TIPS FOR RECENTLY MARRIED OR DIVORCED TAXPAYERS WITH A NAME CHANGE

The IRS just issued a reminder to people with name changes.  Processing of your return will be slowed down if you do not properly follow their steps. 

Five Tips for Recently Married or Divorced Taxpayers with a Name Change

If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. f you took your spouse’s last name -- or if you hyphenated your 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 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 easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you'll need to update their names with SSA too. 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. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

I WON A $55,000 FORD MUSTANG

Recently I was talking to an acquaintance of mine who’s tax work I am not involved with. I congratulated him on the hole-in-one that he had and the $55,000 Ford Mustang that went along with the win. He said he talked to his tax guy and he realizes this will be taxable to him.

He said, “Because I won this car, I’m looking for all the deductions I can possibly get.”

I thought about his comment for a second and then I asked him, “Shouldn’t you always be looking for all the deductions you can get?”

He looked at me and said, “You know you’re right.”

The lesson here is the fair market value of the car that he won is going to be taxable to him. This will be ordinary income so if he’s in a 25% tax bracket plus a 7% state bracket, his income tax will be roughly $17,600. In addition to this, he has to buy license plates, pay property tax on the vehicle, plus the insurance. It’s still a good deal but at the same time there are some taxes involved.

But the real lesson to be learned is even if you don’t hit a hole-in-one and win a vehicle, you still should try to take all the deductions that are allowable.

HERE'S SOME GOOD NEWS

Law School Applications Fall 15%

The total number of applications and applicants for the Class of 2015 at ABA-approved law schools as of January 13, 2012 were:

• Applicants: 31,815, down 16.7% from last year
• Applications: 233,361, down 15.3% from last year

HIP TO BE SQUARE

Have you seen the new Square credit card app?

We use it when we are on the road to ring up credit card sales. It is really handy.

Developed by Twitter founder Jack Dorsey, this app allows merchants to accept credit cards via a small, square swiping device that plugs right into an iPhone or Android device. The only charge is a 2.75% transaction fee on every purchase.

In May they launched a new program called Square Register, a free iPad app that acts as a complete point of sale system for businesses It manages inventory and runs sales analytics. I have not used this software.

Here is how the software works. The customer swipes their cards on the Square card-reading device and sign their name directly on the screen of the iPad. They receive an email or text message receipt.

Customers with smart phones can download an app called Square Card Case, which allows them to set up and keep a tab with the merchant. When a customer activates the app and makes a purchase, his or her name appears on the merchant's iPad, and the merchant charges the account. The transaction is done completely over the iPad and the phone.

How long before a young person asks you "what was that stuff called cash that you used to use?"

1099K - PAYPAL & AMAZON

Q. Hello. I just had a couple of quick questions about the new 1099k form. I read your blog post "1099K NO WORRIES THIS YEAR". Does this mean card companies are not reporting any sales amounts to the IRS this year until they get it figured out? Does this apply to companies such as Paypal and Amazon as well? I haven't seen this news anywhere else and that's what prompted me to email you. Is there a link to read where it says this? The whole process is so confusing. Thank you very much for your time.

A. The best I can tell is that the credit card and debit card companies, including PayPal, will be sending out 1099K's with copies going to the IRS. Apparently the IRS will not be able to match so they are saying put 0 in the box.

As far as a link, I will look but I actually heard this at the Washington Tax Conference.

SPENDING

Please take a moment to watch this video about spending: WATCH ME

CONGRESS AGAIN PLAYS POLITICS

MAJOR FLAW IN THE VOW TO HIRE VETERANS ACT LOST IN POLITICAL POPLARITY

The VOW to Hire Heroes Act includes tax incentives intended to lower the unemployment rate of this country's veterans which, according to the Bureau of Labor Statistics, stands at 7.7% (860,000 workers). Not surprisingly, the House Committee on Veterans' Affairs is already singing the act's praises (see Comprehensive Legislation to End Veteran Unemployment.

However, the VOW to Hire Heroes Act has one major problem: The design does not prevent abuse by employers which could result in no net reduction in veteran unemployment whatsoever. As the Tax Foundation reported after the President's proposal of the American Jobs Act, tax credit programs-without proper checks put into place-given to businesses who hire unemployed workers can easily be gamed. Unfortunately, this bill includes such credits.

These incentives include:
• A tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months
• A $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months
• A tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months

Targeted incentives are poor policy in general, but are especially wasteful in this case. Why? Legislators failed to include a provision saying that business must increase net employment in order to receive the credit. Given the lack of such a provision, a business could hire a veteran and fire one on the same day, eventually collect a government check of up to $9,600, and not reduce veteran unemployment by a single job.


Though unemployment is high (9% nationally, 12% among young veterans), politically popular legislation which has not been properly thought through is not the answer. After serving their country, veterans should benefit from a sustainable growing economy rather than political gimmicks that will do little to serve anyone.

