Taxes
Don’t Fall for Phony IRS Websites
Oct 29th
IRS Corrected Special Edition Tax Tip 2012-13
The Internal Revenue Service is issuing a warning about a new tax scam that uses a website that mimics the IRS e-Services online registration page.
The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one.
The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.
The address of the official IRS website is www.irs.gov. Don’t be misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov.
If you find a suspicious website that claims to be the IRS, send the site’s URL by email to phishing@irs.gov. Use the subject line, ‘Suspicious website’.
Be aware that 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.
If you get an unsolicited email that appears to be from the IRS, report it by sending it to phishing@irs.gov.
The IRS has information at www.irs.gov that can help you protect yourself from tax scams of all kinds. Search the site using the term “phishing.”
Links:
- Suspicious e-Mails and Identity Theft
- Reporting Phishing
- Identity Theft resource page
- Publication 4523, Beware of Phishing Schemes (PDF)
IRS YouTube Videos:
IRS Podcasts:
More Bogus IRS Emails Hit Inboxes
Oct 1st
from Kelly Phillips Erb, aka taxgirl:
If you’re like me, you got slammed today with bogus emails claiming to be from the IRS. Most were the run of the mill “Federal tax transaction rejected” variety – like the ones from before. A few, however, were a bit more sophisticated. This one, in particular, caught my eye:
To read the rest of her article, please go here.
Reminder: Are You 1099 Compliant?
Aug 30th
Are you a sole proprietor, farmer, landlord, partner or shareholder? If so, take note, because included on the 2012 Schedules, C, E and F and Forms 1065, 1120 and 1120-S are two questions regarding 1099 compliance that must be answered.
The first question is “Did you make any payments in 2012 that would require you to file Form(s) 1099?” Then, ‘If “Yes,” did you or will you file all required Forms 1099?’ These questions are part of the IRS’ ongoing effort to close the tax gap by ensuring that service providers report 100% of their income.
When are you required to file a 1099? A 1099 is required to be filed when $600 or more is paid to any unincorporated business or individual for any of the following.
- For services
- For services combined with providing materials
- For rent
In addition, if you paid $600 or more for legal or health care services, 1099′s need to be issued regardless of the vendor’s entity status (in other words, you must send them to corporations as well.)
Before you decide to simply answer “No” to these questions, keep in mind that the penalties for noncompliance can add up. For “Intentional Disregard” (purposefully not filing the required forms), the minimum penalty the IRS may impose is $100 per 1099 not filed, with no maximum penalty.
To avoid noncompliance be sure to complete a Form W-9 before you pay for services rendered. Examples of services rendered include, but are not limited to repairs, janitorial, accounting, legal, consulting and computer maintenance services. In other words, get the name, address, entity type and Social Security Number or Federal Employer Identification Number of anyone you make payments to for services rendered in the course of conducting your business. Five minutes worth of due diligence can save you hundreds, even thousands of dollars!
BRING US YOUR 1099-Ks!
1099-Ks are now required to be filed by credit card companies, banks and third party networks (think PayPal) to report gross receipts made by credit or debit cards. If you report gross receipts of less than the amounts reported on the 1099-Ks issued to you the IRS will be sure to assess additional tax and penalties. Because of this we must have your 1099-K’s to ensure correct revenue reporting.
The reporting requirements can be complex. Please contact our office if you need clarification on these issues.
Organizing Tax Records This Summer Can Help You Keep Your Cool
Aug 10th
IRS Summertime Tax Tip 2012-16
If the sweltering dog days of summer aren’t incentive enough to get out of the sun for awhile, the IRS suggests another reason to head indoors: organizing your tax records. Devoting some time mid-year to putting your tax-related documents in order may not only keep you out of the sun, but it should also make it easier for you to prepare your tax return when the filing season arrives.
Here are some things the IRS wants individuals and small business owners to know about recordkeeping.
- What to keep – Individuals. In most cases, keep records that support items on your tax return for at least three years after that tax return has been filed. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed. You should typically keep records relating to property at least three years after you’ve sold or otherwise disposed of the property. Examples include a home purchase or improvement, stocks and other investments, Individual Retirement Account transactions and rental property records.
- What to keep – Small Business Owners. Typically, keep all your employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Also, keep records documenting gross receipts, proof of purchases, expenses and assets. Examples include cash register tapes, bank deposit slips, receipt books, purchase and sales invoices, credit card charges and sales slips, Forms 1099-MISC, canceled checks, account statements, petty cash slips and real estate closing statements. Electronic records can include databases, saved files, e-mails, instant messages, faxes and voice messages.
- How to keep them - Although the IRS generally does not require you to keep your records in any special manner, having a designated place for tax documents and receipts is a good idea. It will make preparing your return easier, and it may also remind you of relevant transactions. Good recordkeeping will also help you prepare a response if you receive an IRS notice or need to substantiate items on your return if you are selected for an audit.
For more information on recordkeeping for individuals, check out Chapter 1, “Filing Information,“ in IRS Publication 17, Your Federal Income Tax.
