Saturday, January 30, 2010
SMALL BUSINESS TAX CALENDAR
Do you own a small business or are you self-employed? Make sure you don't miss out on an important IRS due date. Link to the Small Business Tax Calendar for due dates, tax topics, forms and publications, and tips from the IRS.
Friday, January 29, 2010
AMERICA'S FINANCIAL CONDITION
I have posted this information before but certainly bears repeating.
To see real-time figures on U.S. debt, federal spending, unemployment figures and other information pertaining to the fiscal health of our country, visit http://www.usdebtclock.org/> for an interesting examination of America's financial condition.
To see real-time figures on U.S. debt, federal spending, unemployment figures and other information pertaining to the fiscal health of our country, visit http://www.usdebtclock.org/> for an interesting examination of America's financial condition.
GOT KIDS IN COLLEGE? TAX CREDIT HELPS PAY FOR HIGHER EDUCATION EXPENSES
The government wants everyone to get a good education. The American Recovery and Reinvestment Act was passed in early 2009 and created the American Opportunity Credit. This educational tax credit – which expanded the existing Hope credit – helps parents and students pay for college and college-related expenses.
Here is a summary of how you can benefit from it when you file your 2009 taxes.
- The credit can be claimed for tuition and certain fees paid for higher education in 2009 and 2010.
- The American Opportunity Credit can be claimed for expenses paid for any of the first four years of post-secondary education.
- The credit is worth up to $2,500 and is based on a percentage of the cost of qualified tuition and related expenses paid during the taxable year for each eligible student. This is a $700 increase from the Hope Credit.
- The term "qualified tuition and related expenses" has been expanded to include expenditures for required course materials. For this purpose, the term "course materials" means books, supplies and equipment required for a course of study.
- Taxpayers will receive a tax credit based on 100 percent of the first $2,000 of tuition, fees and course materials paid during the taxable year, plus 25 percent of the next $2,000 of tuition, fees and course materials paid during the taxable year.
- Forty percent of the credit is refundable, so even if you do not owe any tax you can get up to $1,000 of the credit for each eligible student as cash back.
- To be eligible for the full credit, your modified adjusted gross income must be $80,000 or less -- $160,000 or less for joint filers. Above these amounts the amount of credit that you get is decreased.
- There is no credit for room, board and transportation (or beer).
Thursday, January 28, 2010
IRS RELEASES NEW FORM FOR CLAIMING THE FIRST TIME HOME BUYERS CREDIT
The IRS released Form 5405, to be used by taxpayers seeking to claim the First Time Home Buyers Credit and announced that the processing of returns claiming the credit will begin in mid-February. The accompanying instructions detail which documents must be included with the return in order to receive the tax credit;
- A copy of the settlement statement properly executed with all necessary information completed, and a properly executed HUD-1 Form.
- For mobile home purchasers, a copy of the sales contract.
- For a newly constructed home where a settlement sheet is not available a copy of the certificate of occupancy will suffice.
The new law enacted in November, 2009, allows long term residents a tax credit for the purchase of a new home if they can demonstrate that they lived in their old home for a five year period ending on the date they purchased the new home. These taxpayers are required to attach documentation covering the five consecutive year period including;
- Form 1098 Mortgage Interest Statements,
- Property Tax Records, or
- Homeowner’s Insurance Records.
Most importantly the instructions state, “Taxpayers Claiming the First Time Home Buyers Credit, MAY NOT E File these returns”. This will likely mean longer waits for tax refunds. Click here for details.
IMPORTANT TAX DEVELOPMENTS
The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
New opportunity to convert to Roth IRA. This year is a pivotal one for retirement planning, as it is the first year in which taxpayers may convert funds in regular IRAs (as well as qualified plan funds) to Roth IRAs regardless of their income level. Such a conversion may be desirable because distributions from Roth IRAs may be tax-free if several conditions are met, and a Roth IRA owner does not have to commence lifetime required minimum distributions (RMDs) from Roth IRAs after he or she reaches age 70 1/2. However, even if Roth distributions are tax-free, a 10% penalty may apply. Plus, the conversion itself will be fully taxed, assuming the rollover is being made with pre-tax dollars (money that was deductible when contributed to an IRA, or money that wasn't taxed to an employee when contributed to the qualified employer sponsored retirement plan) and the earnings on those pre-tax dollars. For example, an individual in the 28% federal tax bracket who rolls over $100,000 from a regular IRA funded entirely with deductible dollars to a Roth IRA will owe $28,000 of tax. So the individual would be paying tax now for the future privilege of tax-free withdrawals, and freedom from the RMD rules.
New option to choose longer carryback period for net operating loss (NOL). A new law enacted last November makes it easier for most businesses to get immediate tax savings from NOLs. It does so by allowing certain NOLs to be carried back to earlier, more profitable years. In these tough economic times, that's good news for businesses who have suffered losses recently after better years when high taxes were paid. Specifically, the new law generally permits any business to increase the carryback period for an applicable NOL to 3, 4, or 5 years from 2 years (however, businesses getting certain federal bailout funds are not eligible). An applicable NOL is a business's NOL for any tax year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010. Generally, an election may be made for only one tax year. The amount of the NOL that can be carried back to the 5th tax year before the loss year can't be more than 50% of a business's taxable income for that 5th preceding tax year determined without taking into account any NOL for the loss year or for any tax year after the loss year.
