited to a deduction for interest paid on $500,000 of home acquisition indebtedness plus interest paid on $50,000 of home equity indebtedness (Bronstein, 138 TC No. 21). The court found that the plain language of the statute mandated this result, which is half the $1 million/$100,000 limit imposed on other taxpayers.

Deferred compensation

The IRS issued proposed regulations intended to tighten the definition of substantial risk of forfeiture (SRF) that applies to compensatory transfers of property in connection with the performance of services under Code Sec. 83 in June. As a result, fewer restrictions would qualify as an SRF.

Statute of limitations

On April 25, 2012, the U.S. Supreme Court resolved a split among the circuit courts of appeal by concluding that an overstatement of basis does not result in an omission of income for statute of limitations (SOL) purposes (Home Concrete & Supply, LLC). As a result the IRS has three years, rather than six years, to act against taxpayers who overstate basis except where fraud can be proved. The issue has arisen in a number of tax shelter cases where a taxpayer overstates basis in a partnership interest, resulting in an understatement of income.

Income

In April, a taxpayer successfully persuaded the Tax Court that her documentary film work was for-profit and not a hobby (Storey, TC Memo. 2012-115). The IRS had determined that the taxpayer, who had a full-time job as an attorney, had engaged in filmmaking without the intent to make a profit. The Tax Court found that the taxpayer had become skilled in filmmaking by attending classes, spent many hours outside of her full-time job on filmmaking and concluded that the taxpayer had a for-profit motive.

Estate tax

The IRS issued temporary and proposed regulations in June on temporary portability election for qualified estates. The portability election generally allows the estate of a deceased spouse dying after December 31, 2010 and before January 1, 2013 to transfer the decedent’s unused estate tax exclusion amount, if any, to the surviving spouse.

Local lodging expenses

In May, the IRS issued proposed reliance regulations outlining when an employee may treat local lodging expenses as working condition fringe benefits or accountable plan reimbursements; and when employers may treat qualified expenditures as deductible business expenses. The proposed regulations also provide a safe harbor for an employee to deduct local lodging expenses if certain requirements are satisfied.

Deposit interest

The IRS issued final regulations in April requiring U.S. banks and other financial institutions to report interest on deposits paid to a nonresident alien (NRA). The requirement applies to residents of any country having a tax information exchange agreement (TIEA) with the U.S. The reporting requirement applies to interest payments made on or after January 1, 2013, the IRS explained.

Health savings accounts

The IRS announced in May inflation-adjusted amounts for health savings accounts (HSAs) in 2013. For 2013, the annual contribution limit for an individual with self-only coverage under a high deductible health plan (HDHP) is $3,250 compared to $3,100 for 2012. For 2013, the annual contribution limit for an individual with family coverage under a HDHP is $6,450, compared to $6,240 for 2012. A HDHP is defined as a health plan with an annual deductible that is not less than $1,250 for self-only coverage and $2,500 for family coverage for 2013.

Fresh start initiative

The IRS announced in May an expansion of its Fresh Start initiative, designed to help taxpayers struggling financially. The IRS provided more flexible terms to its offer in compromise (OIC) program. The IRS also instructed its examiners on taxpayers’ ability to pay when student loans or state/local taxes are outstanding.

Economic substance

The Health Care and Education Reconciliation Act (HCERA) codified the economic substance doctrine. In April, IRS Chief Counsel released instructions to its personnel on when they may raise the codified economic substance doctrine.

Telephone tax refunds

In April, the IRS reminded taxpayers of the July 27, 2012 deadline to request refunds of federal excise taxes paid on long-distance telephone communications billed after February 23, 2003 and before August 1, 2006. In 2006, the IRS had announced that would stop collecting the three percent excise tax on long-distance telephone communications. Individuals who filed a 2006 return but who did not request a telephone excise tax refund should file an amended return or Form 1040-EZT (if not required to file a 2006 return).

Bankruptcy

The Supreme Court held in May that tax on a bankrupt debtor’s post-petition farm sale was not dischargeable in bankruptcy (Hall). The Supreme Court found that federal income tax liability resulting from a debtor farmer’s post-petition farm sale was not "incurred by the estate" under Bankruptcy Code Sec. 503(b).

IRS administration

In April, IRS Commissioner Douglas Shulman announced that he will step down at the end of his five-year term in September 2012. Shulman has overseen such high-profile programs as the offshore voluntary disclosure initiative (OVDI), the return preparer oversight initiative and modernization of the agency’s operating systems.

If you have any questions about these or any federal tax developments, please contact our office.

Planning 2012: Travel and Entertainment Review

2012-07-31T08:00:00.000-04:00

Although the computer age and modern telecommunications have reduced the need for in-person contact, it is still sometimes necessary for businesses to send employees out of town on business, or to entertain clients and customers. How travel and entertainment expenses are handled can have an impact on your net income, your paperwork burden, and on the tax results for you and your employees.

If you require employees to substantiate travel or entertainment expenses that are bona-fide business deductions, partial or complete advances or reimbursements are not treated as compensation income to the employee, and the advance or reimbursement is not subject to social security taxes or to income tax withholding. However, only 50 percent of any business-related meal or entertainment expense is deductible by the company, including costs of meals consumed by employees while they are traveling.

To ensure that the reimbursement is not subject to payroll and withholding taxes, the business must maintain a fairly detailed recordkeeping system. For travel, employees must submit a written statement of the time, place, destination and business purpose of the trip and the amount of expenses incurred by category (e.g., travel, meals, lodging). For meals or entertainment, the employee must submit a written statement showing time, place and cost of the event, who was entertained, and the business purpose of the meal or entertainment (if the event follows or precedes a business discussion, additional recordkeeping is required). Finally, the employee must keep and turn in to the employer documentary evidence such as receipts for all lodging expenses, and for other travel and entertainment expenses over $75.

Because the recordkeeping can be onerous, the law provides some shortcuts, depending on the type and frequency of the travel and entertainment expenses. For example, the paperwork burden and the cost of travel expenses can be decreased by giving employees who travel for business purposes a flat daily allowance, a per diem, which varies by destination, to cover meals, lodging and incidental expenses. If the daily allowances do not exceed IRS-determined maximums, they are payroll and income tax free with a minimum of paperwork; all that is required is a record of the time, place and business purpose of the travel. To-the-penny accounting of expenses and corroborating receipts is not necessary.

One simple way to cut out paperwork while boosting company tax deductions is to give employees a flat allowance for anticipated travel and entertainment, and not require these expenses to be substantiated. The allowance is fully deductible as compensation (assuming the employees' compensation packages are reasonable), and there is minimal paperwork required. The allowance, however, is subject to payroll and income tax withholding, and the company may not be able to determine what their actual travel and entertainment expenses are for budgeting purposes. In addition, there are unfavorable tax consequences for the employee, even if the travel and entertainment expenses are deducted on their own returns.

Travel and entertainment expenses are particularly susceptible to challenge by the IRS. However, in some instances, businesses may fail to deduct qualifying travel and entertainment expenses, or may be deducting these expenses improperly. We can perform a confidential review of your company's travel and entertainment expenses to ensure compliance with the complex rules that govern these deductions. Please call us to arrange an appointment at your earliest convenience.

Planning 2012: Tax Strategies for Dependent Children

2012-07-30T07:00:00.000-04:00

Raising a family can be both challenging and rewarding. As a parent, you worry about your children receiving quality child care, paying medical expenses, or saving for college. You want to do what is right for your family, but there are so many factors to consider, including how your choices will impact your family’s overall tax burden. We can assist you in understanding your options and in taking full advantage of the credits and deductions that you are entitled to as a parent.

For instance, you may be able to take a child and dependent care credit if your child is under the age of 13 at the end of the year. However, not all expenses qualify, and some expenses may qualify for both the dependent care credit and the deduction for medical expense, depending on your circumstances. In addition, if your employer offers a flexible spending plan, you might consider whether or not participating in the plan saves you more money than claiming the credit. If you are divorced, the issues can be more complicated. Who is entitled to an exemption for your child and how does claiming the exemption impact other tax benefits for a dependent?

Even if child care is not a concern of yours, these examples illustrate how complex family tax planning can be. There are many other tax considerations, such as the benefits and pitfalls of shifting income to minor children in light of the kiddie tax; determining what expenses qualify for the education credits and deductions and who can claim them; the eligibility requirements for the earned income credit; or the impact of the alternative minimum tax. We can help you see the bigger picture and develop a plan that both meets your needs and saves you money. Please call our office at your earliest convenience to make an appointment for a full review of your tax situation.

2012 Planning: Tax Solutions for S Corporations

2012-07-29T11:30:00.000-04:00

An S corporation, such as yours, is a pass-through entity that is treated very much like a partnership for federal income tax purposes. As a result, all income is passed through to your shareholders and taxed at their individual tax rates. However, unlike a C corporation, an S corporation’s income is taxable to the shareholders when it is earned whether or not the corporation distributes the income. Because an S corporation has a unique tax structure that directly impacts shareholders, it is important for you to understand the S corporation distribution and loss limitations, as well as how and when items of income and expense are taxed, before developing your overall tax plan.

In addition, some S corporation income and expense items are subject to special rules and separate identification for tax purposes. Examples of separately stated items that could affect a shareholder’s tax liability include charitable contributions, capital gains, Sec. 179 expense deductions, foreign taxes, and net income or loss related to rental real estate activities.

These items, as well as income and losses, are passed through to the shareholder on a pro rata basis, which means that the amount passed through to each shareholder is dependent upon that shareholder’s stock ownership percentage. However, a shareholder’s portion of the losses and deductions may only be used to offset income from other sources to the extent that the total does not exceed the basis of the shareholder’s stock and the basis of any debt owed to the shareholder by the corporation. The S corporation losses and deductions are also subject to the passive-activity rules.

