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 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.

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.

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.

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.

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.

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.

Military personnel have some unique duties, expenses and transitions. Some special tax benefits may apply when moving to a new base, traveling to a duty station, returning from active duty and more. These tips may put military members a bit “at ease” when it comes to their taxes.

1. Moving Expenses If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household.

2. Combat Pay If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all your military pay received for military service that month is not taxable. For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

3. Extension of Deadlines The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

4. Uniform Cost and Upkeep If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of those uniforms, but you must reduce your expenses by any allowance or reimbursement you receive.

5. Joint Returns Generally, joint returns must be signed by both spouses. However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

6. Travel to Reserve Duty If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

7. ROTC Students Subsistence allowances paid to ROTC students participating in advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.

8. Transitioning Back to Civilian Life You may be able to deduct some costs you incur while looking for a new job. Expenses may include travel, resume preparation fees, and outplacement agency fees. Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

9. Tax Help Most military installations offer free tax filing and preparation assistance during the filing season.

Tax Information IRS Publication 3, Armed Forces’ Tax Guide, summarizes many important military-related tax topics. Publication 3 can be downloaded from www.irs.gov or may be ordered by calling 1-800-TAX-FORM (800-829-3676).

Links:

Tax Information for Members of the U.S. Armed Forces

IRS Publication 3, Armed Forces’ Tax Guide ( PDF)

YouTube Videos:

Military Tax Tips: English | Spanish |  ASL

Did you know that special tax law provisions may help you recover financially from the impact of a federally declared disaster?

If you have damaged or lost property in a location declared by the federal government as a major disaster area, you may be able to get some money back from the IRS right now.

Additionally, depending on your circumstances, the IRS may grant you more time to file your return and pay your taxes. You could get a faster refund by claiming losses related to a disaster on your tax return for the previous year, usually by filing an amended return.

Check out the Tax Relief in Disaster Situations webpage to learn more about the latest disaster relief information. This page has helpful tax relief information for those affected by a disaster such as the Mississippi River flooding this spring, along with the April and May tornadoes.

Remember, when natural disasters strike, the IRS is here to help you.
_________________________________________________________________________

IRS.gov

• Help for Individuals
  • FAQs for Disaster Victims
  • Gulf Oil Spill: Questions and Answers
  • Reconstructing Your Records
  • Publication 2194, Disaster Losses Kit for Individuals
  • Help for Hurricane Victims: Information on Tax Relief, Charitable Issues
• Help for Small Business Owners – Audio Presentations
  • Continuity Planning and Other Tips to Stay in Business After a Major Disaster Audio
  • Insurance Coverage and Other Emergency Planning Tips to Help Your Business Survive a Major Disaster Audio
  • Recordkeeping and Reconstructing Business Records to Help Your Business Survive a Major Disaster Audio
  • Disaster and Emergency Relief – Webinar Archive Video

IRS.gov in Spanish

• El IRS en Español
  • Alivio Contributivo en Situaciones de Desastre

IRS Forms and Publications

• Publication 3067, IRS Disaster Assistance
  • English & Spanish
  • English & Chinese
  • English & German
  • English & Korean
  • English & Russian
  • English & Vietnamese
• Publication 1600, Disaster Losses — Help from the IRS
• Publication 547 – Casualties, Disasters and Thefts
• Publication 2194, Disaster Losses Kit for Individuals

Publication 2194B, Disaster Losses Kit for Businesses

If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:

   • Gifts that are not more than the annual exclusion for the calendar year,
   • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
   • Gifts to your spouse,
   • Gifts to a political organization for its use, and
   • Gifts to charities.

6. Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
7. Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:

   • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
   • You and your spouse are splitting a gift.
   • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
   • You gave your spouse an interest in property that will terminate due to a future event.

8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

For more information see Publication 950, Introduction to Estate and Gift Taxes. Both Form 709 and Publication 950 can be downloaded at http://www.irs.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

• Publication 950, Introduction to Estate and Gift Taxes 
• Form 709, United States Gift Tax Return 
• Form 709 Instructions  
• Gift Tax 
• Frequently Asked Questions on Gift Taxes 

Congratulations! You have tied the knot and cut the cake… Now what? Although next
year’s tax day seems far away, it will be here before you know it. Here are four simple
steps you can take soon after tying the knot to make your first joint income tax return
less stressful.

Step 1: Marriage can mean a change in name. Ensure the names you will enter on your
first tax return match the names and Social Security numbers on file with the Social
Security Administration. Make the change with SSA as soon as possible if there is a
spousal name change. 

Step 2: Even if you get married on Dec. 31, 2011, you are considered to have been
married for the entire year. Check your withholding to be sure you are having enough
taxes taken out of your paychecks. If you both work, your combined income may place
you in a higher tax bracket.

The IRS Withholding Calculator will help you figure the correct amount of withholding for a married couple. Making a change to your withholding now can eliminate or reduce a tax bill next year. Use Form W-4, Employee’s Withholding Allowance Certificate, to make the needed adjustments and give the form to your employer. 

Step 3: Make sure the IRS knows of your correct mailing address. Either you can notify the US Postal Service or you can complete and mail an IRS Form 8822, Change of Address form, to the address listed on page 2 of the form.

Step 4: Just in case you forgot to invite your employers to the wedding, let them know
about any name and address changes as soon as possible. This will ensure that you
receive your Form W-2, Wage and Tax Statement, at the right time to file. Also, ensure
other payers, such as banks and investment companies, have your updated name and
address as well.

You may be wondering how being married will affect your taxes. When you file your
return, you will be able to choose between filing jointly with your spouse (which may
lower your combined tax) or using the filing status called married and filing separately. 

When it comes to wedding planning, details are important. So take these steps now to
ensure your first tax season as husband and wife goes as smoothly as your wedding.