By Steve Adams 

            Before email and filing tax returns online, there was the fax. At one time it was THE way to transmit important documents (such as W-2 statements and real estate tax information) quickly from one location to another.

            While it’s normal to think that faxing has gone the way of the typewriter, it’s still a big part of the accounting world, and even the preferred method of document transfer in some cases.

            So to make sure you have the most current information – and a good store of knowledge should you appear as a contestant on Jeopardy! and the Daily Double is a fax-related question – we offer the following quiz.

Fax Quiz

 Q1. Faxing was invented in:

1.  
   1. 1843
   2. 1945
   3. 1972
   4. 1984

1. The correct answer is A. 1843—almost 20 years before the first Federal income tax was levied. The technology didn’t really become common in offices until the mid-1980s, but the basic concept was patented more than 150 years prior by Alexander Bain.

Q2.  The amount of money spent on faxing the last few years has:

1.  
   1. Increased
   2. Decreased
   3. Remained the same

1. If you guessed B you’d be in good company. But you’d be wrong. The truth is the dollar volume spent on faxing has grown steadily over the last few years, and is projected to continue doing so.

Q3. Privacy laws allow you to send documents with a client’s Social Security Number on them by either email or fax:

1.  
   1. True
   2. False

1. False, with a caveat. Social Security Number protection laws vary from state-to-state, but it is illegal in at least some states to transmit a document that contains an SSN via standard email because it is considered too insecure, i.e. email can be intercepted or misdirected too easily. Even if the law allows the use of email, though, it goes against the industry’s best practices for the same reasons. Faxes are immune to this type of interception by the nature of how they are transmitted. Internet fax services that provide 128-bit encryption provide an additional level of security.

Q4. The number of trees that could be saved each year by delivering just one percent (1%) of paper faxes in America as electronic documents is:

1.  
   1. 15 million
   2. 27.2 million
   3. 52.5 million
   4. 73.5 million

1. It is 73.5 million. That’s just one percent in one country. In addition, moving from fax machines to an Internet fax service would save energy and cut down on the waste stream by eliminating the need to dispose of the machine, toner containers and wasted paper.

Q5. Some advantages of an Internet fax service over a fax machine are:

1.  
   1. No need to go back to the office to read your faxes
   2. Internet fax accounts never have busy signals on inbound faxes
   3. Because they’re electronic, your faxes can travel with you more easily
   4. Only A and C
   5. All of the above

1. All of the above. Since Internet fax services are tied to your email account, you can receive faxes anywhere you can get email. That also means you can store your faxes on your laptop.

So how did you score? 4-5 correct: You are a faxing genius! 2-3 correct: You’re smarter than the average bear when it comes to faxes. 0-1 correct: Your old VCR is probably still flashing 12:00.

Steve Adams is vice president of marketing for Protus (www.protus.com), a provider of communications tools for small-to-medium-businesses and enterprise organizations, including the MyFax internet fax service; my1voice, a virtual phone service.

 He can be reached at sadams@protus.com.

Thanks for the post Steve.

If you have a post that you think should be written for the “Taxing Public”, please send it my way, I will do my best to get it out.

© 2010, Bruce Mc. All rights reserved.

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Do I have to File a Tax Return? 

You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive.

Check the Individuals section of IRS.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for specific details that may affect your need to file a tax return with the IRS this year.

Even if you don’t have to file, here are eight reasons why you may want to file:

1. Federal Income Tax Withheld If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Making Work Pay Credit You may be able to take this credit if you have earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Government Retiree Credit You may be eligible for this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit you receive.
4. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund.
5. Additional Child Tax Credit This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
6. Refundable American Opportunity Credit This education tax credit is available for 2009 and 2010. The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.
7. First-Time Homebuyer Credit The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. The credit applies to homes bought anytime in 2009 and on or before April 30, 2010. However, you have until on or before June 30, 2010, if you entered into a written binding contract before May 1, 2010. If you bought a home after November 6, 2009, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
8. Health Coverage Tax Credit Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2009 tax return.

For more information about filing requirements and your eligibility to receive tax credits, visit IRS.gov.

Links:

• Forms and Publications
• Earned Income Tax Credit
• First-Time Homebuyer Credit Information Center
• Health Coverage Tax Credit
• 1040 Central

© 2010, Bruce Mc. All rights reserved.

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They are really going after those who file for this credit and do not qualify. Make sure you really are eligable. Start by reading this IRS tax tip.

Be Sure to Know Whether You Qualify for the Earned Income Tax Credit 

The Earned Income Tax Credit, commonly referred to as EITC, can be a financial boost for working people adversely impacted by hard economic times. However, one in four eligible taxpayers could miss out on the credit because they don’t check it out. Here are the top 10 things the Internal Revenue Service wants you to know about this valuable credit, which has been making the lives of working people a little easier for 35 years.

1. Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial, marital or parental situations change from year-to-year, you should review the EITC eligibility rules to determine whether you qualify.
2. If you qualify, it could be worth up to $5,657 this year. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. New EITC provisions mean more money for larger families.
3. If you qualify, you must file a federal income tax return and specifically claim the credit in order to get it – even if you are not otherwise required to file.
4. Your filing status cannot be Married Filing Separately.
5. You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
7. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.
8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
10. Free help is available at volunteer assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File at IRS.gov.

For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

• EITC Assistant
• Earned Income Tax Credit
• Publication 596, Earned Income Credit (EIC) (PDF 373K)
• Free File
• Tax Topic 601, Earned Income Credit

© 2010, Bruce Mc. All rights reserved.

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If you want to get your refund as quickly as possible, just tell the IRS to deposit your refund directly into your bank account. By choosing Direct Deposit, you can get your refund much sooner than if you chose to have a paper check mailed to you.

Here are the main reasons 73 million taxpayers chose Direct Deposit in 2009:

1. Security Thousands of paper checks are returned to the IRS by the U.S. Post Office every year as undeliverable mail. Direct Deposit eliminates the possibility you won’t receive your check and prevents your refund from being stolen.
2. Convenience The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself.
3. Ease When you’re preparing your return, simply follow the instructions on your return. Make sure you enter the correct bank account and bank routing numbers on your tax form and you’ll receive your refund quicker than ever.
4. Options You can also deposit your refund into multiple accounts. With the split refund option, taxpayers can divide their refunds among as many as three checking or savings accounts and up to three different U.S. financial institutions. Use IRS Form 8888, Direct Deposit of Refund to More Than One Account, to divide your refund among different accounts. A word of caution: some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your Direct Deposit will be accepted.

For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. Helpful tips are also available in IRS Publication 17, Your Federal Income Tax. To get a copy of Publication 17 or Form 8888, visit the Forms and Publications section of IRS.gov, or call 800-TAX-FORM (800-829-3676).

Links:

• E-file
•  Publication 17, Your Federal Income Tax (PDF 2,085K)

IRS TAX TIP 2010-19

© 2010, Bruce Mc. All rights reserved.

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WASHINGTON — An expanded Earned Income Tax Credit (EITC) means larger families will qualify for a larger credit, offering greater relief for people who struggled through difficult financial times last year, the Internal Revenue Service said today.

The IRS and the Treasury Department marked EITC Awareness Day as their partners nationwide worked to highlight the availability of this important tax credit. EITC, which is in its thirty-fifth year, is one of the federal government’s largest benefit programs for working families and individuals. Last year, nearly 24 million people received $50 Billion in benefits. The average credit was more than $2,000.

“As part of the economic recovery efforts, there have been important changes to expand EITC to benefit taxpayers,” said IRS Commissioner Doug Shulman. “Today, more than ever, hard-working individuals and families can use a little extra help. EITC can make the lives of working people a little easier.”

Eligibility for EITC depends on earned income and family size, among other tests. However, single people and childless workers also are eligible, although for smaller amounts. For tax years 2009 and 2010, the American Recovery and Reinvestment Act created a new category for families with three or more children and expanded the maximum benefit for this category.

To qualify for the EITC, earned income and adjusted gross income (AGI) for individuals must each be less than:

• $43,279 ($48,279 married filing jointly) with three or more qualifying children
• $40,295 ($45,295 married filing jointly) with two qualifying children
• $35,463 ($40,463 married filing jointly) with one qualifying child
• $13,440 ($18,440 married filing jointly) with no qualifying children

The maximum credit for tax year 2009 is:

• $5,657 with three or more qualifying children
• $5,028 with two qualifying children
• $3,043 with one qualifying child
• $457 with no qualifying children

The maximum amount of investment income is $3,100 for tax year 2009. For families, there are also certain requirements for child residency and relationship that must be met. Additional eligibility information is available in FS-2010-11 and on the Web at IRS.gov/EITC.

Another new provision adds to the definition of a “qualifying child:” The child must be younger than the person claiming the child unless the child is totally and permanently disabled any time during the year. The child cannot have filed a joint return other than to claim a refund. Also new for 2009, if a qualifying child can be claimed by either a parent or another person, the other person must have an AGI higher than the parent in order to claim the child for EITC purposes.

Historically, one in four eligible taxpayers fails to claim the EITC, which is why the IRS and its free tax preparation partners host an annual EITC Awareness Day. This year, there are 68 news conferences being held around the country. Community coalitions and IRS partners nationwide also are also issuing 128 news releases, writing letters to the editor and using social media tools to spread the word about EITC.