Other key points to consider when developing your comprehensive tax strategy include:

the availability of the Code Sec. 179 deduction at the corporate and shareholder level;
reporting requirements for the domestic production activities deduction;
the tax treatment of fringe benefits;
below-market loans between shareholders and S corporations; and
IRS scrutiny of distributions to shareholders who have not received compensation.

We can assist you in identifying and maximizing the potential tax savings. Please call our office at your earliest convenience to arrange an appointment.

Check 21 -- Proving Tax Deductions Without Cancelled Checks

2012-07-28T09:00:00.000-04:00

By now you must have noticed the growing trend towards remote deposit of checks. Owing to the increasing sophistication of smartphones, you can now photograph a check written out to you and digitally send it to your bank for deposit. All this and more became possible after the Check Clearing for the 21st Century Act (Check 21) became effective in 2004. What it meant for most consumers then is that most banks discontinued the practice of retaining a paper version or copy of your checks. Check 21 allowed banks to truncate each of your checks, create a new electronic negotiable instrument called a substitute check, and then destroy the originals.

This industry change has important tax consequences for taxpayers who previously used checks to substantiate their expenses or charitable contributions. But the bottom line is that Check 21 allows you to use a substitute check as proof of payment because it is legally the same as the original check. The IRS, therefore, must accept your substitute check as proof of payment.

Banking online

Many of you may have switched to online banking. If so the IRS will accept image statements of substitute checks as proof of payment. If, however, an IRS auditor is suspicious that the image statement is not genuine, you may still be requested to order the actual substitute check from your bank. This will be a rare instance, however, and will likely occur only if you are audited. As an additional precaution, we suggest that you download and print out your bank statements at the end of the year. That way, even if you are audited several years from now, you'll have a record that's easy to access.

If you still rely on paper bank statements and paper copies of your checks, keep them in good order. The IRS will still accept bank statements that contain images of cancelled checks and/or substitute checks. To be used as proof, an account statement must show check number, amount, payee's name, and the date the check was posted. In order to keep track of your payments more easily for tax purposes, you should also continue to or begin to maintain a careful check register. That way, you'll know on which bank statement to look if you are ever audited.

Please do not hesitate to call this office if you have any further concerns about Check 21.

Selling Your Home

2012-07-27T15:42:00.001-04:00

Planning 2012: Maximizing Itemized Deductions

2012-07-27T07:00:00.000-04:00

Successful tax planning includes a review of your available deductions and the impact of your filing status on your option to itemize. It is important that all of the technical requirements for your deductions are met. In addition, certain items are deductible only to the extent they exceed a percentage threshold. By reducing your adjusted gross income, you increase the amount of itemized deductions you can claim, because the floor limitation amounts are reduced accordingly.

A strategy commonly used in year-end individual tax planning is to determine the best timing for claiming itemized deductions. Generally, it is beneficial for taxpayers to defer income and accelerate expenses. This strategy may enable you to itemize your deductions if you claimed the standard deduction in the past. This year, there is more uncertainty due to the sunset of various tax incentives originally provided by EGTRRA and regularly extended by other tax acts.

Unless they are retroactively extended by Congress, the following provisions are not available for 2012:

Itemized deduction for state and local general sales taxes in lieu of state and local income taxes
Mortgage insurance premium deduction
Above-the-line deduction for certain out-of-pocket classroom expenses
Above-the-line deduction for qualified tuition and related expenses
Alternative minimum tax (AMT) patch
Nonrefundable tax credit offset of entire regular and AMT tax liability
Tax-free IRA distributions to charity

Tax planning for higher-income taxpayers is more complicated. Generally, you must reduce your otherwise allowable itemized deductions if your adjusted gross income exceeds a specified threshold amount. Although the phase-out of itemized deductions and personal exemptions for higher-income taxpayers is eliminated through 2012, the phase-out limits are set to return in 2013.

The failure to take the alternative minimum tax (AMT) into account may also jeopardize your tax planning strategy, as the AMT continues to negate many itemized deductions. The AMT exemptions amounts have been increased through the 2011 tax year, but uncertainty exists for 2012 and later years.

You may benefit from planning strategies designed to take advantage of the current tax laws. Maximizing your itemized deductions is an important aspect, but there are other issues that you may need to consider in light of your overall tax scenario. We hope to provide you with planning options that enable you to achieve the greatest tax savings possible. Please contact our office at your earliest convenience to make an appointment to discuss your tax planning options.

ALERT IRS E-MAIL SCAM

2012-07-26T12:49:00.003-04:00

ALERT - SCAM

We have seen this e-mail being sent to many clients. It is a phishing scam which will lead you a .doc which could affect your computer. I would advise you to delete the e-mail. Please see the information below directly from the Internal Revenue Service.

Report Phishing

The IRS does not initiate contact with taxpayers by email or any social media tools to request personal or financial information

What is phishing?Phishing is a scam typically carried out by unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.
All unsolicited email claiming to be from either the IRS or any other IRS-related components such as the Office of Professional Responsibility or EFTPS, should be reported to phishing@irs.gov.

However, if you have experienced monetary losses due to an IRS-related incident please file a complaint with the Federal Trade Commission through their Complaint Assistant to make that information available to investigators.

What to do if you receive a suspicious IRS-related communication

If	Then
You receive an email claiming to be from the IRS that contains a request for personal information …	Do not reply. Do not open any attachments. Attachments may contain malicious code that will infect your computer. Do not click on any links.If you clicked on links in a suspicious email or phishing website and entered confidential information, visit our identity protection page. Forward the email as-is, to us at phishing@irs.gov. After you forward the email and/or header information to us, delete the original email message you received. Note:Please forward the full original email to us at phishing@irs.gov. Do not forward scanned images of printed emails as that strips the email of valuable information only available in the electronic copy.
You discover a website on the Internet that claims to be the IRS but you suspect it is bogus …	... send the URL of the suspicious site to phishing@irs.gov. Please add in the subject line of the email, 'Suspicious website'.
You receive a phone call or paper letter via mail from an individual claiming to be the IRS but you suspect they are not an IRS employee …	Phone call: Ask for a call back number and employee badge number. Contact the IRS to determine if the caller is an IRS employee with a legitimate need to contact you. If you determine the person calling you is an IRS employee with a legitimate need to contact you, call them back. Letter or notice via paper mail: Contact the IRS to determine if the mail is a legitimate IRS letter. If it is a legitimate IRS letter, reply if needed. If caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1.800.366.4484.
You receive an unsolicited e-mail or fax, involving a stock or share purchase …	... and you are a U.S. citizen located in the United States or its territories or a U.S. citizen living abroad. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission. Forward email to phishing@irs.gov. Please add in the subject line of the email, 'Stock'. If you are a victim of monetary or identity theft, you may submit a complaint through the FTC Complaint Assistant. ... and you are not a U.S. citizen and reside outside the United States. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission. Contact your securities regulator and file a complaint. Forward email to phishing@irs.gov. Please add in the subject line of the e-mail, 'Stock'. If you are a victim of monetary or identity theft, you may report your complaint to econsumer.gov.
You receive an unsolicited fax (such as Form W8-BEN) claiming to be from the IRS, requesting personal information …	Contact the IRS to determine if the fax is from the IRS. If you learn the fax is not from the IRS, please send us the information via email at phishing@irs.gov. In the subject line of the email, please type the word ‘FAX’.
You have a tax-related question ... Note: Do not submit tax-related questions to phishing@irs.gov.	If you have a tax-related question, unrelated to phishing or identity theft, please contact the IRS.

How to identify phishing email scams claiming to be from the IRS and bogus IRS websites

Sample of phishing emails
Sample of FAX scam
- Sample of recent fax scam requesting EIN - PDF
Are you a victim of Identity Theft?
- Contact the Federal Trade Commission
- Visit the IRS Identity Theft resource page

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 does not ...

... request detailed personal information through email.... send any communication requesting your PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

What to do if you receive a suspicious email message that does not claim to be from the IRS

If	Then
You receive a suspicious phishing email not claiming to be from the IRS ...	Forward the email as-is to reportphishing@antiphishing.org.
You receive an email you suspect contains malicious code or a malicious attachment and you HAVE clicked on the link or downloaded the attachment …	Visit OnGuardOnline.gov to learn what to do if you suspect you have malware on your computer.
You receive an email you suspect contains malicious code or a malicious attachment and you HAVE NOT clicked on the link or downloaded the attachment …	Forward the email to your Internet Service Provider’s abuse department and/or to spam@uce.gov.

Additional related resources
The IRS uses new and social media tools to share the latest information on tax changes, initiatives, products and services.
The IRS also issues customer satisfaction surveys to capture taxpayer and tax practitioner opinions and suggestions for improving our products and services.
Are you having trouble downloading a PDF?

2012 Planning: Tax Issues for Higher-Income Individuals

2012-07-26T11:11:00.000-04:00

We know that you have worked hard for your money and would like to reap the benefits to the greatest extent possible. Your ultimate goal is to sustain a successful wealth-building strategy while avoiding unnecessary and expensive tax consequences. We are interested in helping you achieve these objectives.

You are probably aware that the previously extended EGTRRA tax benefits are set to expire at the end of 2012. Numerous tax reform proposals have been made, including variations of the “flat tax,” as well as the imposition of a minimum effective tax rate for higher-income taxpayers (the so-called “Buffet Rule.”) However, it does not appear that fundamental tax reform will come to fruition before the fall elections. Beginning in 2013, higher-income taxpayers like you may assume an increased tax burden through higher tax rates and/or more limited deductions. It may be advantageous for you to shift income into 2012 while the lower tax rates are still available.

