Category Archives: IRS Changes and Rulings

Looking Forward to 2015 Tax Benefits

Seal of US Treasury IRSIn 2015, Various Tax Benefits Increase Due to Inflation Adjustments

For tax year 2015, the Internal Revenue Service announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments. Continue reading

Is the IRS having an accuracy problem?

Yellow CAUTION signAccording to Accounting Today the answer is yes.  In their article “An IRS Error in Your Favor; businesses need help in fixing agency mistakes”, the IRS may be suffering from an accuracy problem.

But before I go any further, I’d like you to keep these numbers in mind that I’ll explain further down: 20, 10, 4, 6 = $81,578

What Accounting Today is alluding to is that because of the level of complexity of what the IRS is supposed to “check for”, and the sheer volume of returns processed, is exactly what sets the ball in motion for the IRS to make an error. They are examining returns for tax obligations and requirements, meeting the IRS rules concerning tax deductions, exceptions, return due dates, estimated installment amounts, and employment tax liability due dates, etc..  “There is a very real possibility that the IRS has miscalculated, resulting in many taxpayers unknowingly walking away from overpayments.”  They also point out that start-ups and young companies “are at particular risk for error” because navigating can be especially challenging and they often fail to discover IRS errors or make their own mistakes.  But the bad news doesn’t end there.

It isn’t just the IRS that has an accuracy problem.  It’s tax preparers too. Seasonal front-window tax preparation services can be risky.  A large segment of my business comes from child care providers.  I specialize in their tax preparation.  Just how well versed is a “seasonal tax preparer” to know their specific business, deductions and exceptions that need to be included for child care providers? I’ll wager not too many.

But remember the numbers I mentioned above… 20, 10, 4, 6 = $81,578?  And what do they mean?

20     =    The last 20 new clients that came into my office.
10     =    Of the 20, 10 were Childcare Professionals.
4       =    Of the 20, 4 were people who owned real estate rentals.
6       =    Miscellaneous

$81,578 = Overpaid tax thru incorrect tax preparation.

The 20 returns were all incorrect preparation.  Of the 20 only one was ‘self-prepared’.  The others had used either a wholesale / front-window service or someone who claimed to know how to accurately prepare taxes.  This is a much bigger problem than the IRS not calculating penalties correctly.

As practitioners, one of the first *benefits* we bring a client is in examining and scrubbing their previous returns. Depending on the history, it can be one to three years.  It can be more if history warrants it. If there has been an error – we will find it.

Today you cannot be too careful.  You are in a need to know capacity – and you need to have trust in the person who is doing your taxes.  Always err on the side of caution.  There is no way a wholesale /front window tax preparation service and its preparers that operate “seasonally” is going to be available if you get a letter from the IRS.  Why risk it?

When we meet with a prospective client, what I want them to know is that 85% of our clients are from referrals.  Of those 85% – more than 50% are “lifetime clients” (meaning more than 15-20 years) and now we have THEIR children and relatives as clients; generational referred clients.

End Point:  Keep that in mind when selecting someone who is going to prepare your taxes.  You want consistency, trustworthiness, experience and knowledge – and someone you can reach if you are contacted by the IRS.  You want an Enrolled Agent.

Source: http://www.accountingtoday.com/ato_issues/28_10/An-IRS-error-in-your-favor-72213-1.html

Congressional and IRS Practices Impact Fraud

IRS WATCHDOG PROVIDES CONGRESS WITH MID-YEAR REPORT AMID ALLEGATIONS OF BAD IRS PRACTICES

Author’s Note:  This post explains why we advocate that taxpayers select a professional tax practitioner who is either a CPA, attorney or Enrolled Agent.  If you don’t,  you may end up the victim of fraud and the problems attached to it.

CAUTION ExclamationTiming is everything, and the National Taxpayer Advocate Service (an independent *watchdog* group within the IRS ) just presented its mid-year report to Congress revisiting its 2002 Congressional recommendation to authorize the IRS to establish *minimum standards* for tax return preparers. Continue reading

401(k) and IRA Limitations and Adjustments for 2014

Larger IRSIRS cost‑of‑living adjustments affect dollar limitations for pension plans and other retirement-related items for tax year 2014. 

Some pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment.  However, other pension plan limitations will increase for 2014.  Highlights include the following: Continue reading

Charitable Contributions Under the Magnifying Glass

Uncle Sam Arm holding Magnifying GlassOrganizations That Qualify To Receive Deductible Contributions

Many of us have our favorite charities that we know and have contributed to in the past.  However, not every charitable contribution is deductible – specifically – those contributions made to individuals.

Please refer to the IRS Publication 526 to get filing guidelines for tax year 2013.  They cover just about everything and include: Organizations That Qualify To Receive Deductible Contributions, Contributions You Can Deduct, Contributions You Cannot Deduct, Contributions of Property, When To Deduct, Limits on Deductions, Records To Keep, and How To Report.

A few posts back we discussed charitable contributions in Part I and Part II on Substantiating Tax Deductions for Charitable Contributions.  According to the IRS, for 2013, you may have to reduce the total amount of certain itemized deductions, including charitable contributions, if your adjusted gross income is more than:

  • $150,000 if married filing separately,
  • $250,000 if single,
  • $275,000 if head of household, or
  • $300,000 if married filing jointly or qualifying widow(er).

They also discuss Disaster relief.

“You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization (defined under Contributions) Organizations That Qualify To Receive Deductible . However, you cannot deduct contributions earmarked for relief of a particular individual or family.”

How to check whether an organization can receive deductible charitable contributions. You can ask any organization whether it is a qualified organization, and most will be able to tell you. Or go to IRS.gov. Click on “Tools” and then on “Exempt Organizations Select Check”  (www.irs.gov/Charities&NonProfits/ExemptOrganizationsSelectCheck).