Typically, people who fail to claim the EITC include workers without qualifying children, people whose earned income falls below the threshold required to file a tax return, farmers, rural residents, people with disabilities and nontraditional families such as grandparents raising grandchildren. People must file a tax return to claim the EITC.

Free help is available to EITC-eligible taxpayers. There are nearly 12,000 free tax preparation sites nationwide. People who want to prepare their own tax returns can visit Free File on IRS.gov. This free tax software and free electronic filing program will walk taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible.

EITC-eligible taxpayers also can seek assistance at the 400 IRS Taxpayer Assistance Centers nationwide. To assist EITC taxpayers, 167 IRS assistance centers will offer Saturday service on Jan. 30, Feb. 6 and Feb. 20.

There is an online EITC Assistant also available on IRS.gov which can help taxpayers and tax preparers determine eligibility. And, for tax preparers and IRS partners, there is EITC Central which has links to toolkits that include marketing products.

More than 65 percent of EITC returns are prepared by a third party. The IRS urges taxpayers to choose a reputable tax preparer to avoid problems that come with an inaccurate tax return. The agency also urges tax preparers to follow due diligence requirements when preparing an EITC tax return. More information is available at irs.gov/eitc.

© 2010, Bruce Mc. All rights reserved.

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 Naw this was just an isolated incident.  We won’t need to subject them to regular testing and IRS guided CPE.

 Right?

Or maybe, given as more of these stories come out, maybe, they should be first.

Yes, I think that would be a good plan. 

IRS Suspends Tax Practitioner for Preparing False Tax Returns 

WASHINGTON — A Certified Public Accountant has been suspended for twelve months from practice before the Internal Revenue Service by the Office of Professional Responsibility for providing false or misleading information in connection with the preparation of his clients’ tax returns.  

“Practitioners have a duty both to their clients and to the system to insure taxpayers are complying with tax laws and filing complete and accurate tax returns,” Karen L. Hawkins, Director of the Office of Professional Responsibility said. Robert A. Loeser, a certified public accountant from Houston, Texas, assisted his clients to lower their tax bills by claiming false business expenses on tax returns he prepared. 

For no legitimate business purpose, Loeser’s clients were advised to forward funds from their businesses to two corporations Loeser controlled. The corporations then rebated the funds to his clients.  Loeser prepared the clients’ books and business tax returns expensing and deducting the entire amounts that were paid to the corporations. The IRS alleged Loeser violated Circular 230 by giving false or misleading information to the Department of Treasury and the IRS.  

The settlement agreement included a disclosure authorization that allowed the Office of Professional Responsibility to issue this release.

The Office of Professional Responsibility (OPR) establishes and enforces standards of competence, integrity and conduct for tax professionals — enrolled agents, attorneys, CPAs, and other individuals and groups covered by Treasury Circular 230. 

© 2010, Bruce Mc. All rights reserved.

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 IRS Tax Tip 2010-21

Five Tips for Avoiding Refund Delays Relating to Your Economic Recovery Payment  

The $250 Economic Recovery Payments that were issued in 2009 by the Social Security Administration, Department of Veterans Affairs and Railroad Retirement Board must be included when claiming the Making Work Pay Tax Credit on 2009 tax returns. Many people who worked during 2009 and also received a $250 Economic Recovery Payment in 2009 are slowing down their tax refunds by not properly including the payments when claiming the Making Work Pay Tax Credit.

Here are five tips from the IRS that will help you avoid these refund delays:

1. If you worked during 2009, you may be eligible to claim the Making Work Pay Tax Credit that was established by the American Recovery and Reinvestment Act of 2009 and is worth up to $400 for individuals and $800 for married couples.
2. The Economic Recovery Payments are not taxable income; however, anyone who receives social security, veteran or railroad retirement benefits, as well as certain other government retirement benefits, must reduce the Making Work Pay Tax Credit they claim by the amount of any payment they received in 2009.
3. Taxpayers with earned income should claim the credit by attaching Schedule M to their 2009 income tax return.
4. To help avoid delays when you claim the credit, make sure you properly report your Economic Recovery Payment on IRS Schedule M, Making Work Pay and Government Retiree Credits.
5. If you are not certain whether you received the $250 payment, you should verify that information by contacting the appropriate agency before preparing and filing your tax return and claiming the Making Work Pay Tax Credit.