Although you are still able to benefit from the individual marginal income tax rate reductions provided by EGTRRA in 2012, the following tax provisions will not be available unless they are retroactively extended by Congress:

Above-the-line deduction for certain out-of-pocket classroom expenses
Above-the-line higher education tuition deduction
AMT patch
Itemized deduction for state and local general sales taxes in lieu of state and local income taxes
Mortgage insurance premium deduction
Personal tax credits allowed against regular tax and AMT
Tax-free IRA distributions to charity

Even more tax incentives will go by the wayside in 2013 unless Congress acts to extend them or make them permanent. These include:

Child tax credit, child and dependent care credit, and adoption credit enhancements
Employee payroll tax cut
Marriage penalty relief
Reduced capital gain rates
Repeal of the itemized deduction and personal exemption phase-outs
Taxation of dividends at capital gain rates
Various education-related incentives, including the American Opportunity Tax Credit

There are several revenue-raising provisions that were enacted as part of the healthcare legislation in 2010 that target higher-income taxpayers. These provisions become effective for tax years beginning in 2013:

Additional Medicare tax for higher-income employees and self-employed individuals
Additional Medicare tax of 3.8 percent on a portion of your net investment income
Itemized medical expenses are deductible only to the extent they exceed ten percent of adjusted gross income (the previous threshold was 7.5 percent of AGI)Contributions to Health FSAs through salary reductions limited to $2,500

If you have global financial interests, you can expect greater scrutiny by the IRS. You may have exposure under the FBAR and/or FATCA provisions of the HIRE Act, which increases disclosure and reporting requirements for foreign accounts, and provides penalties for noncompliance. However, to encourage full disclosure of unreported offshore accounts, the IRS has reopened the offshore voluntary disclosure program (OVDP). This program offers individuals the opportunity to disclose their foreign accounts and pay reduced penalties, rather than risk IRS detection and possible criminal prosecution at a later date.

The more complex issues faced by higher-income individuals create a challenging planning environment for the 2012 tax filing season. We would like to meet with you to discuss the options that are best suited to meet your personal financial goals, while minimizing your tax liability. Please contact our office at your earliest convenience to make an appointment.

Truck Driver Expenses

2012-07-23T09:05:00.000-04:00

Question:

Hi Ralph. Hope all is well with you. *** finally got a job. He just got his CDL-A and was hired as entry level truck driver with **** Transportation. He is on the road and in training for 12 weeks and then will be local, so I have no idea what the salary will be. We will just deal with that at the end of the year. But, I do have one question. While he is on the road there are expenses that he incurs that are out-of-pocket--meals, showers ($24.00 for a shower at the truck stop), laundry, and just little job related expenses. The employer told him that he could claim these on his income tax, but I am deferring to the expert here. Are there some kind of guidelines for what can be claimed while he is on the road?

Answer:

Here is a link to a great discussion about your trucking questions on my website. I also have a form which can be used for tracking. Please let me know if you have any questions.

http://www.saggioaccounting.com/399/Tax-Deductions-for-Overnight-Drivers/

Meeting politicians at The Delaware State Fair

2012-07-20T16:16:00.001-04:00

Really enjoyed meeting Jeff Cragg and Kevin Wade at the Delaware State Fair.

2012-07-20T12:33:00.001-04:00

This is a must watch video. Have a great weekend.

Who built your business?

2012-07-19T11:33:00.001-04:00

"If you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be ‘cause I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something. If you’ve got a business, you didn’t build that. Somebody else made that happen." - President Obama

I agree with the President on this, but I will not give credit to the government like he suggests. If your business has been successful, get on your knees and thank God. It is God who has given you the gifts to make your business successful, don't ever think that the government can do it. Thank God today for what he has given you and ask him for his will moving forward. I thank God everyday for my business, the opportunities that I have to witness to my clients and the ability to serve God in my chosen vocation. If we want our country to be strong again we need to look to the Lord for his guidance and stop counting on the government for direction.

US Supreme Court Decision on Healthcare

2012-07-12T12:10:00.001-04:00

On June 28, 2012, the United States Supreme Court issued its long-awaited decision on the constitutionality of the Patient Protection and Affordable Care Act (PPACA) and its companion law, the Health Care and Education Reconciliation Act (HCERA). In a nutshell, the nation’s highest court upheld the law – except for certain Medicaid provisions. The 5 to 4 decision preserves many far-reaching tax provisions and health insurance reforms. In coming months, lawmakers and legal scholars will examine all of the nuances of the Court’s highly complex decision. More immediately, individuals and businesses are concerned about what steps they need to take next.

Court challenges

After passage of the PPACA, several states challenged the law on constitutional grounds. The cases started in the federal district courts, worked their way through the circuit courts of appeal and eventually landed before the Supreme Court.

In March 2012, the Supreme Court heard three days of oral arguments on whether the individual mandate in the law is a proper exercise of Congress' taxing power or its power under Constitution's commerce clause. The Court also heard arguments on the viability of the PPACA without the individual mandate. Another issue before the Court was whether the law’s expansion of Medicaid exceeds the government's spending authority. Finally, the Court heard arguments on whether the Anti-Injunction Act (Code Sec. 7421) applies.

Individual mandate

The PPACA includes a shared responsibility requirement for individuals. This has come to be known as the individual mandate. Broadly, this provision requires individuals to obtain minimum essential health coverage or pay a penalty starting in 2014. Many individuals, however, are exempt from the penalty. These include individuals covered by Medicare and Medicaid, individuals with coverage under military health plans, undocumented individuals, and others. The PPACA also imposes no penalty on individuals who could not afford coverage. Additionally, individuals with employer-provided coverage generally are treated as having minimum essential coverage and are exempt from the penalty unless the coverage is deemed unaffordable.

In National Federation of Independent Business et al. v. Sebelius, June 28, 2012, Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan found that the individual mandate was a valid exercise of Congress’ taxing power under the Constitution. “Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income.”

The majority concluded: “Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. That is sufficient to sustain it.”

Justices Scalia, Kennedy, Thomas, and Alito dissented. According to the dissenting justices, the majority’s decision that the individual mandate imposes a tax in essence was a rewrite of the PPACA and not an interpretation. The dissenting justices would have struck down the entire law.

Tax provisions

Along with the individual mandate, the PPACA includes many tax provisions, which remain law. It cannot be over-emphasized that the tax provisions impact nearly every individual and business.

Here’s a run down some of the tax-related provisions:

Code Sec. 45R small employer health insurance tax credit

Additional Medicare tax for higher income individuals

Medicare tax on investment income

Contribution limits on health flexible spending arrangements (health FSAs)

Increased itemized medical expense deduction threshold

Excise tax on high-dollar health insurance plans

Additional tax on distributions from health savings accounts (HSAs) and certain other arrangements

Excise tax on certain medical devices

Indoor tanning excise tax

Tax credit for therapeutic discovery projects

Disclosure of cost of employer-provided coverage on Forms W-2 for informational purposes

Limits on use of health FSA dollars on over-the-counter medications

Enhanced simple cafeteria plan rules for small businesses

Changes to retiree prescription drug subsidies

Codification of the economic substance doctrine

Branded prescription drug fees

Reforms for charitable hospitals

Reporting requirements for sponsors of health care coverage

The PPACA also imposes a penalty on applicable employers (generally employers with more than 50 full-time employees) that do not provide affordable health insurance coverage to their employees. The penalty is scheduled to take effect after 2013. Employers need to review their coverage to determine if it satisfies the minimum essential coverage and affordability requirements under the PPACA. Employers also should review their benefits packages for compliance with the PPACA.

Since passage of the PPACA/HCERA, the IRS and the U.S. Departments of Health and Human Services (HHS) and Labor (DOL) have issued extensive guidance on the new law. The pace of guidance is expected to accelerate now that the law has been upheld by the Supreme Court.

Insurance reforms

Along with the tax-related provisions we have discussed, the PPACA has set in motion many insurance reforms. They include:

Enhanced coverage for certain dependents

Summary of benefits coverage and uniform glossary

New rules for internal and external reviews of adverse decisions by health insurance carriers

Patient’s bill of rights

New rules for preventive services

Like the tax provisions, federal agencies have been busy issuing guidance on the insurance reforms. More guidance is expected in coming weeks and months.

Health insurance exchanges

The PPACA requires every state to establish an American Health Benefit Exchange and Small Business Health Options Program (SHOP Exchange) to provide qualified individuals and qualified small business employers access to qualified health plans. Some states have already begun the process of setting up exchanges. Other states waited to see the outcome of the Supreme Court case.

Medicaid

The PPACA also expanded Medicaid to cover more individuals with incomes below 133 percent of the federal poverty level. The federal government would cover 100 percent of the Medicaid costs of the newly eligible individuals, with the percentage dropping to 90 percent (with states covering the difference) by 2020. States would be required to make up the difference. The PPACA also set minimum essential levels of Medicaid coverage and made other changes. States that fail to comply with the PPACA risk termination of all Medicaid funding from the federal government.

The Supreme Court held that Congress could expand Medicaid. However, Congress could not penalize states that choose not to participate in the expansion by taking away their Medicaid funding.

Looking ahead

Employers, taxpayers – indeed everyone – must prepare for sweeping changes in health care in coming years. Many of the provisions in the PPACA have already been implemented or are in the process of being implemented. Other provisions are scheduled to take effect after 2012. The Supreme Court’s upholding of the PPACA clears the way for implementation of the new law (unless a future Congress votes to repeal the law). Our office will keep you posted of developments and the steps you need to take in the coming months and years.

FOR MORE INFORMATION CONTACT RALPH V. ESTEP, JR., OF SAGGIO ACCOUNTING FOR MORE SPECIFIC INFORMATION.

Small business owner wants to know: Buy or lease? - Business - NewsObserver.com

2012-07-11T13:06:00.001-04:00

Small business owner wants to know: Buy or lease? - Business - NewsObserver.com

Happy July 4th

2012-07-03T20:15:00.001-04:00

I want to wish everyone a safe and enjoyable holiday. Enjoy time with family and friends and take a moment to thank God for all we have and the remaining freedoms we have in this country.