Homebuyer credit extended and liberalized. A new law enacted last November extended and generally liberalized the tax credit for first-time homebuyers, making it a much more flexible tax-saving tool. Before the new law, the credit was to have expired for homes purchased after Nov. 30, 2009. The new law extended the credit to apply to a principal residence bought before May 1, 2010; it also applies to a principal residence bought before July 1, 2010 by a person who enters into a written binding contract before May 1, 2010, to close on the purchase of the principal residence before July 1, 2010. Also, effective for purchases after Nov. 6, 2009, the new law allows existing homeowners who meet certain conditions to qualify for a reduced credit of up to $6,500. For purchases after Nov. 6, 2009, the phaseout rules have been eased. These are the rules that cause the credit to be reduced or eliminated as modified adjusted gross income exceeds certain levels. Much higher income levels are now allowed before there is any reduction of the credit. On the negative side, a credit cannot be claimed for a home whose purchase price exceeds $800,000. In addition, the new law included some crackdowns designed to prevent abuse of the credit.
New lease on life for COBRA subsidy. In December of last year, the 65% COBRA premium subsidy that was enacted in February of 2009 got a new lease on life. Under the original provision, employees who were involuntarily terminated after Aug. 31, 2008 and before Jan. 1, 2010, and who elected COBRA health continuation coverage, became entitled to receive a 65% subsidy on their COBRA premiums. For periods of COBRA coverage beginning after Feb. 16, 2009, the involuntarily terminated employee was treated as having paid the required COBRA premium if the individual paid 35% of the premium amount. The employer (or, in some cases, multiemployer health plan or insurer) could recover the other 65% by taking the subsidy amount as a credit on its quarterly employment tax return. The December 2009 legislation added another six months to the maximum period that the COBRA subsidy can run (i.e., to a total of 15 months). In addition, it extended the up-to-15 month COBRA premium subsidy to workers (and their eligible family members) who lose their jobs during the first two months of 2010.
Standard mileage rates down for 2010. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 50¢ per mile for business travel after 2009. That's 5¢ less than the 55¢ allowance for business mileage during 2009. Further, the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 16.5¢ per mile, down 7.5¢ from the 24¢ per mile allowance for 2009.
How small employers opt in or out of filing Form 944 for 2010. The IRS has explained how small employers eligible to file Form 944 (Employer's Annual Federal Tax Return), should request to file that form instead of Forms 941 (Employer's Quarterly Federal Tax Return), for tax years beginning on or after Jan. 1, 2010. In addition, the IRS explained how employers who previously were notified to file Form 944, may request to file Forms 941 instead for tax years beginning on or after Jan. 1, 2010. Employers whose estimated annual employment tax liability is $1,000 or less are eligible to file Form 944 rather than Form 941 (but not if they must file Form 943, Employer's Annual Federal Tax Return For Agricultural Employees, or Schedule H (Household Employment Taxes, Form 1040)). Beginning in tax year 2010, employers will be able to opt out of filing Form 944 for any reason if they follow certain procedures.
If you need information on any of the above please email.
Larry Kopsa CPA
New opportunity to convert to Roth IRA. This year is a pivotal one for retirement planning, as it is the first year in which taxpayers may convert funds in regular IRAs (as well as qualified plan funds) to Roth IRAs regardless of their income level. Such a conversion may be desirable because distributions from Roth IRAs may be tax-free if several conditions are met, and a Roth IRA owner does not have to commence lifetime required minimum distributions (RMDs) from Roth IRAs after he or she reaches age 70 1/2. However, even if Roth distributions are tax-free, a 10% penalty may apply. Plus, the conversion itself will be fully taxed, assuming the rollover is being made with pre-tax dollars (money that was deductible when contributed to an IRA, or money that wasn't taxed to an employee when contributed to the qualified employer sponsored retirement plan) and the earnings on those pre-tax dollars. For example, an individual in the 28% federal tax bracket who rolls over $100,000 from a regular IRA funded entirely with deductible dollars to a Roth IRA will owe $28,000 of tax. So the individual would be paying tax now for the future privilege of tax-free withdrawals, and freedom from the RMD rules.
New option to choose longer carryback period for net operating loss (NOL). A new law enacted last November makes it easier for most businesses to get immediate tax savings from NOLs. It does so by allowing certain NOLs to be carried back to earlier, more profitable years. In these tough economic times, that's good news for businesses who have suffered losses recently after better years when high taxes were paid. Specifically, the new law generally permits any business to increase the carryback period for an applicable NOL to 3, 4, or 5 years from 2 years (however, businesses getting certain federal bailout funds are not eligible). An applicable NOL is a business's NOL for any tax year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010. Generally, an election may be made for only one tax year. The amount of the NOL that can be carried back to the 5th tax year before the loss year can't be more than 50% of a business's taxable income for that 5th preceding tax year determined without taking into account any NOL for the loss year or for any tax year after the loss year.
Homebuyer credit extended and liberalized. A new law enacted last November extended and generally liberalized the tax credit for first-time homebuyers, making it a much more flexible tax-saving tool. Before the new law, the credit was to have expired for homes purchased after Nov. 30, 2009. The new law extended the credit to apply to a principal residence bought before May 1, 2010; it also applies to a principal residence bought before July 1, 2010 by a person who enters into a written binding contract before May 1, 2010, to close on the purchase of the principal residence before July 1, 2010. Also, effective for purchases after Nov. 6, 2009, the new law allows existing homeowners who meet certain conditions to qualify for a reduced credit of up to $6,500. For purchases after Nov. 6, 2009, the phaseout rules have been eased. These are the rules that cause the credit to be reduced or eliminated as modified adjusted gross income exceeds certain levels. Much higher income levels are now allowed before there is any reduction of the credit. On the negative side, a credit cannot be claimed for a home whose purchase price exceeds $800,000. In addition, the new law included some crackdowns designed to prevent abuse of the credit.