More information about the Economic Recovery Payment and the Making Work Pay Tax Credit can be found at IRS.gov/recovery.  Schedule M and the related instructions can be obtained at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

Links:

• The American Recovery and Reinvestment Act of 2009: Information Center
• Schedule M, Making Work Pay and Government Retiree Credits
   

Additional Contact Information:

• Social Security Administration - Toll free Number: 800-772-1213
• Department of Veterans Affairs – Toll Free Number: 800-827-1000
• Railroad Retirement Board

© 2010, Bruce Mc. All rights reserved.

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While the Internal Revenue Service provides publications about a wide range of topics, there is one publication every taxpayer should have with them when they are preparing their federal tax return. Publication 17, Your Federal Income Tax is available at IRS.gov and contains a wealth of information for individual taxpayers.

Here are the top five things the IRS wants you to know about Publication 17 and how it will come in handy when you prepare your taxes.

1. The online version of Publication 17 contains electronic links that make finding your answer simple.  Both the downloadable PDF and online 2009 Publication 17 have more than 6,000 hyperlinks.
2. Publication 17 features details on recent tax law changes and legislation that can help you save money at tax time. You’ll find lots of helpful information about the American Recovery and Reinvestment Act of 2009, including the Making Work Pay Credit and the First-time Homebuyer Credit.
3. This publication is packed with basic tax-filing information and tips on what income to report and how to report it. Publication 17 also includes information on figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement.
4. Publication 17 is also available in Spanish. – Publicación 17 también está disponible en español. Formato pdf
5. You can get a hard copy of Publication 17 for free. To get a copy, visit IRS.gov or call 800-TAX-FORM (800-829-3676).

 
Links:

• Publication 17, Your Federal Income Tax
• Publication 17, Your Federal Income Tax (PDF 2085K)

this is IRS Tax Tip 2010-18

© 2010, Bruce Mc. All rights reserved.

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Ten Things You Should Know about the Making Work Pay Tax Credit 

Many working taxpayers are eligible for the Making Work Pay Tax Credit, a provision created by the American Recovery and Reinvestment Act in early 2009.

Here are 10 things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.

2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.

3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.

4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.

5. Taxpayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.

6. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit.

7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit  for wage earners is distributed through reduced withholding. The credit – which was spread out over nine months last year – is being spread over 12 months this year.  A little less credit in each paycheck means slightly higher withholding.  But don’t worry,  in the end it all adds up.

8. Certain taxpayers should review their tax withholding to ensure enough tax is being withheld in 2010.  Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recipients who also work, and workers without valid Social Security numbers.

Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.

9. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on IRS.gov.

10. If you find you need to adjust your withholding, submit a revised Form W-4, Employee’s Withholding Allowance Certificate to your employer.

Visit IRS.gov for more information about the making Work Pay Tax Credit, Schedule M, Form W-4 or Publication 919. You can also call 800-TAX-FORM (800-829-3676) to order forms and publications.

Links:

• The American Recovery and Reinvestment Act of 2009: Information Center
•  Publication 919, How Do I Adjust My Withholding? 

FYI: This credit is going to upset a lot of folks, please use caution.

© 2010, Bruce Mc. All rights reserved.

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Get started here, then please serch my blog and the web for what is being said on this.

Eight Tips to Help You Choose a Tax Preparer

The IRS urges people to use care and caution when choosing a tax preparer.  Remember, you are legally responsible for what’s on your tax return even if it was prepared by an another individual or firm.

Most tax return preparers are professional, honest and provide excellent service to their clients. However, unscrupulous tax return preparers do exist and can cause considerable financial and legal problems for their clients.  Therefore, it’s important to find a qualified tax professional.

The following tips will help you choose a preparer who will offer the best service for your tax preparation needs.

1. Check the person’s qualifications Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.
2. Check on the preparer’s history Check to see if the preparer has any questionable history with the Better Business Bureau, the state’s board of accountancy for CPAs or the state’s bar association for attorneys.
3. Find out about their service fees Avoid preparers that base their fee on a percentage of the amount of your refund or those who claim they can obtain larger refunds than other preparers.
4. 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 April 15, in case questions arise.
5. Provide all records and receipts needed to prepare your return Most 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.
6. Never sign a blank return Avoid tax preparers that ask you to sign a blank tax form.
7. 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.
8. Make sure the preparer signs the form  A paid preparer must sign the return 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.

You can report abusive tax preparers and suspected tax fraud to the IRS on Form 3949-A, Information Referral or by sending a letter to Internal Revenue Service, Fresno, CA 93888.  Download Form 3949-A from IRS.gov or order by mail at 800-829-3676.      

Links:

• Form 3949-A Information Referral (PDF 94K)

Where Do You Report Suspected Fraud Activity?

With e-file up and running, it is time to find yourself a preparer.

© 2010, Bruce Mc. All rights reserved.

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