Graduation Day at Carson Long Military Academy

2012-06-01T09:33:00.001-04:00

Very proud of our son Ryan Christopher graduating today from 8th grade.

Taxable and Nontaxable Income

2012-05-25T12:31:00.001-04:00

Offer in compromise rules made more flexible in expansion of Fresh Start program

2012-05-23T11:00:00.001-04:00

Offer in compromise rules made more flexible in expansion of Fresh Start program

House passes bill creating federal 'blue alert' system - The Hill's Floor Action

2012-05-16T09:55:00.001-04:00

House passes bill creating federal 'blue alert' system - The Hill's Floor Action

Happy Mothers Day

2012-05-13T10:00:00.001-04:00

To my wife and the best Mother I have ever known, Happy Mothers Day!

IRS Competency Exam

2012-05-03T17:01:00.001-04:00

Today I took the IRS tax preparation competency test. I am pleased to report that I was successful on the first attempt. I think this is a great process and should eliminate some of those who should not be preparing taxes.

When I Grow Up, I Want to be a Tax Accountant -- Before ONESOURCE (Exten...

2012-04-27T11:00:00.001-04:00

Rep. Cantor's small-business tax cut bill passes House in 235-173 vote - The Hill's Floor Action

2012-04-20T11:48:00.001-04:00

Rep. Cantor's small-business tax cut bill passes House in 235-173 vote - The Hill's Floor Action

Taking Social Security At 62 Makes Sense In Some Circumstances

2012-04-19T15:38:00.001-04:00

Taking Social Security At 62 Makes Sense In Some Circumstances

America's Dumbest Tax Loophole: The Florida Rent-a-Cow Scam - The Atlantic

2012-04-19T15:37:00.001-04:00

America's Dumbest Tax Loophole: The Florida Rent-a-Cow Scam - The Atlantic

Video which demonstrates how to use the EFile Cabinet

2012-04-19T09:30:00.001-04:00

Final hours

2012-04-17T19:25:00.001-04:00

It's the final hours of tax season. Still time for an extension. Call now 302 659 6560

Tax season ends dance

2012-04-14T18:51:00.001-04:00

Check out this video on YouTube:

http://www.youtube.com/watch?v=zP-6uRdpYv0&feature=youtube_gdata_player

Ralph V. Estep, Jr.
Sent from my iPhone

Final Hours of Tax Season

2012-04-14T14:48:00.001-04:00

Only a few more hours of tax season. If you haven't filed, we can certainly file an extension for you. Visit our website at www.askralph.com

Final days

2012-04-12T06:35:00.001-04:00

Just a few more days until tax returns are due. Call today to schedule an appointment or file an extension.

If I file an extension can I delay paying tax?

2012-03-29T16:06:00.000-04:00

Question - Ralph - I have a pretty simple question for you. If I file an extension for my taxes this year, since I know I am probably going to owe the IRS, can I also extend the time to pay the tax? I am really short on money right now and I simply cannot afford to pay them what I expect I will probably owe.

Answer: We get this question often this time of year. While you are able to file an extension to extend the time needed to file your tax return, your tax obligation is still due and payable by the tax deadline, which for the 2011 tax return season is April 17th. If you extend your return and file after the tax filing deadline the IRS will charge you both penalty for late payment and also interest on the amount you later report as due and payable. With all of this said, I still think it's wise to file an extension so you can avoid penalties for failure to file which can be great.

For more specific guidance on extension filing or to have Saggio Accounting+PLUS file an extension for you, please contact Ralph V. Estep, Jr., at 302-659-6560 or visit our website for more information at www.saggioaccounting.com

TurboTax for Preparation

2012-03-27T10:24:00.002-04:00

Ask Ralph your question.

My significant other, Mike, is an over-the-road truck driver. Last year we bought a home; up to that point I prepared his tax returns myself but because of the home purchase I was not comfortable doing so. We ended up using Liberty Tax Service and were not at all happy with the results. The preparer had taken a course in preparing but actually worked in construction. We later found out that because we itemized (for the first time) there was a whole slew of deductions for which Mike qualified because of his employment but the preparer did not take. So this year Mike decided to ask coworkers for recommendations and was told to use TurboTax online; however, I am of the opinion that an automated online tax form is not going to help us find the deductions we should be using. Any thoughts?

Answer: This is a great question and one we get often. In life I have learned that you get what you pay for. I don't use TurboTax, but I think you can purchase it for about $50. You have already seen the results of going to a Tax Preparer with a "tax course" and the lack of experience when you took that route. Using a licensed Public Accountant is really your best option if you are looking for a professionally prepared tax return. In my case, I have a Master's Degree in Business and I have been preparing taxes for over 10 years. I am an expert in the tax field and I am certain that I know what questions to ask based on your significant other's job field. I would suggest you give us a try and see the difference that experience, education, licensure and professionalism bring. We welcome your call to schedule an appointment. We also offer a $35 discount for all new clients.

Reasonable compensation for S corp shareholders

2012-03-22T09:33:00.001-04:00

Reasonable compensation for S corp shareholders

Pleased with Services!

2012-03-21T14:03:00.002-04:00

Picked up my taxes today..very pleased (not that I have to pay but that's not your fault) but with the way they were presented to me and how fast and efficiently they were prepared. Thanks again. I will be recommending you to my friends.

Fee Question - Moved from PA to DE

2012-03-18T09:00:00.000-04:00

Question:
Hello. I moved to Delaware in September 2011 from Pennsylvania and need to have my 2011 taxes done, both federal and state. I sold some stocks, withdrew money from my Roth IRA. I normally did my own taxes, but with moving, selling stock, etc, I would rather have my taxes done by a professional. Is there any way to get an idea of an approximate cost range for having my taxes done?

Answer:

We do not quote specific prices because it's impossible to determine exactly what work will need to be done to professionally prepare your tax return. Based on the information you provided, I can tell you that our base fee is $200, which includes the 1040, Schedule A, and State of Delaware return. In your case, you will also need to have a PA return, Schedule D and appropriate sub-schedules, and some other items relative to your IRA and moving. I will also tell you that we offer a $35 discount for new clients. We are certainly interested in adding you as a client so please call our office or feel free to schedule an appointment online. We look forward to seeing you soon.

Why I'm Paying My Taxes With a Credit Card This Year

2012-03-16T13:59:00.001-04:00

Why I'm Paying My Taxes With a Credit Card This Year: Paying your taxes with a credit card means paying big fees. So why am I doing it? Because this year, I come out ahead.

IRS Fresh Start Program

2012-03-09T19:13:00.003-05:00

Taxation of abandonments, foreclosures and repossessions

2012-03-06T16:53:00.000-05:00

Taxation of abandonments, foreclosures and repossessions

Funny Accountant Humor for Friday

2012-03-02T18:18:00.001-05:00

Tax Tips: Haven't Filed a Tax Return in Years?

2012-02-24T12:14:00.000-05:00

Technology Helps Small Businesses Restore Competitiveness to U.S. Economy

2012-02-22T15:35:00.000-05:00

This is a great article. We can help with cloud technology. Contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS to review our cloud services offering.

Technology Helps Small Businesses Restore Competitiveness to U.S. Economy

Price for Tax Preparation

2012-02-20T18:23:00.001-05:00

Question: I was wondering if you would be able to give me a general idea of how much tax preparation will run? Not sure if it is based on the number of papers we have or type of job. Also, do you offer E-file? We would also be new clients and I did see your sign about $35 off for new clients. If you could please let me know the cost, that would be great!! We are new to Smyrna and are trying to find a place that isn't too expensive as we do live on a tight budget. Thank you for your time!

Answer:

Our fees are based on the schedules we file with your tax return. Our base fee is $200 which includes the 1040 Long Form, Schedule A (Itemized Deductions), and State of Delaware return. We do offer a $35 discount for all new clients. We e-file all returns for free since e-filing is mandated. If you want to email your return from last year, I could review and get a more specific estimate because it is impossible to quote a return without understanding the specifics. Additional schedules which are required for the professional preparation of your tax return run between $5-$35 each, based on the complexity of the return. Since you are new to Smyrna I assume you may have moved from another state and/or sold a home, so that will certainly require additional work. When you are ready to set-up your appointment, please feel free to give us a call or you may schedule online through our website at www.saggioaccounting.com and click on Book Now.

Congress passes payroll tax cut extension

2012-02-20T09:44:00.000-05:00

Congress passes payroll tax cut extension

My mother passed away...not what do I for taxes?

2012-02-18T09:29:00.000-05:00

Question: My mother passed away in May of 2011. All she received was SS and a pension from my deceased fathers work. What is involved with finalizing her taxes. She did have a very small home that was left to my sister and I which we have started renting to my daughter @ $600 a month with the first payment coming in 2012. Thanks and by the way I am going to be scheduling to have you do my business/personal taxes, as well as my daughters taxes which are simple but she also is going thru a divorce.

Answer:

I am certainly sorry to hear about the loss of your mother. We can certainly assist you with all of these issues. Your mother's taxes will require us to understand more of the specifics about the situation and based on that review we will let you know exactly what is needed. When you come in your appointment we can discuss the specifics, but basically we will need to file a final tax return for your mother and we may need to file an estate tax return based on how the estate was handled. We certainly will need to discuss the rental property which now is shared with your sister. Give us a call when you have a moment and schedule an appointment and we will review all of these items and I will certainly assist you. Good hearing from you and I look forward to seeing you soon.

Handling the final affairs of our loved ones can be tricky, so call Ralph V. Estep, Jr., of Saggio Accounting+PLUS and he will assist you in making sure everything is done correctly. Call us today to schedule your appointment at 302-659-6560 or visit our website www.saggioaccounting.com

Where's my Refund?

2012-02-18T09:14:00.001-05:00

Question: I filed my taxes several weeks ago and I still have not received my refund. Do you know how I can check on my refund status?

