Category Archives: General Information

FTB Of CA Penalties and their meaning

AN EDUCATED TAXPAYER IS OUR BEST CUSTOMER.

We help our clients understand the ever-changing federal and state tax laws so they can maximize their tax deductions, and adopt best recordkeeping practices.

Many of our clients have come to us after having a bad tax preparation experience that resulted in penalties and interest. When we come across a reference document that we feel is valuable for the taxpayer – we promote it.

We have linked to the 18-page Penalties and Interest Reference Table published by the Franchise Tax Board of California.

Penalty reference chart (pdf)

FTB Top 500 State Income Tax Delinquents

275 individuals and 72 businesses owe CA more than $161M

04.10.2014

Sacramento –The Franchise Tax Board (FTB) today updated its Top 500 Delinquent Taxpayers list with 275 individuals and 72 businesses comprising the new list. Combined they owe the state more than $161 million.

In October, FTB sent letters to 500 taxpayers who potentially could appear on the list if they failed to resolve their tax liabilities. 153 taxpayers resolved their accounts prior to the list’s publication. More than $316 million has been collected from the top debtors program since its October 2007 inception.

Being on the Top 500 Delinquent Taxpayer list carries added provisions, including:

Suspension of state-issued licenses including driver’s licenses and occupational or professional licenses.
Publishing professional license information.
Prohibiting state agencies from entering into contracts with listed debtors.
Returning noncompliant taxpayers to the list.
Publishing the names and titles of corporate officers of listed corporations.

FTB removes a taxpayer from the list once the tax is paid or the taxpayer agrees to make payments under an approved installment agreement or offer in compromise. Tax liabilities under appeal, in litigation, or in bankruptcy proceedings are not included on the list.

Individuals on the list can contact FTB at 888.426.8555 to resolve their accounts. Business taxpayers can call 888.426.8751.

The Top 500 list is published twice a year in April and October.

FTB administers two of California’s major tax programs: Personal Income Tax and the Corporation Tax. FTB also administers other non tax programs and delinquent debt collection functions, including delinquent vehicle registration debt collections on behalf of the Department of Motor Vehicles, and court–ordered debt. Annually, FTB’s tax programs collect more than 65 percent of the state’s general fund.

The Board of Equalization has a similar list of the state’s top sales and use tax delinquencies, which they update quarterly.

https://www.ftb.ca.gov/aboutFTB/press/2014/Release_14.shtml

IRS GUIDELINES ON RECORDKEEPING

Green Checkmark

Record Retention for Small Business & Self-Employed Taxpayer – Learn why you should keep records, what kinds of records to keep and how long you should keep your records.

Why should I keep records?
Good records will help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.

What kinds of records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes.

How long should I keep records?
The length of time you should keep a document depends on the action, expense, or event the document records. You must keep your records as long as they may be needed to prove the income or deductions on a tax return.

How long should I keep employment tax records?
You must keep all of your records as long as they may be needed; however, keep all records of employment taxes for at least four years.

How should I record my business transactions?
Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. These documents contain information you need to record in your books.

What is the burden of proof?
The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them.

Source: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Recordkeeping

Page Last Reviewed or Updated: 29-Apr-2014

CSEA Disaster Emergency Planning Brochure

CSEA ADDS TO CHECKLIST OF “GOTTA HAVE” FOR EMERGENCIES

The California Society of Enrolled Agents produced a brochure of essentials to have in your family-personal plan in the event of an disaster.

They ask, “If your home, office or apartment were to burn down today, or be burglarized, or be destroyed in an earthquake or hurricane, would you have accessible records to reconstruct your assets for tax and insurance purposes? ” This little brochure touches on things you may not have thought of covering.

Home Inventory
The Evacuation Box
Business Records

Just click on the picture below or here and print out a copy of this handy brochure.

IRS chases taxpayers for old debts

Social Security, Treasury target taxpayers for their parents’ decades-old debts

On April 10, the Washington Post led with a story that created an uproar and outrage by taxpayers across the country. The story focused on the seizure of tax refunds by the government to repay debt that was, in some instances, decades old.

“Social Security claims it overpaid someone in the Grice family — it’s not sure who — in 1977. After 37 years of silence, four years after Sadie Grice died, the government is coming after her daughter.

Update from Forbes. The SSA has suspended its scope of more than 10 years. Meaning, they will not pursue alleged over-payments on any taxpayer more than 10 years. But, did you know that the government gave itself the right to chase taxpayers for old debts indefinitely. And the easiest way to do it is through an offset. Where you ask? When?