New lease on life for COBRA subsidy. In December of last year, the 65% COBRA premium subsidy that was enacted in February of 2009 got a new lease on life. Under the original provision, employees who were involuntarily terminated after Aug. 31, 2008 and before Jan. 1, 2010, and who elected COBRA health continuation coverage, became entitled to receive a 65% subsidy on their COBRA premiums. For periods of COBRA coverage beginning after Feb. 16, 2009, the involuntarily terminated employee was treated as having paid the required COBRA premium if the individual paid 35% of the premium amount. The employer (or, in some cases, multiemployer health plan or insurer) could recover the other 65% by taking the subsidy amount as a credit on its quarterly employment tax return. The December 2009 legislation added another six months to the maximum period that the COBRA subsidy can run (i.e., to a total of 15 months). In addition, it extended the up-to-15 month COBRA premium subsidy to workers (and their eligible family members) who lose their jobs during the first two months of 2010.
Standard mileage rates down for 2010. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 50¢ per mile for business travel after 2009. That's 5¢ less than the 55¢ allowance for business mileage during 2009. Further, the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 16.5¢ per mile, down 7.5¢ from the 24¢ per mile allowance for 2009.
How small employers opt in or out of filing Form 944 for 2010. The IRS has explained how small employers eligible to file Form 944 (Employer's Annual Federal Tax Return), should request to file that form instead of Forms 941 (Employer's Quarterly Federal Tax Return), for tax years beginning on or after Jan. 1, 2010. In addition, the IRS explained how employers who previously were notified to file Form 944, may request to file Forms 941 instead for tax years beginning on or after Jan. 1, 2010. Employers whose estimated annual employment tax liability is $1,000 or less are eligible to file Form 944 rather than Form 941 (but not if they must file Form 943, Employer's Annual Federal Tax Return For Agricultural Employees, or Schedule H (Household Employment Taxes, Form 1040)). Beginning in tax year 2010, employers will be able to opt out of filing Form 944 for any reason if they follow certain procedures.
If you need information on any of the above please email.
Larry Kopsa CPA
Wednesday, January 27, 2010
NONPROFIT FILING REMINDER
If you are on the board of a nonprofit you should pay close attention to the attached filing reminder from the IRS. Since non-profit corporations are sometimes set up by tax protesters as a way to cheat on their income tax returns, and also since terrorist activities are sometimes funded through non-profits, these returns are being scrutinized closely by the IRS.
The IRS Reminds Tax-Exempt Organizations of All Sizes to File the Form 990 on Time to Preserve Their Tax Exempt Status.
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.
The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.
A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Small non-profit organizations with annual receipts of $25,000 or less can file an electronic notice, Form 990-N (e-Postcard). They will need only a few basic pieces of information to file: the organization’s employer identification number, its tax year, legal name and mailing address, any other names used, an Internet address if one exists, the name and address of a principal officer and a statement confirming the organization's annual gross receipts are normally $25,000 or less.
Tax-exempt organizations with annual receipts above $25,000 are required to file the Form 990 or the Form 990-EZ annually. Private foundations file Form 990-PF. Churches and integrated auxiliaries of churches are not required to file Form 990-series returns or notices.
Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.
The IRS Reminds Tax-Exempt Organizations of All Sizes to File the Form 990 on Time to Preserve Their Tax Exempt Status.
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations to make sure they file their annual information form on time. In 2010 the tax-exempt status of any non-profit that has not filed the required form in the last three years will be revoked.
The Pension Protection Act of 2006 requires that non-profit organizations that do not file a required information form for three consecutive years automatically lose their Federal tax-exempt status. This requirement has been in effect since the beginning of 2007.
A list of revoked organizations will be available to the public, as well as state charity and tax officials on this website.
If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.
Small non-profit organizations with annual receipts of $25,000 or less can file an electronic notice, Form 990-N (e-Postcard). They will need only a few basic pieces of information to file: the organization’s employer identification number, its tax year, legal name and mailing address, any other names used, an Internet address if one exists, the name and address of a principal officer and a statement confirming the organization's annual gross receipts are normally $25,000 or less.
Tax-exempt organizations with annual receipts above $25,000 are required to file the Form 990 or the Form 990-EZ annually. Private foundations file Form 990-PF. Churches and integrated auxiliaries of churches are not required to file Form 990-series returns or notices.
Form 990-series returns and e-Postcards, are due by the 15th day of the 5th month after an organization’s tax year ends.
WILL MY TAXES CREATE A RED FLAG WITH THE IRS?
Larry, I am wondering if the fact that we are going to be submitting something so entirely different this year in regards to taxes, if that will create a red flag to the IRS and make us that much more susceptible to auditing?
Tessa
Tessa, I hope all is well. You do not have to worry about creating a “red flag” due to the fact that things are different on your tax returns. Fortunately, the IRS does not have the computer sophistication to compare one year with the next. As a matter of fact, if you were chosen for an audit the auditor would not see the prior and/or succeeding year until you are selected for audit. And even at that the auditor normally asks us for copies of the return, he or she does not even retrieve the returns through the IRS system. Rest easy.
Let me know if there is anything else we can do to assist.
It is a pleasure serving you.
Larry Kopsa CPA
Tessa
Tessa, I hope all is well. You do not have to worry about creating a “red flag” due to the fact that things are different on your tax returns. Fortunately, the IRS does not have the computer sophistication to compare one year with the next. As a matter of fact, if you were chosen for an audit the auditor would not see the prior and/or succeeding year until you are selected for audit. And even at that the auditor normally asks us for copies of the return, he or she does not even retrieve the returns through the IRS system. Rest easy.
Let me know if there is anything else we can do to assist.
It is a pleasure serving you.