Answer: Here's a great IRS you tube to explain the process. You may also go to www.irs.gov and click on Where's my Refund.

When we file returns for our clients our clients receive an email once the tax returns is processed and accepted by the IRS and States. We take your tax filing seriously and we want to build a life-long relationship with our clients. Call Ralph V. Estep, Jr., of Saggio Accounting+PLUS today at 302-659-6560 or visit our web site at www.saggioaccounting.com

Tax Tips: Charitable Contributions

2012-02-17T15:37:00.000-05:00

IRS Gives Advice on Reporting Unemployment Benefits: Accounting Today

2012-02-16T11:49:00.000-05:00

Here's a good article on Unemployment Benefits. For more specific information contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our web site at www.saggioaccounting.com

IRS Gives Advice on Reporting Unemployment Benefits: Accounting Today

Top Ten Ways To Annoy An I.R.S. Agent

2012-02-15T12:58:00.000-05:00

Regulations Issued on Repair Expenditures

2012-02-15T12:49:00.000-05:00

This is a very good article for those who have rental properties and are concerned about the difference between improvements and repairs. For more specific information and assistance, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our web site at www.saggioaccounting.com.

Regulations Issued on Repair Expenditures

When a client leaves or loses a job

2012-02-14T12:39:00.000-05:00

Here is a great article about leaving a job. A must read!

When a client leaves or loses a job

Office in Home Deduction

2012-02-13T06:44:00.000-05:00

Question: I work at home for a company located in Wilmington, Delaware. They provide an office for me, but it's just easier to work from the comfort of my home in Smyrna and I avoid all the travel. I would like to know what expenses I may deduct for my "home office" on my tax return.

Answer: Ok, are you ready for this NOTHING! Sorry to report, but since you are working at home for your convenience, you may NOT deduct the costs associated with your home office. If your employer is providing you with an office, but you elect to work from home, then the home office is not allowed. If on the other hand, your employer does not provide an office and you are working for the employer's convenience, then you will have some legitimate home office deductions. We will need to start by looking at the total square footage of your home. We then need to know the square footage of the specific space which is exclusively used for business. We will then figure out a home office percentage. We will then need to know the costs associated with your home and we will derive a home office deduction. You will need to remember that the deduction is a 2% limited deduction on your Itemized Deduction schedule, so the savings will be based on the amount of space, costs, and your income. We may also discuss taking a depreciation deduction for your home, but that gets complicated so we will leave that for another day.

For more specific assistance with the home office deduction and other tax questions, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com. Call today to take advantage of our $35 discount for all new clients.

Benefits of a Roth IRA

2012-02-11T10:32:00.000-05:00

Question: Wondering about the benefits of a Roth IRA. When do we need to purchase to benefit us for 2011 taxes? Where do we need to go to purchase?

Answer: Thank you for the great question. The Roth IRA was set-up by Delaware's own Bill Roth who served for many years as one of our U.S. Senators. Roth IRA accounts are set-up with after-tax money, so their is no tax deduction in the current year for the contribution to a Roth IRA. Unlike traditional IRA accounts, which are a reduction in income in the current year and will result in current year tax deductions, the Roth account is funded with after tax money. The benefit to the Roth account is that distributions/withdrawals from a Roth account, once the account has been held for a certain period are tax-free. When you take a distribution from a traditional IRA you have to pay tax when you take the money out, but with the Roth, both the principal and the income is tax-free when taken from the account.

You will need to speak to your investment advisor to provide you with more specific information the benefits of a Roth versus traditional IRA account. We can certainly assist you with the basic account fundamentals when you come in for your tax preparation appointment.

For more specific answers to your tax questions, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our web site at www.saggioaccounting.com

Why did the State send me a 1099 for my tax refund from last year?

2012-02-10T06:36:00.003-05:00

Question: The State sent me a form 1099-G for the exact amount of my refund from last year. It said something about having to report this on my current year tax return. What is this all about?

Answer: This is a question that I bet we are asked at least three times a day during tax season. The State sent you a form 1099-G to report as income the amount of the State tax refund you were paid last year because this is taxable income to you in the current year if you itemized your deductions on last year's return. When your return was prepared you took an itemized deduction for the full amount of the State taxes which were withheld from your payroll, you found this number on your form W-2. Your deduction was for the full amount of tax which was withheld from you pay, but your tax burden was less than this withholding since you received a refund. You actually took a tax deduction for taxes which you did not owe, therefore, the refund becomes income in the year where you receive the refund. This only applies when you itemized your deductions since that is the only way you would have taken the deduction. This is something that you MUST report since the State will be sending a copy of the Form 1099-G to the Internal Revenue Service and they will no doubt send you a summer letter adjusting your federal return if the refund is not claimed as income.

For navigating these income reporting issues as well as other tax complexities, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com where you will find a great deal of information about tax savings tips.

Late Mortgage Interest Statement

2012-02-09T06:37:00.000-05:00

Question: Hey Ralph, I hope you can help me with this question. Last year, after I filed my taxes on one of those free file sites I received another Mortgage Interest statement from the lender who took over my mortgage. Since I had already filed my taxes and received my refund I was not able to claim the interest. I was wondering if I could just add it to this year's return? It's quite a bit of interest so I don't want to loose the deduction.

Answer: Unfortunately we see get this question frequently. The mortgage interest must be taken on the tax return for the year when it was paid so the only option is to amend your tax return from last year and include the mortgage interest as part of a correction to your previously filed return. The filing of amended/corrected tax returns is very common, but you will have to file it the old paper format and it can take some time for the Internal Revenue Service to review and issue your refund. It is in your best interest to file the amended return since you will increase your refund.

Filing amended returns and computing corrections can be complicated so call Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com.

Identity Theft Video from the IRS

2012-02-03T15:49:00.003-05:00

Here is a great Identity Theft video from the Internal Revenue Service.

We work hard to guard your personal information. We employ the most up-to-date systems to protect our clients and their valuable data. For more information about our services and the extra efforts we employ to prevent client data intrusion, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com

Taxes for a Delaware LLC

2012-02-01T09:46:00.000-05:00

Question: I am looking for an accountant to help prepare and file my taxes. I started a Delaware LLC in December 2011 and I am looking to recoup the start up costs and file with the IRS. I would like a breakdown of what services I would need and the breakdown of cost as well.
Thank you

Answer: Thank you for your question. What seems to be a pretty simple question is actually quite complex. We need to first start by understanding what type of LLC was formed. When you create an LLC, the Internal Revenue Service by default considers it a disregarded entity and would expect to see either the LLC reported on your personal income tax return or on a partnership return. You may also have filed an S Election, form #2553 to be taxed as a corporation. All of this is normally spelled out in your Operating Agreement, if you have one, and you should have one. The attorney or incorporator who established your LLC should have drafted this for you.

We file LLC tax returns of all types and we work with our clients in creating the best tax structure to meet your business needs. Contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our website at www.saggioaccounting.com and let us build a relationship with you.

Lawmaker Introduces Bill to Close Newt Gingrich Medicare Tax Loophole : Accounting Today

2012-02-01T09:37:00.000-05:00

Small Business Owners Take Note!

You have to read this article and you need to keep an eye on this. This is a huge item and will significantly affect anyone who is currently taking "reasonable" compensation from an S Corporation. When you read between the lines, what this actually proposes is the full self-employment taxation of all earnings in an S Corporation. The Congress has been looking for a way to raise more revenue and this may very well be the start. I will keep everyone in the loop as this moves forward. I would also encourage everyone to contact Rep. Peter Stark from California to state your objection to this legislation.

Lawmaker Introduces Bill to Close Newt Gingrich Medicare Tax Loophole : Accounting Today

IRS and DOJ Bust Identity Thieves Across U.S.

2012-02-01T09:33:00.000-05:00

Great Article, a must read!

IRS and DOJ Bust Identity Thieves Across U.S.

Fees for Tax Preparation

2012-01-31T09:46:00.000-05:00

Question: Can you give me an estimate of how much you charge for Income Tax services.
My situation: Two working adults + one 5 year old daughter, own house, itemized deductions, no surprises.

Answer:

Our base fee for the tax preparation is $200 for the 1040, Schedule A, and State of Delaware return. Additional schedules required will be in addition to this fee. We also offer a $35 discount for all new clients. I have attached our new client package for your review. We look forward to serving you, simply go to our website at www.saggioaccounting.com and click on “Book Now” or contact our office at 302-659-6560.

New Client Package

Introducing the new Billboard Ad - Locate it and get $50

2012-01-30T18:36:00.000-05:00

Our new billboard ad launched today. The first person to send an email to ralph@askralph.com with the exact location and the slogan on the billboard will get $50 off their tax preparation. Be on the look-out and be the first to find it and get a great discount.

Streamlined installment agreement program modified

2012-01-30T16:50:00.000-05:00

This is a positive change. For assistance with Internal Revenue Service installment agreements, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.askralph.com

Streamlined installment agreement program modified

Select the "Best" Tax Accountant

2012-01-30T14:20:00.000-05:00

Here is a great report about the importance of selecting a qualified tax accountant. When you are ready to file, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our web site at www.saggioaccounting.com

Ask Ralph Radio Ad

2012-01-29T20:06:00.001-05:00

Here's the new Ask Ralph radio ad...just click on play.

https://secured.client-sites.com/2133dela/Saggio_Final_30.mp3

Internet Based Business Structure

2012-01-29T19:59:00.000-05:00

Question: Hey Ralph, I am an Australian Resident, but am working with a few folk in the USA and we are in the process of setting up an internet based business. We believe the business has quite large growth potential and have outside investors supporting the business. One of those investors is a US Citizen and will act as a US resident director. I was a VP at (omit)and (omit) and am quite used to taking small businesses and making them large. Important thing is that we have a good corporate structure in the USA for ongoing growth (different types of shares plus flexibility in corporation setup) and to keep the costs down at this stage of the game. Are you in this business? If so what are the fee structures/options available?