“To be clear, the government has long had the authority to seize tax refunds to pay back certain obligations (more on that in a moment), but in 2008, the rules that limited the time to seize funds were rewritten. The change was made in the Food, Conservation, and Energy Act of 2008 – sometimes called “the farm bill” – since, as you know, Congress is terribly fond of tossing bits of new law into totally unrelated bills (like those credit card reporting requirements inserted into the Housing and Economic Recovery Act of 2008 or how a bill called the Service Members Home Ownership Tax Act of 2009 turned into the Patient Protection and Affordable Care Act). The provision, tucked near the back of the Act, which clocks in at more than a quarter million words, says simply:

(e)(1) Notwithstanding any other provision of law, regulation, or administrative limitation, no limitation on the period within which an offset may be initiated or taken pursuant to this section shall be effective. (2) This section does not apply when a statute explicitly prohibits using administrative offset or setoff to collect the claim or type of claim involved.”

SSA’s announcement might have been a relief to some taxpayers but the law is still on the books. And so long as the law authorizes government agencies to collect on those old debts, taxpayers could be in danger of having their tax refunds seized for years to come.

And remember, that the IRS can go as far as they want to if they suspect fraud, so make sure your taxes and records are in order, and have your taxes prepared by a tax professional, such as a CPA or EA.

GOT QUESTIONS? CALL 619-589-8680.

At US-TaxLaws, we do more than just tax preparation. We review your previous returns. We may just review 1 or 2 years. But if you are an in-home business, we will take a closer look to make sure you are getting all of the deductions your in-home business is permitted. US-TaxLaws is your best source for professional tax preparation and/or financial consulting services.

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://www.washingtonpost.com/politics/social-security-treasury-target-hundreds-of-thousands-of-taxpayers-for-parents-old-debts/2014/04/10/74ac8eae-bf4d-11e3-bcec-b71ee10e9bc3_story.html

http://www.forbes.com/sites/kellyphillipserb/2014/04/24/payback-is-forever-tax-refund-offset-law-remains-on-the-books/#./?&_suid=139851903245309521199226209964

As the Tax Season ends, IRS answers: Where’s My Refund?

Larger IRS IR-2014-54, April 17, 2014

WASHINGTON — With the close of the tax filing season, the vast majority have filed their income tax returns and received their income tax refunds. As of last Friday, the IRS had received almost 113 million tax returns and issued more than 85 million refunds, about 78 percent of all the refunds the agency will issue this year.

However, taxpayers who have not yet received their refunds can use the “Where’s My Refund?” on IRS.gov or on the smartphone application IRS2Go 4.0 to find out about the status of their income tax refunds. As of April 11, 2014, Where’s My Refund? has been accessed almost 160 million times.

The Where’s My Refund?tool enables taxpayers to track the status of their refund. Initial information will normally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after the taxpayer mails a paper return to the IRS. The system updates only once every 24 hours, usually overnight, so there’s no need to check more often.

Taxpayers should have their Social Security number, filing status and exact refund amount when accessing Where’s My Refund?

Taxpayers can find more information about refunds and other tax topics at IRS.gov.

2014 FILING SEASON STATISTICS
Cumulative statistics comparing 4/12/13 and 4/11/14
Individual Income Tax Returns:	2013		2014		% Change
Total Receipts	112,403,000		112,741,000		0.3
Total Processed	103,880,000		110,266,000		6.1
E-filing Receipts:
TOTAL	99,787,000		101,289,000		1.5
Tax Professionals	62,163,000		61,956,000		-0.3
Self-prepared	37,624,000		39,332,000		4.5
Web Usage:
Visits to IRS.gov	278,307,884		251,540,768		-9.6
Total Refunds:
Number	84,581,000		85,262,000		0.8
Amount	$229.607	Billion	$234.547	Billion	2.2
Average refund	$2,715		$2,751		1.3
Direct Deposit Refunds:
Number	69,680,000		69,924,000		0.3
Amount	$202.188	Billion	$202.167	Billion	-0.01
Average refund	$2,902		$2,891		-0.4

Source: http://www.irs.gov/uac/Newsroom/As-the-Tax-Season-ends-IRS-answers:-Where’s-My-Refund

Parents of Young Kids: Test Your Financial Reflexes

Even today, Kiplinger’s 2009 quiz is still valuable for parents of young children. They cover allowances to gifts and they offer the best way to handle real-life experiences. Start raising your own money-smart kid.

How long should I keep records, and other business files

How Long Do You Really Need to Keep Your Financial Documents?

