Dear Family, 

It’s a beautiful, sunny day here in Southern California. Lots to do. And oh yes, don’t forget. Valentine’s Day is next week. If you’re going to get something…order it now (like these lovely hearts…). 

Hopefully, you’re making progress getting your tax returns ready for filing. Please remember, don’t file too early. There are still lots of documents coming your way. Anyone working with a tax preparer, make sure your Tax Pro has a valid PTIN. IRS started mandating this new registration last year. Taking it more seriously this year. (Some Tax Pros are still unclear about the regulations. Sometimes, things do get confusing.) Watch for the new MarketWatch article about how to hire a great tax preparer. And why.

WASHINGTON — The Treasury Department and the Internal Revenue Service today issued proposed regulations for the next major phase of implementing the Foreign Account Tax Compliance Act (FATCA).

Enacted by Congress in 2010, the law targets non-compliance by U.S. taxpayers using foreign accounts.

IRS YouTube Video: IRS2Go 2.0    Podcast: IRS2Go 2.0

 WASHINGTON — The Internal Revenue Service announced today the availability of IRS2Go 2.0, an expanded version of its smartphone application designed to provide taxpayers easier access to practical tools and information.

The new app, available on the Apple and Android platforms, adds a new YouTube feature, news feed and tax transcript service in addition to existing tools, such as checking on the status of a tax refund.

WASHINGTON — The IRS today released the guidance and forms that employers can use to claim the newly-expanded tax credit for hiring veterans. The IRS also announced that employers will have more time to file the required certification form for employees hired on or after November 22, 2011, and before May 22, 2012. The VOW to Hire Heroes Act of 2011, enacted Nov. 21, 2011, provides an expanded Work Opportunity Tax Credit (WOTC) to businesses that hire eligible unemployed veterans and for the first time also makes the credit available to certain tax-exempt organizations.

The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations. The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, hours a veteran works and the amount of first-year wages paid. Employers who hire veterans with service-related disabilities may be eligible for the maximum credit.

Normally, an eligible employer must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But according to today’s guidance, employers have until June 19, 2012, to complete and file this newly-revised form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.

In an effort to streamline the certification requirements, IRS today clarified and expanded upon 2002 guidance to facilitate employers’ use of electronic signatures when gathering the Form 8850 for transmission to state workforce agencies. The guidance confirms that employers can transmit the Form 8850 electronically, and also allows employers to transmit the Form 8850 via fax, subject to the ability of the state workforce agencies to accept submissions in those formats. The IRS expects the Department of Labor to issue further guidance to the state workforce agencies providing further clarification.

Notice 2012-13, posted today on IRS.gov, and the instructions  for Form 8850 provide further details.

Businesses claim the credit on their income tax return. The credit is first figured on Form 5884 and then becomes a part of the general business credit claimed on Form 3800.

This credit is also available to certain tax-exempt organizations by filing Form 5884-C.  The guidance released today also provides instructions and a new set of forms for tax-exempt organizations to claim the credit.  For more information, including how to claim the credit, go to IRS.gov.

Today TaxMama® hears from Nico out in the world, with this tough situation. “Have you ever had a client who never received a W-2 because the company went belly up? I know it is illegal to use the last year’s W-2 to prepare the return. What do you suggest I do?”

Dear Nico,

You bet I’ve seen this. During the decades of working people who had not filed tax returns, I came across this regularly. In fact, this is one of reasons someone becomes a non-filer. They are stumped about how to proceed. Once they don’t file for one year, they are afraid to file for the next year because they didn’t file last year…and a cycle starts.

However, the solution is relatively easy. Especially when you know the trick. There’s even a form for this. Here’s what you do, in two easy steps:

1) Use Form 4852 – Substitute for W-2
http://www.irs.gov/pub/irs-pdf/f4852.pdf

2) Recreate the earnings and withholdings. Here are some ways to do that:

a) Use the final paystub, if your client has it, and it has year-to-date information.
b) If not, you mention the prior year W-2.
If the client worked for the company all year and the income was the same – use that.
c) Or if the client only worked for the company for several months, you
can prorate that 2010 W-2 to reflect the number of days/weeks/or months worked.
d) Or if you know how much the client was earning per hour/week/month, or whatever and can reconstruct earnings and withholding – do that.

Whatever you do to arrive at your computations, just explain your logic to IRS.
You can probably use the same form for the State, now that IRS has added
state withholding fields to the form.

And remember, you can find answers to all kinds of questions about missing W-2s, and other tax issues, free. Where? Where else? At www.TaxMama.com.

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People, hearing the word tax, sometimes turn around and walk away from me. Just the idea of taxes frightens them so! It is a daunting subject. Especially when you are having problems with the tax system, yourself. (In fact, at my very first television interview on Good Day L.A., the host, Mario Machado, did exactly that. Talk about scaring me to death. How could I ever talk to him during the interview???!!  But, it all worked out – and he even invited me to be a guest on his radio show – more than once. )

[Note: This is a reprint from an April 28, 2000 article]

Some issues get so involved, or so complicated, or emotionally frustrating, that they end up in Tax Court.

As a tax professional, I have always heard about how meticulously I must prepare my case before I even file my tax court petition. So, I’ve always pressured my clients to get me everything I need in order to be thorough before I sent in the request for our day in court.

Today TaxMama® hears from Insha in the TaxQuips Forum with this question. “I run a daycare center in my home. I file a Schedule C on the cash basis. In February 2011, I bought an asset for my business that cost $2,000. I’m making payments of $100 per month on it. So, on my 2011 tax return, how do I list it as an asset for depreciation? Do I use the whole $2,000? Or do I use what I’ve paid on it this year; and just keep adding what I pay each year to the asset?

 
Today TaxMama® hears from Alice in the TaxQuips Forum with a valid question. “On line 39a of the Form 1040, if a box is checked, resulting in a deduction for those over 65 years old, where do we put the amount? And what line is it deducted on from?