Larry Kopsa CPA
Tuesday, January 26, 2010
'ECONOMIST: GLOBAL WARMING BILL THREATENS MIDWEST ECONOMY'
(Sioux City Journal) -- Siouxcityjournal.com reports that Midwestern "consumers and industries would pay a heavy price if a controversial climate bill clears Congress, a leading economist told a group of local business leaders" last week. The article notes that the House has already "approved a so-called cap-and-trade bill, which would cap greenhouse gas emissions at 17% of 2005 levels by 2020" and force businesses to purchase "emission allowances." Margo Thorning, chief economist for the American Council for Capital Formation, said the Midwest would get "hit more severely than the east coast or the west coast" due to its "dependence on coal and heavy reliance on energy-dependence industries." The story reports, "Thorning said the House bill would escalate energy bills, destroy jobs and restrict growth and transfer wealth, while doing little to slow long-term global climate change." An ACCF study "found Waxman-Marky's provisions would cost Iowa, Nebraska and South Dakota a total of nearly 33,000 manufacturing jobs by 2030" and the "average annual household income would fall by as much as $1,410 in Nebraska," while "electricity rates would jump as much as 64% and natural gas rates by 77%, while gasoline prices would rise by 24%." "It would have a very noticeable impact on your personal lifestyles," she said. See more at
http://www.siouxcityjournal.com/business/local/article_48bdfcda-0172-11df-a8a2-001cc4c002e0.html>
http://www.siouxcityjournal.com/business/local/article_48bdfcda-0172-11df-a8a2-001cc4c002e0.html>
'DOLLAR CRISIS LOOMS IF U.S. DOESN'T CURB ITS DEBT: EXPERTS'
If you have been reading my blogs you know that my biggest concern in inflation. Having lived in the 1970’s when we wore buttons that said “WIP” (which stood for “whip inflation now”) and having started in business when the interest rate swelled to 21%, I know how devastating inflation can be. Here is an article form CNBC which echo’s my concerns.
(Reuters/CNBC.com) -- Reuters.com reports that a panel of experts last week concluded that "the United States must soon raise taxes or cut government spending to curb its debt," since "failure to act will risk a crippling dollar crisis as investor confidence ebbs." The story notes that "the 24-strong Committee on the Fiscal Future of the United States" conducted a two-year study that found "mounting debt could sap investor confidence in the economy, and the nation's ability to honor its obligations, pushing up interest rates and causing a steep fall in the value of the dollar as international creditors seek safer returns elsewhere." The committee identified curbing Medicare, Medicaid and Social Security spending as the top challenge -- "and had a lukewarm assessment of cost containment in health care reform currently before Congress that Obama hopes to sign soon." See more at http://www.cnbc.com/id/34848783>
(Reuters/CNBC.com) -- Reuters.com reports that a panel of experts last week concluded that "the United States must soon raise taxes or cut government spending to curb its debt," since "failure to act will risk a crippling dollar crisis as investor confidence ebbs." The story notes that "the 24-strong Committee on the Fiscal Future of the United States" conducted a two-year study that found "mounting debt could sap investor confidence in the economy, and the nation's ability to honor its obligations, pushing up interest rates and causing a steep fall in the value of the dollar as international creditors seek safer returns elsewhere." The committee identified curbing Medicare, Medicaid and Social Security spending as the top challenge -- "and had a lukewarm assessment of cost containment in health care reform currently before Congress that Obama hopes to sign soon." See more at http://www.cnbc.com/id/34848783>
Monday, January 25, 2010
QUOTE OF THE WEEK
"Be wary of strong drink.
It can make you shoot at
tax collectors... and miss."
Robert Heinlein
Friday, January 22, 2010
PUTTING A BILLION INTO PERSPECTIVE
I have blogged about big numbers on a couple of occasions. (See my post from August 2009-The Law of Big Numbers). Here is another example of a billion.
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of it's releases.
A. A billion seconds ago it was 1959.
B. A billion minutes ago Jesus was alive.
C. A billion hours ago our ancestors were living in the Stone Age.
D. A billion days ago no-one walked on the earth on two feet.
E. A billion dollars ago was only 8 hours and 20 minutes at the rate our government is spending it.
While this thought is still fresh in our brain...let's take a look at New Orleans ...It's amazing what you can learn with some simple division.
Louisiana Senator, Mary Landrieu (D) is presently asking Congress for 250 BILLION DOLLARS to rebuild New Orleans . Interesting number... What does it mean?
A. Well ... If you are one of the 484,674 residents of New Orleans (every man, woman, and child); you each get $515,810.
B. Or... If you have one of the 188,251 homes in New Orleans, your home gets $1,328,014.
C. Or... If you are a family of four... Your family gets $2,063,242.
A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of it's releases.
A. A billion seconds ago it was 1959.
B. A billion minutes ago Jesus was alive.
C. A billion hours ago our ancestors were living in the Stone Age.
D. A billion days ago no-one walked on the earth on two feet.
E. A billion dollars ago was only 8 hours and 20 minutes at the rate our government is spending it.
While this thought is still fresh in our brain...let's take a look at New Orleans ...It's amazing what you can learn with some simple division.
Louisiana Senator, Mary Landrieu (D) is presently asking Congress for 250 BILLION DOLLARS to rebuild New Orleans . Interesting number... What does it mean?
A. Well ... If you are one of the 484,674 residents of New Orleans (every man, woman, and child); you each get $515,810.
B. Or... If you have one of the 188,251 homes in New Orleans, your home gets $1,328,014.
C. Or... If you are a family of four... Your family gets $2,063,242.
Thursday, January 21, 2010
FIVE FILING FACTS FOR RECENTLY MARRIED OR DIVORCED TAXPAYERS
The IRS released some very good information for recently married or divorced taxpayers. If you do not follow their recommendations, it almost always causes problems with getting refunds and/or correspondence with the IRS.
If you were married or divorced recently, there are a couple of things you’ll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.
Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.
1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is a snap; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
4. Form SS-5 is available on SSA’s Web site at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-FORM (800-829-3676).
If you were married or divorced recently, there are a couple of things you’ll want to do to ensure the name on your tax return matches the name registered with the Social Security Administration.
Here are five facts from the IRS for recently married or divorced taxpayers. Following these steps will help avoid problems when you file your tax return.
1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is a snap; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office.
4. Form SS-5 is available on SSA’s Web site at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. It usually takes about two weeks to have the change verified.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling 800-TAX-FORM (800-829-3676).
