Tax Accounting Blog
News and Views in the Tax Preparation, Accounting, and Financial Investment World
Tax Season to Open on Schedule After Extender Legislation
The IRS has announced that the tax filing season for 2015 will open on schedule following the passing of legislation for tax extenders. The IRS will accept tax returns electronically on January 20, 2015, with paper returns processing at the same time. Congress decided to renew several “extender’ provisions that had expired at the end of 2013 and they are being renewed through the end of 2014. You can read more about the tax extenders here. This was officially signed into law on December 19, 2014. John Koskinen, IRS Commissioner commented that after the IRS reviewed the late tax changes they determined that they would aggressively work to assure their systems are up to speed in the next month so they will be ready to complete the final stages that will be needed for the 2015 tax season. Taxpayers should be reminded that the most accurate way to file their returns and receive a refund is to do it electronically. It will not be to anyone’s advantage to file tax returns on paper in early January as they wait for e-filing to begin. Original Article
1099 Processing – What You Need to Know
The IRS is concerned that payers are failing to backup withhold on 1099 reportable payment without Taxpayer Identification Numbers (TIN). The National Research Program (NRP) did an audit and found the following will need a sharper audit focus: Backup Withholding Triggers Have the payees TIN at the time you make the payment. That means you do not have until January 31st to solicit them. Ideally, you need to gather this information when you first hire the employee or contractor. Assure that the TIN is certified. Make sure the payee responds to your B Notice letters and that the bank sends payer’s interest and dividends notices. If the payee crosses out the perjury section of the W-9 where it tells the payer to back up withhold on interest and payments, it will likely garner the attention of the IRS. Guidelines for Reporting Federal taxes withheld from payments must be deposited with the U.S. Treasury through the Electronic Federal Tax Payment System (EFTPS) and according to your organization’s tax schedule. In 2015 you will be a monthly schedule depositor if the total tax on your TY 2013 Form 945 (form 945 filed in 2014 on line 3) was $50,000 or less. Deposits become due by the...
2014 Tax Extenders Signed by President Obama to Help Taxpayers
President Obama has signed H.R. 5771, The Tax Increase Prevention Act. The bill contains a list of over 50 tax extenders that will give you more money to play with as of April 15th. Teachers, commuters, green home renovators and those who live in no-income tax states will receive tax relief on their 2014 returns. The one-year extension of the laws that expired on December 31, 2013, will be good through Dec 31, 2014. This may make estimating your 2015 a little tricky. Some of the most important extenders now valid through December 31, 2014 include: The deduction for state and local sales tax. This is particularly good for no-income tax states like Florida and Texas. It gives you the option to deduct state and local sales taxes instead of deducting state and local income tax. Above-the-line deduction of up to $4,000 for college expenses will help students and parents. Employer-provided mass transit and parking benefits will be $250 per month which is up from $130 per month. Transit commuters who run all their travel costs through their employer’s transit plan should receive a retroactive payment which may earn them up to $576 in tax savings. Excluding up to $2 Million in discharge...
What Small Employers Need to Know About the Health Care Tax
It’s possible that small employers that are either new or existing may be able to provide insurance to their employees because of the Small Business Health Care Tax Credit. For the 2014 tax year, the maximum credit is 50% of premiums paid for small business employers and 35% of premiums paid for tax-exempt small employers, including charities. To be eligible to qualify for the credit, a small employer must have fewer than 25 employees who work full-time, or a combination of full-time and part-time. If an employee is enrolled in a qualified health plan that has been offered through a Small Business Health Options Program Marketplace, the tax credit will pay premiums on the employee’s behalf. A full-time, or equivalent, employee will qualify if he or she earns less than $51,000. Eligible employers may receive the credit for two consecutive taxable years. If a small business employer doesn’t owe tax during the year, he or she may carry the credit back or forward to other tax years. Because the amount of the health insurance premium payments is greater the total credit claimed a small employer, who is eligible, may receive the credit as a refund as long as it doesn’t exceed its...
Complicated Filing Season Ahead for 2015
IRS Commissioner John Koskinen addressed hundreds of attendees at the AICPA National Tax Conference recently and noted that the 2015 tax season will be one of the most complicated tax seasons ever. This is, in part, because two new provisions introduced in the Patient Protection and Affordable Care Act of 2010 (ACA). They include the premium tax credit and the individual shared-responsibility payment or “individual mandate” to maintain minimum essential health coverage. Congress has not made it easier by its late action or inaction on legislation to extend temporary tax provisions that mostly expired at the end of 2013. This continued uncertainty is stressing out the entire tax community, including the IRS. If nothing is decided into 2015, or contains new or modified provisions, the IRS may need to delay the start of filing season which will delay the processing of returns. Reductions in the IRS’s funding have made it even harder to provide reasonable service to taxpayers, provide enforcement and update old technology systems. Its budget has declined by 7% since 2010. Many taxpayers have found it impossible to get through to the IRS to have questions answered because call...