Find small business recordkeeping information in IRS Publication 583, Starting a Business and Keeping Records. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Also available are new video and audio files explaining recordkeeping requirements in detail, located on the IRS video portal at www.irsvideos.gov.
Links:
- Publication 17, Your Federal Income Tax (PDF)
- Tax Topic 305 – Recordkeeping
- Publication 583, Starting a Business and Keeping Records (PDF)
YouTube Videos:
Just a Reminder!
Mar 26th
Our tax offices will close at 2 pm on Tuesday, April 17 and re-open at 8 am on Thursday, April 19. However, Gough Financial Group will be open.
Just a reminder — All e-file authorization forms (Form 8879) MUST be received in our office by Monday, April 16 to ensure timely filing.
Are You 1099 Compliant?
Jan 4th
by Julie Powers
Are you a sole proprietor, farmer, landlord, partner or shareholder? If so, take note, because included on the 2011 Schedules, C, E and F and Forms 1065, 1120 and 1120-S are two new questions regarding 1099 compliance that must be answered.
The first question is “Did you make any payments in 2011 that would require you to file Form(s) 1099?” Then, ‘If “Yes,” did you or will you file all required Forms 1099?’ These questions are part of the IRS’ ongoing effort to close the tax gap by ensuring that service providers report 100% of their income.
When are you required to file a 1099? A 1099 is required to be filed when $600 or more is paid to any unincorporated business or individual for any of the following.
- For services
- For services combined with providing materials
- For rent
In addition, if you paid $600 or more for legal or health care services, 1099′s need to be issued regardless of the vendor’s entity status (in other words, you must send them to corporations as well.)
Before you decide to simply answer “No” to these questions, keep in mind that the penalties for noncompliance can add up. For “Intentional Disregard” (purposefully not filing the required forms), the minimum penalty the IRS may impose is $100 per 1099 not filed, with no maximum penalty.
To avoid noncompliance be sure to complete a Form W-9 before you pay for services rendered. Examples of services rendered include, but are not limited to repairs, janitorial, accounting, legal, consulting and computer maintenance services. In other words, get the name, address, entity type and Social Security Number or Federal Employer Identification Number of anyone you make payments to for services rendered in the course of conducting your business. Five minutes worth of due diligence can save you hundreds, even thousands of dollars!
BRING US YOUR 1099-Ks!
1099-Ks are now required to be filed by credit card companies, banks and third party networks (think PayPal) to report gross receipts made by credit or debit cards. If you report gross receipts of less than the amounts reported on the 1099-Ks issued to you the IRS will be sure to assess additional tax and penalties. Because of this we must have your 1099-K’s to ensure correct revenue reporting.
The reporting requirements can be complex. Please contact our office if you need clarification on these issues.
IRS Announces 2012 Standard Mileage Rates, Most Rates Are the Same as in July
Dec 12th
IR-2011-116, Dec. 9, 2011 http://1.usa.gov/ttw0ow
The Internal Revenue Service today issued the 2012 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, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 55.5 cents per mile for business miles driven
- 23 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
In 2012, Many Tax Benefits Increase Due to Inflation Adjustments
Oct 20th
IR-2011-104, Oct. 20, 2011, http://1.usa.gov/nPdoS7
WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:
- The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
- The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.
Credits, deductions, and related phase outs.
- For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
- The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
- The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
- For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.
| Medical Savings Accounts (MSAs) | Self-only coverage | Family coverage |
| Minimum annual deductible | $2,100 | $4,200 |
| Maximum annual deductible | $3,150 | $6,300 |
| Maximum annual out-of-pocket expenses | $4,200 | $7,650 |
The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.
Estate and GiftFor an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.
The annual exclusion for gifts remains at $13,000.
Other Items
- The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
- Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.
Details on these inflation adjustments can be found in Revenue Procedure 2011-52, which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011.
IRS Announces New Voluntary Worker Classification Settlement Program; Past Payroll Tax Relief Provided to Employers Who Reclassify Their Workers
Sep 29th
IR-2011-95, Sept. 21, 2011
WASHINGTON – The Internal Revenue Service launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.
This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.
This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.
“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.
To be eligible, an applicant must:
- Consistently have treated the workers in the past as nonemployees,
- Have filed all required Forms 1099 for the workers for the previous three years
- Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.
Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
Full details, including FAQs, will be available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64.
Understanding Innocent Spouse Relief
Aug 29th
By Michael Rozbruch, CEO and Founder of Tax Resolution Services, Co.
Being married can have its ups and downs, but did you know that the IRS views couples as individuals and will hold both taxpayers responsible? For better or worse, a spouse inherits their partner’s tax history (when filing jointly) so should the marital bliss fade, the couple’s tax liability will not.
Divorced or not, the IRS will attempt to collect taxes, penalties, and interest from both parties even if court ordered divorce papers states that one spouse is responsible for paying the other spouse’s tax liability. If you owe prior taxes as a couple and are currently married, recently divorced, separated, or living apart from one another, be aware that there may be a solution in the form of Innocent Spouse Tax Relief.
To read the rest of Mr. Rozburch’s article, please go to http://bit.ly/mSeJvz.
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