Answer: This is a great question. When it comes to corporation setup we will leave that to the legal guys. I will recommend someone to you in a private e-mail. Due to the complex nature of what you are looking to do, I would recommend you invest some time and effort in the set-up of the legal entity. It may be somewhat complex since you will have what appears to be both US and foreign investors. Once you have established the entity we could certainly work with you in developing the appropriate tax structure for your entity. We can work with your attorney as well in consultation as to the tax ramifications of the entity structure, but we will leave the legal side of this to the attorney.

For assistance with tax implications of your business entity, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our website at www.saggioaccounting.com.

Can I deduct my dental expenses?

2012-01-29T16:00:00.000-05:00

Question: My dentist just told me that I have to get a root canal and he said the cost would be over $4000. He also mentioned that since I don't have dental insurance I should check with my accountant and see if the dental expenses are tax deductible. Please help me so I can figure our if these dental expenses will be a tax deduction.

Answer: First a toothache and now you have a financial ache as well. Hope your root canal goes well, I have been putting one off for some time, I guess once the tooth starts hurting I will be forced to do something about it. Nevertheless, your question is a good one and a question we get routinely. Dental expenses fall under the "medical" expense category and they ARE a tax deduction with some limitations. First of all, medical/dental expenses are a Schedule A itemized deduction so you will have to itemize in order to take advantage of these expenses. You should also be aware that their is a 7.5% limitation based on your Adjusted Gross Income, so you cannot deduct these medical expenses until they exceed 7.5% of your AGI. On of the strategies which we suggest to our clients if they know they will need major medical/dental treatments is to load all of these into a particular year if possible, so they will reach the limitation without effort. This works were well for elective procedures, but of course that is on a case-by-case basis. Good luck with the dental work!

Ralph V. Estep, Jr., of Saggio Accounting+PLUS works to build life-long relationships with his clients. Call Ralph today at (302) 659-6560 or visit the website at www.askralph.com.

We are now on TaxBuzz

2012-01-29T09:26:00.000-05:00

We are now participating on the TaxBuzz site, follow our link

http://www.taxbuzz.com/public-accountant-tax-preparation-consulting-saggio-management-group

Travel expenses on my tax return

2012-01-29T08:56:00.001-05:00

Question: Ralph, I was just recently promoted to a sales position with my company and they now require that I travel throughout the East Coast visiting clients. My company picks up the costs of my airline flights and my hotels room, they even have been giving me $25 per day for meals. I was wondering if I have to report the $25 per day as income and if I can deduct my other expenses since I now have to pay for taxis from the airport, hotel laundry services and my meals generally cost more than the $25 per day since my clients are in the larger cities. Please help, this is very confusing to me.

Answer: First of all congratulations on your promotion. The move to a sales position can be difficult to manage at first, but most of our clients who take on sales positions find them very rewarding both for their career and financially. You must also take a closer look at your expenses because you will miss out on some deductible expenses. Since your employer is covering the costs of your airline and hotel and even giving you a modest daily meal stipend, they are probably taking care of most of the expenses. You will want to keep track of the balance of your expenses so at tax time we can take a deduction. Keep track of all of your unreimbursed expenses and make sure you mention them when you prepare your taxes. These deductions are Misc. itemized deductions and they are taken on your Schedule A of your tax return. These deductions are subject to a 2% limitation based on your Adjusted Gross Income, but with the amount of travel you will most likely undertake, you will find this to be a potentially fruitful deduction.

For navigating this tax issue as well as other tax complications, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our website at www.saggioaccounting.com

$35 Coupon for New Clients

2012-01-27T19:55:00.002-05:00

Shoebox of Receipts

2012-01-27T19:45:00.000-05:00

Question: Ralph, My girlfriend already has her taxes done, and has a refund on the way. I just have a shoebox of receipts, which I know is not going to help you do my taxes. What do I need to do to get organized? Thanks

Answer: Well at least your better half is off to a good start. I would suggest you go to our website at www.saggioaccounting.com and click on the About Us tab and then select the Document Library, there you will find a "New Client Package" which contains a great Tax Organizer. We also have some great links to assist you with putting together your records under our "Information Center" tab. You will find numerous guides for handling your particular industry.

Since you say you have a shoebox of receipts, I assume you may have your own business. These returns can get very complicated and you need the services of a true professional to help reduce your potential tax exposure. You will want to start by totaling all of the income your received from your customers. This is your "Revenue" and this is where we will start the process. You will then need to sort your receipts by category and then total them up by category. These are your "Expenses." The difference between your Revenue and Expenses will by your net income. We will have some other ideas for you when you come in for an appointment, but you will want to also write down all of your "Business" mileage as well as any purchases of equipment, these are called "Assets" and they are treated a little different from expenses.

Like I said, these returns get complicated quickly and you don't want to end up paying more than your fair share, unless you feel like making a donation to the Internal Revenue Service, but that's no fun! When you are ready contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our website at www.saggioaccounting.com and click on the "Book Now" icon to set-up an appointment. We are eager to start a relationship with you so let's hear from you soon.

Energy Crediits

2012-01-27T11:39:00.000-05:00

Question: Good Morning, Mr. Estep

I'm preparing for our tax meeting and wanted to know, if there are any tax credits or deductions available this year for energy efficiency improvements? We replaced 8 windows in our home, bought an Energy Star refrigerator and had additional insulation installed in our attic as well as having the basement sealed with foam insulation. All together we spent approximately $9k.

Answer: Great question. Here is some excellent guidance right from the IRS web site.

Home Energy Credits Still Available for 2011

Special Edition Tax Tip 2011-08, November 21, 2011

The IRS reminds homeowners that they still have time this year to make energy-saving and green-energy home improvements and qualify for either of two home energy credits.
The Nonbusiness Energy Property Credit is aimed at homeowners installing energy efficient improvements such as insulation, new windows and furnaces. The credit is more limited than in the past years, but can still provide substantial tax savings.

The 2011 credit rate is 10 percent of the cost of qualified energy efficiency improvements. Energy efficiency improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.
The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.
The credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011.
Qualifying improvements must be placed into service to the taxpayer’s principal residence located in the United States before January 1, 2012.

Homeowners going green should also check out the Residential Energy Efficient Property Credit, designed to spur investment in alternative energy equipment.

The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.
No cap exists on the amount of credit available except for fuel cell property.
Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.
Link:

Form 5695, Residential Energy Credits

YouTube Videos:

Cut Your Energy Costs and Taxes - English | ASL

For more specific information contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our web site at www.saggioaccounting.com.

Documenting Charitable Contributions

2012-01-27T06:43:00.000-05:00

Question: Good Evening Ralph. I donated a ton of clothes and other household items to the Goodwill in December. They told me that I could take a tax deduction on my tax return, but they just gave me a receipt that says I gave them 3 bags of clothes and a sofa. How do I go about taking this deduction on my tax return?

Answer: We get this question at least five times a day and it really does affect your tax return so this is important. Charitable contributions are a schedule A deduction. They are reported based on the type of donation. All cash/check donations are listed by the amount donated (less any goods/services received in the donation). When you donate some of your personal "treasures" you have to complete a separate tax form to the extent that the donation value exceeds a set amount. What we recommend for our clients is that they make an itemized list of the items which were donated and record a fair market value with each item. We then recommend that you attach this list to the receipt from the charity and put it with your tax papers for filing. If you have something which is of great value, you will want to have it appraised and you will want to retain this appraisal.

Tax returns can get very complex quickly, so it's really a great idea to find a qualified professional accountant to prepare your taxes plus give you great advice moving forward. Contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS for expert advice. "We are all about building relationships with our clients," says Ralph. Contact Saggio Accounting+PLUS at 302-659-6560 or www.saggioaccounting.com today.

IRS Warns of Tax Refund Delays: Accounting Today

2012-01-26T19:50:00.000-05:00

Great article about IRS refund delays. A must read.

IRS Warns of Tax Refund Delays: Accounting Today

Divorce is Unfair!

2012-01-26T13:09:00.000-05:00

Question: Ralph, I was instructed by your staff to send you an E-mail question.

I am recently divorced (2010), with two kids. I had 50% custody of my kids until late August 2011. Due to proximity of school to mom, she now has kids more during school time (9 days in rolling 2 week schedule). I have 50% time in summer. I pay significant child support, including half of the Daycare costs.

The way I read the federal tax code last year, if parents have equal time with children, the parent paying child support (and higher income) may have all child credits. When I filed in April 2011, I gave my exwife one of the child tax credits since she asked, and i took one, since this seemed fair.

Now my ex wife is refusing to allow me to have the same arrangement this year. She is planning to take both credits this year.

Is there any way you can prepare a tax filling for me this year, which will allow me to have at least one child tax credit. Our divorce papers are silent on this, and my lawyer said a good tax account may be better than a legal court argument.

Please help.

Answer: This is a really tough situation, but a situation we seem to see more often these days. Here is a great answer that I found on About.com

Qualifying Children

To be claimed as a qualifying child, the person must meet four criteria:Relationship — the person must be your child, step child, adopted child, foster child, brother or sister, or a descendant of one of these (for example, a grandchild or nephew).
Residence — for more than half the year, the person must have the same residence as you do.
Age — the person must be

under age 19 at the end of the year, or
under age 24 and a be a full-time student for at least five months out of the year, or
any age and totally and permanently disabled.

Support — the person did not provide more than half of his or her own support during the year.