Same Sex Marriage – What Employers Need to Update
Now that same sex marriage is recognized in 19 states, and imminent in the other 31, employers are finding they have to revise their benefit plans and policies to comply. Since the U.S. vs Windsor ruling last year, those fighting for same sex equality laws have been winning almost every court case. The Windsor ruling did away with federal law that limited the terms “spouse” and “marriage” to only heterosexual partners. Even though the ruling has no say in what a state can decide, it’s set a precedent. It’s expected that states that do not currently recognize same sex marriage will soon follow suit. The laws change on a daily basis and employers must keep up with these changes. If you are an employer, make sure to update your benefit plans and other documents to remain compliant. This includes qualified retirement plans such as a 401 (k), profit sharing plans and pensions. All qualified plans must treat anyone who is officially married, no matter what their sexual orientation, like any other employee. This encompasses spousal consent in order for a participant to receive distributions, or qualify for loans in the event of financial hardship. Other considerations that involve same...
Tax Planning for the Affordable Care Act
If you purchased insurance using the federal or state run insurance exchange, chances are you may have received a subsidy to offset your monthly payments. The purpose of this is to make your payments more affordable. Once you become a part of the exchange, it’s important to report any increases or decreases in household income. You also want to report if you have a new child, got married or were divorced. For a complete list of life events that could make a difference in your coverage or how much you pay, go to Healthcare.gov – Report income or life changes. There are 2 ways to claim your credit. Have it or part of it paid directly to your insurance company to lower your payments. Wait and claim the credit on your tax return. Either way, you must file a federal tax return. The exchanges estimate how much your premium tax credit will be based on the size of your family and estimated income. This is called MAGI – modified adjusted gross income. You must include salary, tips, net income from self-employment or business, unemployment, Social Security payments, disability payments and alimony. Not included is child support, supplemental security income, veteran’s disability payments...
Beware of Government Imposters
Have you ever received a call and saw FTC, IRS, or 202 for Washington DC on your phone display? You may think it’s legit but it’s actually someone who is a government imposter. Their MO is to talk you into sending them money before you figure out they’re fake. Government imposters are scam artists. The idea is to scare you into paying them by saying you owe taxes or unpaid debt. They want you to panic and they do this by convincing you that you might be sent to jail or taken to court. They may want you to transfer money using a prepaid credit card and will ask you for the number. The truth is; no governmental agency would ever do this. Rules to Live By to Avoid Scam Artists Posing as Government Representatives No one from the Federal Government will ever ask people to send money for prizes or unpaid loans. The IRS always corresponds by postal mail and NEVER by the phone. Employees or representatives of Federal Agencies will never ask you to wire money or use a pre-paid debit card to pay what you owe. When you transfer money or pay using a pre-paid card there is no way to recover it. Don’t depend on caller ID. Scammers hack the phone system to display whatever information they...
Seeking Tax Advice Online May Be Hazardous to Your Wealth
Now that people are communicating daily using social networks such as Twitter, Facebook and Instagram, they’re letting the cat out of the bag in regards to their personal and financial secrets. Of particular concern, are those who are asking questions online seeking tax advice. On Twitter, for example, a person may follow financial experts who offer helpful tax tips. Some of these experts are legit and many are bogus. For all you know, a 12 year old boy may be posing as a 45 year old accountant, or an angry bank employee may be giving out harmful advice just for spite. You could be taking advice from a stranger that might be hazardous to your wealth. More importantly; there are people seeking tax advice on social media, forums, and websites asking questions such as; “How can I avoid reporting all my income to the IRS so I don’t have to pay any taxes?” or “How can I keep PayPal from reporting all my online income to the Feds?” The IRS, and other governmental agencies all have social media accounts and they are listening. A guy in the IRS office is probably sitting at his desk right now searching for keywords on his Twitter account filtering tweets that may be suspicious. As soon...
7 Tips on How to Respond to a Letter From the IRS
Have you ever received a letter from the IRS? Chances are you have. They mail out millions of notices every year. Below are 7 tips on how to respond to a letter from the IRS: Don’t throw the letter away or stash it under your other bills. Respond to it immediately. Read it carefully to determine what it’s asking you to do. Most letters from the IRS deal with a specific issue that requires a correction or it may simply ask you for more information. If the IRS has notified you that it has corrected a previously filed tax return, make sure to compare it with your tax return to make sure it makes sense. Unless a payment is due, or you don’t agree to it, it is not necessary to respond to the letter. If you disagree with the IRS’s proposal, then write a letter explaining why. Enclose copies of all pertinent documents. Always include the tear-off portion of your notice. Mail your letter to the address the IRS has provided and expect to wait at least 30 days for a response. Keep copies and file all notices you receive from the IRS. Although it’s best to deal with the IRS using the mail, you can try to call them using the number at the top of your letter. Have your tax return on hand...