Wednesday, January 20, 2010
TAX OUTLOOK FOR 2010 AND BEYOND
2010 is here, and that means dozens of tax law changes. I want to make sure that you are updated on those changes and make sure you don't miss any opportunities to minimize your bill. Let's work together to make sure you don't pay any more in tax than you have to! As always, call us for more information at 402.362.6636 or email me directly at lkopsa@kopsaotte.com.
• Under current law, you pay employment tax of 6.2% up to the "Social Security wage base," which is $106,800 for 2010. You also pay Medicare tax of 1.45% on all your employment income. If you're self-employed, you pay double these amounts. The 2009 stimulus act created a new "Making Work Pay" credit to eliminate the first $400 of that tax ($800 for joint filers). President Obama has also proposed to add a new tax in the 2-4% range on earned income above $250,000. We will keep an eye on this for you and let you know if this becomes a possibility.
• Standard deductions for 2010 are $5,700 for singles and married couples filing separately, $8,400 for heads of households, and $11,400 for joint filers. Taxpayers who are blind or age 65 or older may claim an additional $1,100.
• Personal exemptions for 2010 are $3,650.
• President Obama has proposed to restore the 36% and 39.6% tax rates for individuals earning over $200,000 and families earning over $250,000. These rates would take effect beginning in 2011.
If you expect your 2011 income to be significantly more or less than in 2010 (as may be the case if you retire, buy or sell a business, or sell significant investments), consider timing income and deductions for maximum tax advantage.
If you expect your income to go DOWN in 2011, consider delaying income (to subject it to tax at next year's lower rate) and paying deductible expenses this year, to the extent possible.
If you expect your income to go UP in 2011, consider accelerating income from commissions, bonuses, and qualified plan withdrawals (to subject it to tax at this year's lower rate), and delaying deductible expenses until next year.
• President Obama has proposed creating tax credits to make healthcare more affordable. As the healthcare debate goes on in Washington, we'll keep you posted on the latest developments.
• Congress has not yet extended the Alternative Minimum Tax (AMT) "fix" to avoid a last-minute scramble, like the one that created havoc a couple of years ago, to prevent it from penalizing more middle-income taxpayers. The AMT exemption amount for the 2010 tax year is now $45,000 for joint filers; if it's "fixed" it will rise to $70,950.
• In 2000 the IRS audit odds for audit were 1 in 200. The latest numbers we now have are in 2008 and the odds have doubled to 1 in 100. But your chance of getting audited is still minimal. Don't take low audit rates as an invitation to cheat! But don't let fear of an audit stop you from taking every legitimate deduction you're entitled to.
• If you have withholding from your pay check, make sure to review your withholding any time your tax picture changes. Do this as soon as possible if you get married or divorced, have a baby, take a new job, get a significant raise, buy or sell your home, or you sell appreciated property.
• Remember that the IRS has tightened rules for substantiating charitable gifts. Now you'll need a canceled check, bank record, or other receipt listing the charity's name, the date of the donation, and amount of the contribution.
• The IRS has imposed new rules for charitable gifts of property. You can't claim deductions for used clothing and household items unless they're in "good" condition. You'll need a qualified appraisal for any item valued at $500 or more, and there are new restrictions on automobile donations. Don't let the new rules stop you from giving! But be aware that you'll need the right substantiation to sustain your deduction.
• Under current law, you pay employment tax of 6.2% up to the "Social Security wage base," which is $106,800 for 2010. You also pay Medicare tax of 1.45% on all your employment income. If you're self-employed, you pay double these amounts. The 2009 stimulus act created a new "Making Work Pay" credit to eliminate the first $400 of that tax ($800 for joint filers). President Obama has also proposed to add a new tax in the 2-4% range on earned income above $250,000. We will keep an eye on this for you and let you know if this becomes a possibility.
• Standard deductions for 2010 are $5,700 for singles and married couples filing separately, $8,400 for heads of households, and $11,400 for joint filers. Taxpayers who are blind or age 65 or older may claim an additional $1,100.
• Personal exemptions for 2010 are $3,650.
• President Obama has proposed to restore the 36% and 39.6% tax rates for individuals earning over $200,000 and families earning over $250,000. These rates would take effect beginning in 2011.
If you expect your 2011 income to be significantly more or less than in 2010 (as may be the case if you retire, buy or sell a business, or sell significant investments), consider timing income and deductions for maximum tax advantage.
If you expect your income to go DOWN in 2011, consider delaying income (to subject it to tax at next year's lower rate) and paying deductible expenses this year, to the extent possible.
If you expect your income to go UP in 2011, consider accelerating income from commissions, bonuses, and qualified plan withdrawals (to subject it to tax at this year's lower rate), and delaying deductible expenses until next year.
• President Obama has proposed creating tax credits to make healthcare more affordable. As the healthcare debate goes on in Washington, we'll keep you posted on the latest developments.
• Congress has not yet extended the Alternative Minimum Tax (AMT) "fix" to avoid a last-minute scramble, like the one that created havoc a couple of years ago, to prevent it from penalizing more middle-income taxpayers. The AMT exemption amount for the 2010 tax year is now $45,000 for joint filers; if it's "fixed" it will rise to $70,950.
• In 2000 the IRS audit odds for audit were 1 in 200. The latest numbers we now have are in 2008 and the odds have doubled to 1 in 100. But your chance of getting audited is still minimal. Don't take low audit rates as an invitation to cheat! But don't let fear of an audit stop you from taking every legitimate deduction you're entitled to.
• If you have withholding from your pay check, make sure to review your withholding any time your tax picture changes. Do this as soon as possible if you get married or divorced, have a baby, take a new job, get a significant raise, buy or sell your home, or you sell appreciated property.
• Remember that the IRS has tightened rules for substantiating charitable gifts. Now you'll need a canceled check, bank record, or other receipt listing the charity's name, the date of the donation, and amount of the contribution.