NEW HSA AMOUNTS FOR 2012

Here are the new contribution limits for 2012 HSA

Contribution limit ~ Family: $6,250 Self: $3,100
Catch up if over 55 ~ Family: $1,000 Self: $1,000
Minimum deductible ~ Family: $2,400 Self: $1,200
Max out of pocket ~ Family: $12,000 Self: $6,050

The catch up contribution can only be made by individuals who are at least 55 and are not yet enrolled in Medicare. Remember that starting in 2011 because of Obama Care over-the-counter medicines may not be reimbursed thru HSA.

MARTIN LUTHER KING DAY

Be inspired!

Martin Luther King - I HAVE A DREAM

DON’T BE SCAMMED BY CYBER CRIMINALS

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things the IRS wants you to know about phishing scams.
1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.

2. The IRS does not initiate contact with taxpayers by email to request personal or financial information. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:
• Do not reply to the message.
• Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.

3. The address of the official IRS website is http://www.irs.gov/. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.

4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious email to phishing@irs.gov.

5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov/. Click on "phishing" on the home page.

WHO MUST ISSUE 1099-MISCs

Here is some basic information about 1099-MISC:

First of all you just need to do a 1099 for certain business expenses.
o For example, someone paints your personal residence and charges you $1,100 you do not have to give that person a 1099. On the other hand if that person should paint your business property and charged you $1,100 you would give that person a 1099 for $1,100

You just have to issue a 1099 for services, not for tangible business purchases
o If the painter gives you a bill for painting and the bill includes labor and the cost of paint you would still give the painter a 1099 for the whole purchase

You do not need to give a 1099 to a corporation
o Both C corporation and S corporations qualify
o You must give a 1099 to LLC’s and partnerships

You just need to give a 1099 if you pay over $600 during the year
o For example the painter paints your business in January and charges you $400 then later in the year you bring them back and he does another $500 of painting. The total is over $600 so you must give the person a 1099

There is no penalty for sending a 1099 to a corporation so if in doubt play it safe and send. Of course there are more rules but these are the basics ones.

WHO CAN CLAIM THE CHILD AS A DEPENDENT

Q. My ex husband claimed our two children as dependents on his return. The kids live with me and I claimed them. Now the IRS sent me a notice. Who gets to claim the kids.

A. I run into this question all the time. Here is the law.

In most cases the child of the custodial parent gets the exemption. This is determined by the "time test." A qualifying child must have the same principal place of abode as the taxpayer for more than one-half of the year. Prior to 1994 the exemption was determined by the divorse decree.

There is a Form 8332 Release of Claim to Exemption for Child of Divorced or Separated Parents. This form is signed by the custodial parent and gives the non custodial parent the right to claim the child. This form needs to be attached every year to the non custoial parents tax return.

WOW THINGS HAVE CHANGED

Think about this...

In 2004:

Twitter was a sound

The cloud was something in the sky

4G was a parking place

LinkedIn was a prison

Skype was a typo

Applications were what you sent to a college
What will change in 7 more years?

DO I NEED TO FILE A TAX RETURN THIS YEAR?

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld: You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit: You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit: This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students: in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit: You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit: Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits give us a call or email today.

IRA CONTRIBUTION AND YOUR AGE

Q: For someone 60 what is the maximum IRA contribution? What about if you are 50?

A: If you are 50 years of age or older before the end of 2012, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 ($5,000 plus $1,000 catch up) or the amount of your taxable compensation. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending on your modified adjusted gross income. There can be further limitations for individuals who also participate in an employer provided plan.

If you are age 50 or older and have a SIMPLE IRA, the maximum contribution is different. The base amount is 100% of your compensation up to $11,500 and the catch up amount is $2,500, for a maximum contribution of $14,000. There is no phase out. Of course to complicate matters there are some exceptions. If you are covered by a retirement plan at work here are the phase outs. CLICK HERE

If your spouse is covered by a pension plan then there are some different phase outs. CLICK HERE

DOES THE IRS OWE YOU MONEY

The IRS has announced that it has $153.3 million in undelivered tax refund checks because of mailing address errors. There are 99,123 taxpayers who are due refund checks, making the average check a whopping $1,547.

If you think you might be owed some cash, you can check with the IRS by using the online “Where’s My Refund?” tool. You’ll need to provide your Social Security number, filing status as reported on your last return and the amount of your refund. If you don’t have access to the internet (which is curious since you’re reading this), you can also call 1-800-829-1954.Tax forms and other correspondences from the IRS are mailed to the last address clearly and concisely provided by the taxpayer, so be sure to update your address on your tax return. You can also update your address at any time using federal form 8822.

HAPPY NEW YEAR

We wish all of our readers a very happy New Year. We started this blog over two years ago and every month without fail we have ever increasing readership. From just having a couple of comments and questions per month to probably having at least 5 a week, we have enjoyed every day of interacting with the readers. We hope the information has been useful and look forward to providing even more in 2012.

We wish everyone a prosperous New Year and we shall see what surprises 2012 bring.