Some Tips about Claiming Qualifying Children

The qualifying child must live with you for more than half the year. More than half a year means, at minimum, six months and one day. If you share custody, you may want to keep a log of where the child spends the night in your calendar or day planner. The new rules state that the qualifying child must not provide more than half of his or her own support. This is different from the old rules. Under the old rules, the taxpayer had to provide over half the support for the child. The change makes it easier for families relying on public assistance, charity, and gifts from family members to claim a dependent.
You might still be able to claim the child as a qualifying relative if the child does not meet the criteria to be a qualifying child. But the qualifying child rules always prevail over the qualifying relative rules. So you'll want to make sure the dependent would not qualify as a qualifying child for someone else before claiming a qualifying relative on your tax return.

Tie-Breaker Tests for Claiming a Qualifying Child

If two or more taxpayers claim a dependent as a qualifying child in the same year, the IRS will use the following tie-breaker tests to determine which taxpayer is eligible to claim the dependent. The tie-breaker tests are listed in order of priority.The child will be the qualifying child of:

the parent,
the parent with whom the child lived for the longest time during the year,
if the time was equal, the parent with the highest adjusted gross income,
if no taxpayer is the child's parent, the taxpayer with the highest adjusted gross income.

Some Additional Tips for Tie-Breaker Situations

A child can be the dependent of at most one taxpayer. If you qualify to claim the child, then be ready to submit documentation to the IRS to support your claim.Chances are the child will spend at least one day more with one parent than the other parent, since there are usually 365 days in a year. Consider keeping a log of where the child spends the night.
If the child spends exactly equal time with both parents, the parent with the higher income will be able to claim the dependent. Both parties can prevent an IRS audit by reviewing these tie-breaker rules in advance, and agreeing on who gets to claim the dependent.
The non-qualifying parent can claim the dependent ONLY IF the qualifying parent releases his or her claim to the dependency exemption. You accomplish this by using IRS Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents (PDF document). You can indicate on this form for which year or years you agree to release the exemption. You can also revoke the release if you later change your mind.

For more specific assistance with this and many other tax issues, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or you may visit our web site at www.saggioaccounting.com.

Lucky at the slots?

2012-01-26T06:42:00.000-05:00

Question: Good evening Ralph. I was wondering about gambling winnings. The other night at the casino I won $1600. When the bells rang and the winnings were paid a casino employee came up and told me that I had to go to the cashiers window to claim my winnings. When I got to the window they asked for my name, address, and social security number. They also asked if I wanted to have any federal taxes withheld from my winnings. I was so shocked by all of this that I told them to just give me the money and don't take out any taxes. I usually never win, so this was quite an experience. What do I do now?

Answer: Congratulations! Lucky at the casino may not mean you are so lucky at tax time. Gambling winnings are reported as ordinary income on your tax return. Since you were compelled to share your information, you can expect to receive a form W-2C from the casino at tax time which will report the winnings. They also will file this form with the IRS, so you MUST report this on your tax return. The good news is that you may be able to partially offset your winnings based on your reportable losses. When we have clients who report to be gamblers the first thing I tell them is to keep track of their losses. The best way to do that normally is to get one of those customer/loyalty cards from the casino. When you use this card, they will track you winnings/losses and they will make available to you at year-end a statement which you can use to determine the gambling losses you can claim on your Schedule A of your tax return. Remember - you can only deduct gambling losses up to the amount of winnings you claim and if you are not able to itemize deductions then the losses will be of no consequence, so you will need the experience of a tax expert. Keep those gambling loss receipts and save them for tax time.

For more specific guidance on reporting gambling winnings and losses contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com. All new client's receive a $35 discount.

IRS Audit Red Flags: The Dirty Dozen - Kiplinger

2012-01-25T11:27:00.000-05:00

Here is a great article, a must read. For specific guidance contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or www.saggioaccounting.com

IRS Audit Red Flags: The Dirty Dozen - Kiplinger

How does E-Filing Work?

2012-01-25T06:43:00.000-05:00

Question: Ralph, I was wondering if E-filing is safe. I am always concerned about identity theft and I want to make sure my information is secure.

Answer: We are now mandated to file all tax returns electronically, quite frankly we have been doing this routinely since we the Internal Revenue Service initiated E-filing. In my view, it really is the most efficient and safest means of filing your tax returns. When we create your tax returns, rather than providing a copy for your to mail, we develop an electronic file which we submit through our tax preparation software provider. That file includes all the traditional tax return information in an electronic format. Several times per day, the host providers dumps that data to the IRS and the IRS will process the return and provide a receipt signifying their receipt of the tax return. I view this as being the best means of filing because it not only provides proof that the tax returns was filed timely, but it also undergoes many basic checks for accuracy. The return is reviewed for completeness, names, social security numbers, dates of birth, and other information is reviewed. These checks substantially reduce the risk of errors in data entry as compared to paper filing. The process is also more secure in my view since you are not using the mail system.

The IRS has recently mandated that any accountant preparing tax returns generally must e-file their client's returns unless they can demonstrate a reason for not e-filing. We are now also required to file a special form with any "paper" returns we file stating the reason for not e-filing. All in all, it's really a great system and our clients are really pleased with the response time. In most cases, refunds are directly deposited to client's accounts with 7-10 days of filing.

When you are ready to e-file your tax returns, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS either by telephone at 302-659-6560 or visit our website at www.saggioaccounting.com. We are offering a $35 discount for all new clients, so don't delay.

When just being a babysitter is not that simple

2012-01-23T20:55:00.000-05:00

Question: I have a question for you Ralph. I took a job as a babysitter for a family on the other side of town. They just told me that they intend to take a deduction for the money they paid me. How does this impact me?

Answer: I get this question at least a few times per day. You have a complicated situation. When you decided to go to work for this family, you probably assumed that this would be some extra money to put in your pocket. The families decision to take a deduction for the money they paid you has complicated the situation. So here's what we have. First of all, you were an employee of the family and they should have set you up as a "household" employee. They should have paid you with normal payroll checks and taken the appropriate taxes from your wages. I would suspect they probably considered you an "independent contractor," but I can assure you that this is not the case. Since you are working at their home, with their children, using their toys, etc., you are not a contractor. I would guess you don't have a business license, business insurance, etc., as well. You are an employee and now you find yourself in the situation where all of the money that was paid to you is income reportable on your personal tax return. You will now be responsible for not only the federal and state income tax, but also the self-employment tax burden on this income. In other words, you had better plan on taking 45% of the money you earned and put it aside for taxes.

If you are still in this "work" relationship, I would suggest you have a clear discussion with the family and explain to them that you are an employee and you expect to be treated as such. It is their responsibility to handle your payroll taxes and provide you with the appropriate documentation. If they are interested in having someone assist them with the payroll function, we can certainly help.

For more information about this issue and other tax related issues, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at 302-659-6560 or visit our website at www.saggioaccounting.com. We will help you navigate the payroll process and provide you with advice in these somewhat complex issues.

It's not a gift it's your money!

2012-01-22T14:55:00.004-05:00

Question: Hey Ralph. Here is a question for you. How can those big tax preparation chains claims that they can get me a greater refund then what someone else can get? I just don't understand the whole refund thing.

Answer: I saw that commercial this morning from the "green" tax preparation franchise. I am sure everyone knows the Block I am referring to. I thought it was interesting that their ads now feature people openings envelopes which look like gifts with refund amounts written inside. This drives me crazy! A refund is not a gift from the government, it is YOUR money. I will never understand how someone gets so excited about a refund, when it's nothing more than the federal government giving you back your own money which was paid through your payroll checks each payroll period. Effective tax planning works to reduce your overall tax burden which is not necessarily a game of getting you the largest refund at tax time. When we effectively manage your tax situation, we set your payroll withholding to reach your tax liability and not a penny more. Why should the government take an interest-free loan from you. What sets our firm apart is our goal in not only preparing your tax returns, but also going the extra mile to provide a tax plan for the current year which will result in the lowest possible tax burden and may even give you more take-home pay throughout the year. At Saggio Accounting+PLUS, the PLUS is providing a framework for our clients to maximize their current year refund, but also to reduce their tax burden moving forward. It's no gift - it's your money and we will provide effective plans to help you keep more of it. It's tax breaks - without an act of Congress.

If we can assist you with your tax planning and preparation today, call us at 302-659-6560 or visit our web site at www.saggioaccounting.com. When you have a tax question, e-mail ralph@askralph.com.

Friday Update - January 20, 2012

2012-01-20T09:30:00.000-05:00

The Saggio Accounting+PLUS Friday Update

It's tax filing season and we are already filing for refunds for our clients. Call today 302-659-6560 or visit our web site at www.saggioaccounting.com and click on Book Now.

Have a wonderful Friday and a great weekend. My best, Ralph V. Estep, Jr.

Choosing a Tax Preparer

2012-01-19T12:45:00.002-05:00

Question: I am wondering about hiring someone to do my taxes, but I want to make sure I am making a good decision. How should I look for?

Answer: We get this question all the time. Here is a great article right from the Internal Revenue Service.

Ten Tips to Help You Choose a Tax Preparer

IRS TAX TIP 2012-06, January 10, 2012

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your return this year, the IRS urges you to choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully. This year, the IRS wants to remind taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).

Here are ten tips to keep in mind when choosing a tax return preparer:

Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education
classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for
attorneys; and the IRS Office of Enrollment for enrolled agents.

Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.

Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items.

Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.

Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM
(800-829-3676).

Ralph V. Estep, Jr., the accountant at Saggio Accounting+PLUS is a Delaware Licensed Public Accountant. As members of the National Association of Public Accountants, Saggio Accounting+PLUS is subject to professional education requirements. We electronically file all of the returns we prepare which are eligible for e-filing. Call today to schedule an appointment at 302-659-6560 or visit our web site at www.saggioaccounting.com.

Are Unemployment Benefits Taxable

2012-01-19T09:29:00.002-05:00

Question: Hello Ralph, I was wondering if Unemployment Benefits are taxable?

Answer: What a great question and very relevant in these times of high unemployment. Yes they are taxable as ordinary income. In 2009, the IRS allowed you to exclude $2400 from tax, but that was only for that tax year. You must include all unemployment benefits on your tax return. Many states, such as Delaware, allow you to voluntarily elect to have federal income taxes withheld from your benefits.