Files and a messy desk Now that April 15 has come and gone, everyone is writing about tax information, records to keep, and records you can discard. For some it’s just personal tax records. For others, it’s personal and business documents. However, before you go out and purchase electronic media to store records and receipts, please read our March 26 blog, Keeping Business Records. Continue reading →

Business Health Plan Review and Options

BUSINESSES NEED TO REVIEW HEALTH PLAN OPTIONS

Businesses need to do a review of their health plan options and strategy. Businesses with 100+ “full time employees” need to act this year; your mandate starts in 2015. Smaller businesses (50-99) have a little more time. Your mandate begins in 2016. See all of our posts on the effects of the Affordable Care Act.

IRS Encourages Small Employers to Check Out Small Business Health Care Tax Credit; Helpful Resources, Tax Tips Available on IRS.gov
IR-2014-27, March 10, 2014 — With business tax-filing deadlines fast approaching, the IRS encouraged small employers that provide health insurance coverage to their employees to check out the small business health care tax credit and claim it if they qualify.

Sources: IRS.gov

Use of Electronic Media for Saving Tax & Business Records

Considering the use of Electronic Media for Saving Tax & Business Records?

Whether you are starting a new business – or have an established business – you might be looking at how to improve your record keeping practices.

If you have considered the use of electronic media for saving tax & business records you will also want to be sure you are in compliance with the IRS rules and regulations for electronic storage systems. Continue reading →

Statewide Median Income Up In 2012 in California

Statewide Median Income Up In 2012

California’s median income for all 2012 individual tax returns was $35,910, an increase of 3.5 percent over 2011’s median income amount. For joint returns, the statewide median income was $70,938, an increase of 4.1 percent over 2011.

“Median income” represents the income reported by a typical California individual or couple and the point where one half of the tax returns median income is above and one half is below the midpoint of the range of values.

California taxpayers filed nearly 16 million 2012 state income tax returns, reporting almost $1.5 trillion of adjusted gross income. This figure is an increase of 27.7 percent from the tax year 2011’s figure of $1.1 trillion. Adjusted gross income is a tax term that means the total income increased or reduced by specific adjustments, before taking the standard or itemized deduction.

Over the past 40 years, the Bay Area counties of Marin, San Mateo, and Santa Clara have consistently reported the highest median incomes. Marin County still has the highest median income for joint tax returns, reporting $127,471, an increase of 6.1 percent over 2011.

Top 10 Counties Reporting Highest Joint Tax Return Median Income

Rank	County	Median Income (Joint Returns)
1	Marin	$127,471
2	San Mateo	$109,827
3	Santa Clara	$109, 309
4	Alameda	$93,557
5	Contra Costa	$93,367
6	San Francisco	$87,446
7	Placer	$83,869
8	El Dorado	$82,706
9	Orange	$78,108
10	Ventura	$77,340

Los Angeles County taxpayers filed more than a quarter (26.6 percent) of all 2012 income tax returns in California. Los Angeles County reported median incomes of $31,144 for all individual tax returns, and $60,939 for joint tax returns, ranking 36 and 25 respectively.

The largest percentage gain in median income for all counties was 6.0 percent, reported in Contra Costa County. For joint-filed tax returns, the largest increase was in San Francisco County with a 7.7 percent increase.

Source: https://www.ftb.ca.gov/professionals/taxnews/2014/March/Article_5.shtml

Tax Reform Update for Small Businesses

How the Tax Reform Act of 2014 Will Affect Your Small Business

You may be holding your breath and wondering how tax reform will affect your small business.

The bill includes a renewal of Section 179 expensing. This tax advantage has typically been renewed every year with higher and higher thresholds, but on Jan. 1, the law reverted back to its original provision, which only allows $25,000 in the expensing of any new assets.

Purchases in excess of this amount must be depreciated over their useful lives. From 2010 to 2013, businesses were allowed a $500,000 threshold for Section 179 expensing. Proposed in the Tax Reform Act of 2014 will be a ceiling of $250,000 – levels enjoyed during 2008 and 2009.

The proposal does not allow for the renewal of bonus depreciation which also expired at the end of 2013. This allowed businesses to deduct 50% of the cost of all assets, above and beyond the Section 179 expensing.

In a statement, National Taxpayers Union Executive Vice President Pete Sepp said that the proposed reform aims to harmonize the top tax rate for S and C Corporations with qualified domestic income to 25%. He contends that because S Corporations are pass-through entities – the individual pays the tax on profit rather than the corporation – there will be an exclusion allowed to create an equivalent 25% tax. Qualified domestic income relates specifically to the manufacturing sector.

This change should encourage production and new jobs within our borders. “The proposal rightly aims to bring a measure of tax parity between ‘pass-through’ small business entities and traditional corporations, but how it hits that target must be thoroughly examined to ensure that job creators aren’t punished in the process,” Sepp said in a statement.