This online tool will enable you to search for qualified organizations. You can also call the IRS to find out if an organization is qualified. Call 1-877-829-5500. People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www.gsa.gov/fedrelay.

The IRS has a tool that you can use to check charitable organizations.  http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts Estate Planning   Bookkeeping   Payroll

 

 

 

 

 

 

 

 

http://us-taxlaws.com/wp-content/uploads/2014/03/IRS-Publicatim-526-Charitable-Contributions.pdf

MarketWatch Highlights Tax Law Changes

Have you planned for these 7 tax law changes?

CALL US - 619-589-8680Seven significant new income tax law changes went into effect at the beginning of the year as a result of two pieces of legislation:

The 2010 Health Care Reform Act
The American Taxpayer Relief Act of 2012

Although the new laws are primarily designed to increase taxes for those with higher levels of income, everyone with earned income is affected. With the first seven months of 2013 behind us, have you begun planning for these changes? Continue reading

Part I : Tips Substantiating Tax Deductions for Charitable Contributions

SUBSTANTIATING CHARITABLE CONTRIBUTIONS

Larger IRSMany charitable organizations described in section 501(c)(3), other than testing for public safety organizations, are eligible to receive tax-deductible contributions in accordance with section 170. Most eligible organizations are listed in Exempt Organizations Select Check (Pub 78 database). Continue reading

Flash – 2013 Short Sellers Get State Tax Relief

 

Franchise Tax Board, State of CAFranchise Tax Board of California 

We updated our website to include information about mortgage debt relief for taxpayers who sold their principal residences through a short sale in 2013.

According to an Internal Revenue Service (IRS) Information Letter dated September 19, 2013, the IRS determined that California taxpayers who sell their principal residences for less than what is owed on the home as part of a short sale, in which the lender agreed to the short sale, do not incur cancellation of indebtedness income. Instead, the amount of forgiven debt is included in the amount realized in determining gain on the sale of that residence.

The IRS guidance is limited to California short sales only. The IRS guidance did not specifically address other types of real estate transactions such as non-judicial foreclosures and mortgage loan modifications.

We will update information and FAQs on our website soon. For more details and updates, please go to ftb.ca.gov and search for mortgage forgiveness debt relief.

 

Pat Michael and his team at US-TaxLaws is your best source for professional tax preparation services with more than 30 years experience and thousands of satisfied clients.
Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation   Incorporation-Choice of Entity    Business Support Services    Corporate Compliance    Audit Representation   Retirement Tax Planning   Wills & Trusts   Estate Planning   Bookkeeping   Payroll 

Net Investment Income Tax (NIIT) EA UPDATE

IRS Affordable Care Act Tax Provision WebsiteUPDATE: Funding the Affordable Care Act through NIIT

Want to know why it is a good idea to have an Enrolled Agent (EA) as your professional tax preparer?  They are “America’s Tax Experts®!” An EA can explain, in easy-to-understand language, how the new tax code will affect you and your taxes today, and help you plan for the future, The IRS is the *enforcement arm* for the Affordable Care Act Tax collection, and the laws and reporting requirements are changing almost daily.  You want someone who is looking out for you and your best interest (no pun intended).  Continue reading

How Will The Affordable Care Act Affect Child Care Providers?

January 29 Header for ChildCare Site

Child Care Tax Specialists takes a look at the comprehensive landmark changes in the health care law and its impact.  Read the full post here http://childcaretaxspecialists.com/how-will-the-affordable-care-act-impact-child-care-professionals/

IRS TAX SEASON DELAY?

Larger IRS2014 Tax Season to Start Later Following Government Closure; IRS Sees Heavy Demand As Operations Resume

IR-2013-82, Oct. 22, 2013

WASHINGTON — The Internal Revenue Service today announced a delay of approximately one to two weeks to the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure. Continue reading

What Information Will The IRS Disclose to HHS On Your Healthcare?

The IRS will disclose taxpayer information to assist the HHS in determining healthcare eligibility.  How will this affect you? 

On Aug. 13, 2013, the Department of the Treasury and the IRS issued final regulations with rules for disclosure of return information to the Department of Health and Human Services that will be used to carry out eligibility determinations for advance payments of the premium tax credit, Medicaid and other health insurance affordability programs. For additional information on the final regulations, see our questions and answers.

Continue reading

Latest News on Same-Sex Marriage & Income Tax

Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes; Ruling Provides Certainty, Benefits and Protections Under Federal Tax Law for Same-Sex Married Couples Continue reading

Deadline for some same-sex marrieds is September 15, 2013

The IRS has released FAQs clarifying the Revenue Ruling 2013-17 .

Here is a link to the complete IRS FAQ. that make it clear that same-sex married couples must file extended 2012 returns by September 15, 2013, to file as single.

For tax year 2013 and going forward, same-sex spouses generally must file using a married filing separately or jointly filing status.

For tax year 2012 and all prior years, same-sex spouses who file an original tax return on or after Sept. 16, 2013 (the effective date of Rev. Rul. 2013-17), generally must file using a married filing separately or jointly filing status.

For tax year 2012, same-sex spouses who filed their tax return before Sept. 16, 2013, may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status.

For tax years 2011 and earlier, same-sex spouses who filed their tax returns timely may choose (but are not required) to amend their federal tax returns to file using married filing separately or jointly filing status provided the period of limitations for amending the return has not expired.

A taxpayer generally may file a claim for refund for three years from the date the return was filed or two years from the date date the tax was paid, whichever is later.

For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html.the tax was paid, whichever is later.
For information on filing an amended return, go to Tax Topic 308, Amended Returns, at http://www.irs.gov/taxtopics/tc308.html.