• The IRS has imposed new rules for charitable gifts of property. You can't claim deductions for used clothing and household items unless they're in "good" condition. You'll need a qualified appraisal for any item valued at $500 or more, and there are new restrictions on automobile donations. Don't let the new rules stop you from giving! But be aware that you'll need the right substantiation to sustain your deduction.
'AVERAGE FEDERAL EMPLOYEE SALARY IS $71,206 - ABOUT $31,000 MORE THAN AVERAGE PRIVATE SECTOR WORKER'
I remember when I was young - people went to work for the government because of the stability of the job and great retirement. The pay was less than the private sector but the benefits made up for that. Now that has all changed - great benefits and much better than average pay. Where do I apply?
(Dallas Morning News blog) -- Despite the severe recession, a Dallas Morning News blog reports that a USA TODAY analysis "shows federal salaries have actually increased through this recession while 7.3 million private sector jobs have gone POOOF!" The blog notes: "Now the average federal worker's salary is $71,206 compared with $40,331 in the private sector." According to the post, "the percentage of federal workers making more than $100,000 jumped from 14% to 20%" since the start of the recession. See more at <http://dallasmorningviewsblog.dallasnews.com/archives/2009/12/american-salari.html>
(Dallas Morning News blog) -- Despite the severe recession, a Dallas Morning News blog reports that a USA TODAY analysis "shows federal salaries have actually increased through this recession while 7.3 million private sector jobs have gone POOOF!" The blog notes: "Now the average federal worker's salary is $71,206 compared with $40,331 in the private sector." According to the post, "the percentage of federal workers making more than $100,000 jumped from 14% to 20%" since the start of the recession. See more at <http://dallasmorningviewsblog.dallasnews.com/archives/2009/12/american-salari.html>
Tuesday, January 19, 2010
OPINION: 'TAX BURDEN LINKED TO LEVEL OF HAPPINESS'
(Tax Foundation Blog) -- A posting at the Tax Foundation's policy blog highlights a recent editorial from The Wall Street Journal, which cites a new study in Science magazine finding "New Yorkers are the unhappiest people in America and their neighbors in Connecticut come in a close second, followed by Michigan, Indiana, New Jersey, California, and Illinois." According to a Tax Foundation analysis, "three of the top five unhappiest states — New York, Connecticut and New Jersey — have the highest state-local tax burdens. On the other hand, four of the top five happiest states —Louisiana, Florida, Tennessee and Arizona — are among the states with the lowest state-local tax burdens." See the blog post at <http://www.taxfoundation.org/blog/show/25667.html>
IRS STRIVES FOR 71%
It’s NFL playoff time. Football gets interesting to me this time of year. As I was reading the latest report on the working of the IRS I had to think, “what would people say if an NFL coach said that he expects his team to give 71% in the playoff game?" Athletes always promise to give 110%, which by the way is impossible. I wonder what one of my tax clients would say if I told him or her that I was going to find 71% of the tax deductions that are available. But I guess 71% is good enough for the IRS. The IRS is only promising to try to answer 71 percent of calls from the taxpaying public. The thing is that they consider 71% a great goal.
More than that, the expected average wait time is 12 minutes and if you do get through, the question is do you get the correct answers. The odds of that happening are most likely going to be the same as in the past; 33% to 50% odds they are wrong.
Here is this IRS announcement per a recent article in USA Today.
And the government thinks that they can do a better job running our health care?
More than that, the expected average wait time is 12 minutes and if you do get through, the question is do you get the correct answers. The odds of that happening are most likely going to be the same as in the past; 33% to 50% odds they are wrong.
Here is this IRS announcement per a recent article in USA Today.
And the government thinks that they can do a better job running our health care?
Monday, January 18, 2010
HOW THE GOVERNMENT PAYROLL REPLACED GOODS-PRODUCING JOBS
"The decline of the jobs in goods producing sectors of the economy--construction, manufacturing, mining and agriculture--has largely been met with an increase in jobs on the government payroll."
The chart below tracks this increase. Read the rest of the article at: http://www.businessinsider.com/chart-of-the-day-goods-producing-wrokers-vs-government-payroll-2010-1.
The chart below tracks this increase. Read the rest of the article at: http://www.businessinsider.com/chart-of-the-day-goods-producing-wrokers-vs-government-payroll-2010-1.
Friday, January 15, 2010
WATER HEATERS AND TAX REBATES
Larry, we had to replace a broken water heater...are there tax rebates for this?
Annie
Annie, the only credit for water heaters is for solar water heaters. Sorry.
Larry Kopsa CPA
Annie
Annie, the only credit for water heaters is for solar water heaters. Sorry.
Larry Kopsa CPA
Thursday, January 14, 2010
A GREAT ATTITUDE FOR THE NEW YEAR!
Confidence will take you everywhere!
I AM ME and I AM OKAY!
Self Esteem by "Virginia Satir"
"I am Me. In all the world, there is no one else exactly like me. Everything that comes out of me is authentically mine, because I alone chose it – I own everything about me: my body, my feelings, my mouth, my voice, all my actions, whether they be to others or myself.
I own my fantasies, my dreams, my hopes, my fears. I own my triumphs and successes, all my failures and mistakes. Because I own all of me, I can become intimately acquainted with me. By so doing, I can love me and be friendly with all my parts.
I know there are aspects about myself that puzzle me, and other aspects that I do not know – but as long as I am friendly and loving to myself, I can courageously and hopefully look for solutions to the puzzles and ways to find out more about me.
However I look and sound, whatever I say and do, and whatever I think and feel at a given moment in time is authentically me. If later some parts of how I looked, sounded, thought, and felt turn out to be unfitting, I can discard that which is unfitting, keep the rest, and invent something new for that which I discarded.