For more answers to your tax questions and for ideas to improve the bottom line, contact Saggio Accounting+PLUS and Ralph V. Estep, Jr. Call today and book for your tax season appointment. Join us at www.askralph.com or call 302-659-6560.

Romney Tax Questions

2012-01-18T09:20:00.005-05:00

Question: Ralph, I am confused about all the talk in the press about Presidential Candidate Mitt Romney and his admission that he only pays an effective 15% tax rate. I seem to be paying more like 30% federal tax. What does he know that I don't know?

Answer: While I am not going to delve into the political aspects of this question, the tax question is very compelling. In this case, it appears the Mitt Romney has moved his income producing items away from normal compensation (i.e. W-2 income like most of us receive) and into what we call "passive" investments. These investments produce income in the form of interest, dividends, and capital gains which are taxed at a much lower rate. When someone has significant wealth and they are not in need of traditional "compensation" they can shift their income producing assets (investments) into these tax friendly areas. This is perfectly legal and is a great way to shield income from tax. It is not feasable during your working years for most of us because we have to work for compensation to earn wealth, but it's a great strategy once you have attained the wealth. We will see how this plays out in the political arena, but anyone with substantial personal wealth is no doubt taking advantage of this strategy.

To reduce your tax costs, contact Saggio Accounting+PLUS and see how Ralph V. Estep, Jr., in Smyrna, Delaware can assist you in reducing your tax obligation and maximizing your refunds.

The official start of Tax Season!

2012-01-17T08:53:00.003-05:00

Today is the official start of the tax filing season. Starting today we are able to electronically file your tax returns. We are ready to bring you the refunds you deserve. We have many convenient appointment times still available to meet your needs. You may go to our web site at www.saggioaccounting.com or call our office at 302-659-6560 and schedule your appointment.

We are also starting our "Ask Ralph" link today. If you have a tax or accounting question just send an email to ralph@askralph.com and I will provide an answer. I will even publish the answers to non-client specific questions. Here's the first question for today.

Question: I was wondering how long it takes to get my federal refund once my return is filed?

Answer: That is a great question. Once we complete your tax return and we submit it electronically, it generally takes 10-14 days to receive your refund. When you choose direct deposit, it's even quicker. File your return today and have your refund fast.

Here's another question:

Question: I would like to know the average costs associated with tax preparation.

Answer: This is a great question. According to a study I just read from the National Society of Public Accountants, the average price for tax preparation (Federal 1040. Schedule A and 1 State) in the Delaware region is $268. I have some great news regarding this average fee, Saggio Accounting+PLUS fees for the same return starts at only $200, and with our $25 discount for new clients, our fees are almost $100 less than the average. Of course, all returns are different and we cannot quote the exact expected fee, but I will assure you that our tax preparation fees are very reasonable and the results of meeting with a licensed professional accountant for a whole hour, will certainly exceed your expectations. Call today or visit our web site at www.saggioaccounting.com

Updated Welcome Message

2012-01-17T08:30:00.000-05:00

Take a look at our new welcome Video.

Ask Ralph!

2012-01-13T20:45:00.001-05:00

Tax filing season officially starts on the 17th. We are ready to start filing. Please feel free to e-mail ralph@askralph.com with any tax questions or other accounting questions and watch this blog for the answers. Call today and schedule your appointment with Saggio Accounting+PLUS.

Fwd: http://www.saggioaccounting.com/19637/Congress-Extends-Tax-Breaks/

2012-01-12T20:51:00.001-05:00

This is a great year end recap. We have more great information on our web site. It is almost filing season. It starts on the 17th. Call today or go to our website and book now. $25 discount for all new clients, let's start a lifelong relationship.

Ralph V. Estep, Jr.

Sent from my iPhone

Begin forwarded message:

From: Ralph Estep Jr <ralph@saggioaccounting.com>
Date: January 12, 2012 8:48:51 PM EST
To: Ralph Estep Jr <ralph@saggioaccounting.com>
Subject: http://www.saggioaccounting.com/19637/Congress-Extends-Tax-Breaks/

http://www.saggioaccounting.com/19637/Congress-Extends-Tax-Breaks/

Ralph V. Estep, Jr.
Sent from my iPhone

Tax Cut Extension

2012-01-11T19:47:00.000-05:00

Payroll Tax Cut Temporarily Extended into 2012
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the
two percentage point payroll tax cut for employees, continuing the reduction of
their Social Security tax withholding rate from 6.2 percent to 4.2 percent of
wages paid through Feb. 29, 2012. This reduced Social Security withholding will
have no effect on employees’ future Social Security benefits. Employers should
implement the new payroll tax rate as soon as possible in 2012 but not later
than Jan. 31, 2012. 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, 2012.

U.S. Adds 200,000 Jobs—but What Type?

2012-01-09T11:52:00.000-05:00

Sometimes the data does not tell you as much as the story under the story.

U.S. Adds 200,000 Jobs—but What Type?

Year-End Planning

2011-12-16T14:31:00.002-05:00

Just a quick reminder that we are still offering a $99 year-end tax planning special. Call us today 302-659-6560. Saggio Management Group, Inc!

Standard Mileage Rates for 2012 Released

2011-12-12T12:12:00.000-05:00

Here are the new Mileage rates for 2012. Please contact Ralph Estep, Jr., of Saggio Management Group, Inc., public accountants with any questions.

Standard Mileage Rates for 2012 Released

Happy Thanksgiving

2011-11-23T14:40:00.001-05:00

Enjoy the turkey and treats.

Saggio Management Group Weekly Update

2011-11-18T13:07:00.000-05:00

We are now on TaxBuzz

2011-11-09T16:30:00.000-05:00

We are now participating on the TaxBuzz site, follow our link
http://www.taxbuzz.com/public-accountant-tax-preparation-consulting-saggio-management-group

Printing from QuickBooks to PrintBoss

2011-11-08T20:31:00.000-05:00

Saggio Management Group, Inc. - Weekly Update

2011-11-04T14:02:00.000-04:00

Pension limits for 2012 - Great news!

2011-11-02T16:32:00.001-04:00

IRS Announces Pension Plan Limitations for 2012

The IRS announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2012. In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged. Highlights include:* The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.* The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.* The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.* The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.* The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

Virtuale Success Cloud Solution Overview

2011-11-02T09:57:00.000-04:00

Welcome To Virtuale Success, Inc.

2011-11-01T14:24:00.001-04:00

ASK RALPH

A Great Opportunity

Change in “Responsible Party” Must Be Reported to the IRS

Pay for your Tax Preparation right from your Refund!

Congratulations Carson Long

TaxBot - This is a must have APP that may save you thousands.

IRS announces automation of taxpayer resources, start of business filing season

Great Letter from Jesus - I did not write this but it's right on point! Merry Christmas.

Tax Season Starts January 31

Praise him today!

2014 IRS MILEAGE RATES

Insurance Cancellation

Happy Thanksgiving!

2014 Tax Deposit Requirements

Does your QuickBooks file take a long time to open?

Obama Care - No Big Surprise

Startup of the week / A tiny cloud computer can be yours for $45 - Start-up of the Week Israel News | Haaretz

Fire Prevention

Tax Season Delay

Updating to the New OSX Mavericks on the Mac

Very funny

Virtual Desktop on Chrome Book

Virtual Desktop

Simplified Home Office Deduction

Children and Money

Fwd: Status of Refund Issuance

Check out Saggio Accounting+PLUS

Check out Saggio Accounting+PLUS

Hosting....update

Back to blogging....

Online Payment Agreement

Why Taxpayers Love Their Accountants

Tax Relief Act - Here's a great write-up and Review

Congress Approves Fiscal Cliff Deal

AMT Letter from the IRS

Figuring Required Minimum Distributions

Job-Hunting Expenses

Medical Expense for Weight Loss Programs

Great Comic Today

Standard Mileage Rates for 2013

IRS Warns AMT Could Affect 60 Million Taxpayers Unless Patched

Will Itemized Deductions Be A Thing of the Past? | Saggio Accounting PLUS

2012 Year-End Tax Planning for Businesses - National Society of Accountants

Carson Long Halloween 2012

Taxes Will Rise Regardless of Congressional Action

Attending the political candidate forum

Obama Voter Says Vote for Obama because he gives a free Phone

eFileCabinet Online Demo

MUST WATCH THIS ASAP! United States Budget Dilemma.wmv

Taxpayer Advocate Service changes criteria for accepting cases

False internet rumors about “real estate transaction tax” worry taxpayers

Required Withdrawals From Your IRA

Renting Your Vacation Home

2012 Second Quarter Federal Tax Developments

Planning 2012: Travel and Entertainment Review

Planning 2012: Tax Strategies for Dependent Children

2012 Planning: Tax Solutions for S Corporations

Check 21 -- Proving Tax Deductions Without Cancelled Checks

Selling Your Home

Planning 2012: Maximizing Itemized Deductions

** ALERT ** IRS E-MAIL SCAM

Report Phishing

The IRS does not initiate contact with taxpayers by email or any social media tools to request personal or financial information

What to do if you receive a suspicious IRS-related communication

If

Then

What to do if you receive a suspicious email message that does not claim to be from the IRS

If

Then

2012 Planning: Tax Issues for Higher-Income Individuals

Truck Driver Expenses

Meeting politicians at The Delaware State Fair

Who built your business?

US Supreme Court Decision on Healthcare

Small business owner wants to know: Buy or lease? - Business - NewsObserver.com

Happy July 4th

Graduation Day at Carson Long Military Academy

Taxable and Nontaxable Income

Offer in compromise rules made more flexible in expansion of Fresh Start program

House passes bill creating federal 'blue alert' system - The Hill's Floor Action

ALERT IRS E-MAIL SCAM