He also reiterated swift action on Capitol Hill will also be necessary. “Some tax-saving provisions for businesses will be gone several years before the final, beneficial 25% tax rate kicks in. Washington must avoid the appearance of clawing back many provisions in the short-term while pushing rate relief into the long-term.”

One tax element that hits many small business owners is the Alternative Minimum Tax which can be triggered when using net operating losses against current year income and when taking depreciation and Section 179 expensing.

On the other hand, the National Federation of Independent Business (NFIB) Vice President of Federal Public Policy Brad Close made the following statement in response to Camp’s proposed reform:

“NFIB has long advocated tax reform that achieves lower rates and a simpler code,” said Close. “While we appreciate Chairman Camp pursuing tax reform that lowers some rates, we are very concerned that this plan does not address the core issues that are important to all small businesses: simplifying the code, leveling the playing field for all businesses, and addressing both corporate and individual tax rates. We look forward to working with members of the Ways & Means Committee and Chairman Camp to achieve comprehensive tax reform that does not pick winners and losers based on size and type of business.”

The tax reform is nowhere near being carved in stone; after all, this is only the discussion draft, so we shall see.

Source: http://smallbusiness.foxbusiness.com/finance-accounting/2014/02/28/how-tax-reform-act-2014-will-affect-your-small-business/

International Business Times : Best & Worst States for Taxes

United States Of Taxation 2014: Here Are The Best And Worst States For Consumption Taxes, Total Tax Burden

Nothing is certain except death and taxes, but taxes can be far more complicated than death. The following article by Angelo Young of IBT makes it pretty clear for you.

As the April 15 tax filing deadline approaches, two groups have released data sets that can offer insight into which states are the most forgiving (or punishing) when it comes to consumption taxes and overall local tax burdens. Continue reading →

401(k) and IRA Limitations and Adjustments for 2014

IRS 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 →

SPECIAL RULE FOR CHILDREN OF DIVORCED OR SEPARATED PARENTS!

CHILD AND DEPENDENT CARE EXPENSES.

IRS Form 2441 is all about child and dependent care. It has a section that talks about the *special rules* that are applied to children of divorced or separated parents.

To be a *qualifying person*, the person had to live with you for more than half of 2013.

First, what does *Qualifying Person* mean? According to the IRS, a qualifying person is: Continue reading →

Cost Segregation? Standard Depreciation?

INVESTMENT IN REAL ESTATE HAS OPTIONS…

shutterstock_165755561 Cost segregation deals with the depreciation of real estate enabling investors to dramatically increase the amount of depreciation they write off every year.

For many investors, this tax write-off can help restructure the cash flow of their properties, allowing them to make more income, while still increasing their tax benefits.

WHY SHOULD YOU CARE?

Shifting portions of the property to non-structural status allows a reduction of income tax by generating an extra 30% to 70% in tax depreciation deductions. The result is increased cash flow. Additionally, extra depreciation converts ordinary rental income at your current tax rate to tax-deferred capital gain when you dispose of the property. This effectively increases your return on investment. The higher your tax bracket, the more savings to you.

To learn more, or to understand how cost segregation can work for you, read Understanding Cost Segregation

Charitable Contributions Under the Magnifying Glass

Organizations 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

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

Tips for Taxpayers, Victims about Identity Theft and Tax Returns

Identity theft remains a top priority for the Internal Revenue Service in 2014

IRS YouTube Videos
ID Theft: IRS Efforts on Identity Theft

FS-2014-2, January 2014

Identity theft remains a top priority for the Internal Revenue Service in 2014. Identity theft is one of the fastest growing crimes nationwide, and refund fraud caused by identity theft is one of the biggest challenges facing the IRS. This year, the IRS continues to take new steps and strong actions to protect taxpayers and help victims of identity theft and refund fraud.

CAUTION IDENTITY THEFT ALERT Stopping refund fraud related to identity theft is a top priority for the tax agency. The IRS is focused on preventing, detecting and resolving identity theft cases as soon as possible.

The IRS has more than 3,000 employees working on identity theft cases. We have trained more than 35,000 employees who work with taxpayers to recognize and provide assistance when identity theft occurs.

Taxpayers can encounter identity theft involving their tax returns in several ways. One instance is where identity thieves try filing fraudulent refund claims using another person’s identifying information, which has been stolen. Innocent taxpayers are victimized because their refunds are delayed.

Here are some tips to protect you from becoming a victim, and steps to take if you think someone may have filed a tax return using your name: Continue reading →

MarketWatch Highlights Tax Law Changes

Have you planned for these 7 tax law changes?

CALL US - 619-589-8680 Seven 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 →