I can see, hear, feel, think, say, and do. I have the tools to survive, to be close to others, to be productive, and to make sense and order out of the world of people and things outside of me. I own me, and therefore, I can engineer me.
I am me, and I am Okay."
From Self Esteem by "Virginia Satir"
I AM ME and I AM OKAY!
Self Esteem by "Virginia Satir"
"I am Me. In all the world, there is no one else exactly like me. Everything that comes out of me is authentically mine, because I alone chose it – I own everything about me: my body, my feelings, my mouth, my voice, all my actions, whether they be to others or myself.
I own my fantasies, my dreams, my hopes, my fears. I own my triumphs and successes, all my failures and mistakes. Because I own all of me, I can become intimately acquainted with me. By so doing, I can love me and be friendly with all my parts.
I know there are aspects about myself that puzzle me, and other aspects that I do not know – but as long as I am friendly and loving to myself, I can courageously and hopefully look for solutions to the puzzles and ways to find out more about me.
However I look and sound, whatever I say and do, and whatever I think and feel at a given moment in time is authentically me. If later some parts of how I looked, sounded, thought, and felt turn out to be unfitting, I can discard that which is unfitting, keep the rest, and invent something new for that which I discarded.
I can see, hear, feel, think, say, and do. I have the tools to survive, to be close to others, to be productive, and to make sense and order out of the world of people and things outside of me. I own me, and therefore, I can engineer me.
I am me, and I am Okay."
From Self Esteem by "Virginia Satir"
REPORT YOUR GUNS TO THE IRS?
Larry, a friend told me that we are going to have to tell the government if we have a gun. We will have to disclose this on our tax return. I figured if anyone would know if this is true it would be you. There is a Starbucks riding on your answer.
Max
Max, that is a hoax that's been floating around the net for quite awhile. The 2009 forms are in place and they don't have anything for reporting firearms. Snopes.com has a good explanation of it. In case you need evidence to win the bet, here is a link to the actual 2009 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf. When you look at it, you'll see that there is absolutely nothing about firearms.
Larry Kopsa CPA
Max
Max, that is a hoax that's been floating around the net for quite awhile. The 2009 forms are in place and they don't have anything for reporting firearms. Snopes.com has a good explanation of it. In case you need evidence to win the bet, here is a link to the actual 2009 1040: http://www.irs.gov/pub/irs-pdf/f1040.pdf. When you look at it, you'll see that there is absolutely nothing about firearms.
Larry Kopsa CPA
Wednesday, January 13, 2010
QUESTION ON MAXIMUM GIFT EXCLUSIONS
Larry, I was wondering if you could help me out with a few questions. I have been doing quite a bit of extensive searching for the maximum gift exclusions for years 1994, 1995, and 1996 and haven’t been able to get anywhere. Was wondering if maybe you might know what these numbers would be? Thanks so much for your help in advance.
Yvonne
Yvonne, It was $10,000 for each of those years, as you can see in the attached chart, which was part of the more extensive history of the gift tax that you can download from here.
Good luck. I hope this helps
Larry Kopsa CPA
Yvonne
Yvonne, It was $10,000 for each of those years, as you can see in the attached chart, which was part of the more extensive history of the gift tax that you can download from here.
Good luck. I hope this helps
Larry Kopsa CPA
Tuesday, January 12, 2010
HOOKERS TIGERS AND 1099's
With a title like that how can you not read this entry.
I’ve tried to avoid blogging the Tiger Woods scandal because, except for the divorce issues it has little to do with taxes. But now this scandal is expanding into the tax area. Hookers and tax form 1099. How can I not blog this information for you.
Michelle Braun, who allegedly made at least $8.5 million for her job as a madam, was eventually busted by the feds for charges related to a prostitution ring. You might recall she operated a high end call girl service which catered to Hollywood actors and royalty (think Charlie Sheen).
Interestingly, she always paid her taxes – smart woman!
Braun has told TMZ that two of the women who have claimed to have relationships with Tiger Woods, Jamie Jungers and Holly Joy Sampson, were active in her escort service. Braun paid the women for their services out of Global Travel Network, her escort front. And she issued them forms 1099.
Tiger or no Tiger, the best part of this story is the whole “upstanding tax citizen” issue. Braun was apparently properly issuing forms 1099 for “non-employee compensation.” Remember, according to the Tax Code, even compensation received for illegal activities is subject to tax. Clearly, this woman had some pretty savvy tax pros at her side.
You can view the alleged tax forms here.
I’ve tried to avoid blogging the Tiger Woods scandal because, except for the divorce issues it has little to do with taxes. But now this scandal is expanding into the tax area. Hookers and tax form 1099. How can I not blog this information for you.
Michelle Braun, who allegedly made at least $8.5 million for her job as a madam, was eventually busted by the feds for charges related to a prostitution ring. You might recall she operated a high end call girl service which catered to Hollywood actors and royalty (think Charlie Sheen).
Interestingly, she always paid her taxes – smart woman!
Braun has told TMZ that two of the women who have claimed to have relationships with Tiger Woods, Jamie Jungers and Holly Joy Sampson, were active in her escort service. Braun paid the women for their services out of Global Travel Network, her escort front. And she issued them forms 1099.
Tiger or no Tiger, the best part of this story is the whole “upstanding tax citizen” issue. Braun was apparently properly issuing forms 1099 for “non-employee compensation.” Remember, according to the Tax Code, even compensation received for illegal activities is subject to tax. Clearly, this woman had some pretty savvy tax pros at her side.
You can view the alleged tax forms here.
Monday, January 11, 2010
QUOTE OF THE WEEK
Be who you say you are...
and say what you feel...
because those that matter,don't mind...
and those that mind, don't matter!
and say what you feel...
because those that matter,don't mind...
and those that mind, don't matter!
Friday, January 8, 2010
WHAT IS HAPPENING WITH ESTATE TAXES?
Would it be a good idea to die in 2010 to avoid estate taxes? This is a question that we cannot yet answer.
Congress is leaving behind a big tax mess. Many key issues remain unresolved for now. Although the House approved extensions for a group of expiring tax breaks, the Senate got bogged down in debate over health care overhaul, preventing it from tackling other must-do bills before year-end. The gridlock could lead to a train wreck on taxes in 2010. Not only will unfinished business have to be taken care of, but Congress will be staring at another major deadline because the Bush tax cuts will expire at the end of the year if nothing is done.
This session’s biggest failure is inaction on the estate tax. We are currently in limbo.
With no change in current law, the estate tax will disappear in 2010, then reappear in 2011 with a top rate of 60% and a low $1-million exemption. The generation-skipping tax will also end for a year, and the gift tax lives on but the top rate falls to 35%. A big problem as the law now stands is that some heirs of people who die in 2010 will owe capital gains tax when they sell inherited assets. Current law, which steps up the basis for inherited assets to the date-of-death value, is replaced by a convoluted system that starts with the decedent’s income tax basis. Executors are allowed to increase the basis of inherited assets by up to $1.3 million. So if they do not change the law it is a good estate planning tool to die this year.
Everyone in the estate tax business felt that some type of resolution would have been reached by now. This is a nightmare.
Congress is leaving behind a big tax mess. Many key issues remain unresolved for now. Although the House approved extensions for a group of expiring tax breaks, the Senate got bogged down in debate over health care overhaul, preventing it from tackling other must-do bills before year-end. The gridlock could lead to a train wreck on taxes in 2010. Not only will unfinished business have to be taken care of, but Congress will be staring at another major deadline because the Bush tax cuts will expire at the end of the year if nothing is done.
This session’s biggest failure is inaction on the estate tax. We are currently in limbo.
With no change in current law, the estate tax will disappear in 2010, then reappear in 2011 with a top rate of 60% and a low $1-million exemption. The generation-skipping tax will also end for a year, and the gift tax lives on but the top rate falls to 35%. A big problem as the law now stands is that some heirs of people who die in 2010 will owe capital gains tax when they sell inherited assets. Current law, which steps up the basis for inherited assets to the date-of-death value, is replaced by a convoluted system that starts with the decedent’s income tax basis. Executors are allowed to increase the basis of inherited assets by up to $1.3 million. So if they do not change the law it is a good estate planning tool to die this year.
Everyone in the estate tax business felt that some type of resolution would have been reached by now. This is a nightmare.
Thursday, January 7, 2010
IRS WAIVES PENALTY IF UNDERPAYMENT DUE TO REDUCED WITHHOLDING
The withholding tables were adjusted in the spring of 2009 to give taxpayers the immediate advantage of the Making Work Pay Credit (MWPC). However, the adjustments to the tables may have caused millions of taxpayers to be underwithheld, according to a recent report by the Treasury Inspector General For Tax Administration (TIGTA). Now, in the wake of this highly critical report, IRS has decided to waive the penalty for an underpayment caused by the adjustments to the tables. It has been fixed but you should see the form that you must fill out to avoid that portion of the penalty. How to get the waiver.
To request the waiver, a taxpayer must check box A or box B in Part II of Form 2210. Box A is used to request a waiver of the entire penalty. In such a case, a taxpayer need only complete page 1 of Form 2210 and attach it to his return. The taxpayer is not required to figure the amount of penalty to be waived. Box B is used to request a waiver of part of the penalty. In such a case, the taxpayer must figure the penalty and the waiver amount on Form 2210.
To request the waiver, a taxpayer must check box A or box B in Part II of Form 2210. Box A is used to request a waiver of the entire penalty. In such a case, a taxpayer need only complete page 1 of Form 2210 and attach it to his return. The taxpayer is not required to figure the amount of penalty to be waived. Box B is used to request a waiver of part of the penalty. In such a case, the taxpayer must figure the penalty and the waiver amount on Form 2210.
Tuesday, January 5, 2010
HOMEBUYER CREDIT HANDOUT
We've been fielding some questions at our office regarding the expanded homebuyer's credit. We thought it would be useful to create a handout for our clients about the credit to reflect the law changes that occurred on Nov. 6 2009.
Check out our Homebuyer Credit Handout on our website at www.kopsaotte.com under General Tax Information; or link directly to the handout at: Homebuyer's Credit from IRS.
Check out our Homebuyer Credit Handout on our website at www.kopsaotte.com under General Tax Information; or link directly to the handout at: Homebuyer's Credit from IRS.
Monday, January 4, 2010
ONLY THE TSA WOULD WORK ON THEIR WEB SITE WHEN PEOPLE USE IT THE MOST
And we want the government to run health care. Come on, what are they thinking?
I was amazed last week that during one of the busiest times of the year for travel the TSA's web site that lists the historical wait times of airport security lines in airports was “under construction” and not available for travelers. Many people use this web site during the busy holiday season to see how long the wait times are at major airports to clear security checkpoints.
This site (when it is up and working) shows all the security checkpoint wait times throughout the day. This helps people plan on how early they need to arrive at the airport to make their flight. When they do finally get the site back in working order I suggest you try it: http://www.tsa.gov/travelers/waittime.shtm.
I was amazed last week that during one of the busiest times of the year for travel the TSA's web site that lists the historical wait times of airport security lines in airports was “under construction” and not available for travelers. Many people use this web site during the busy holiday season to see how long the wait times are at major airports to clear security checkpoints.
This site (when it is up and working) shows all the security checkpoint wait times throughout the day. This helps people plan on how early they need to arrive at the airport to make their flight. When they do finally get the site back in working order I suggest you try it: http://www.tsa.gov/travelers/waittime.shtm.
QUOTE OF THE WEEK
"The things you fear are undefeatable
not by their nature but by your approach."
Jewel, singer-songwriter
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