HOW TO GET A COPY OF YOUR RETURN FROM THE IRS

Q. I lost my old tax returns and now I need them to give to the bank. Is there anyway that the IRS keeps old copies that I can get?

Ralph

A. It is a good idea to have a filing system that keeps good track of your records. If you go to the Kopsa Otte website at http://www.kopsaotte.com/ we have a record retention guide in the publications section.

As far as your current problem is concerned there are a couple of ways you can get the information that the bank is requesting. The quickest, easiest and cheapest way as to ask for a transcript. This is not a copy of your return, but rather pertinent numbers that are on the return. I would ask the bank if they would accept a transcript. If not, then you will need to request a full copy.

Requesting a Transcript
The IRS does not charge a fee for transcripts, which are presently available for the current tax year as well as the past three tax years. As mentioned above, a tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes made after the return was filed. In addition a transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income.

To request a transcript online, go to http://www.irs.gov/ and look for a online tool called Order A Transcript. To order by phone, call 800-908-9946 and follow the prompts in the recorded message.

To request a 1040, 1040A or 1040EZ tax return through the mail, complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.

If you order online or by phone, you should receive your tax return transcript within 5 to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T or Form 4506T-EZ.

Requesting An Actual Copy
If you still need an actual copy of a previously processed tax return, it will cost $57 for each tax year that you order. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year as well as the past six years. Allow 60 days for actual copies of your return.

I hope that this helps.

Larry Kopsa CPA

S CORP DIVIDENDS RECLASSIFIED AS WAGES - COST TAXPAYER OVER $20,000

The government keeps chipping away the tax savings strategy of S corporations. As you know wages are subject to payroll taxes whereas distributions from S corporations are not. Here is a new case which the IRS prevailed in court.

The court determined that the IRS may recharacterize dividend payments to S shareholder-employee as wages. The district court has concluded that an S corporation shareholder-employee's $24,000 salary in 2002 and 2003 was unreasonably low, and allowed IRS to reclassify as salary over $67,000 in dividend payments to the officer during each of those years. The corporation will also owe employment taxes on the reclassified dividend payments. Watson, P.C. v. U.S.

I estimate that the this cost the taxpayer and the corporation a total of $21,000 to $30,000 in additional tax for the two years.

SORRY YOU CAN'T DEDUCT THIS

A magazine editor recently asked me for a list of items that taxpayers think are deductible but are not. I thought my might be interested in my response.

• Reimbursed Job Expenses. It's true that you can deduct unreimbursed business expenses as an itemized deduction. The issue is that if the expenses are reimbursed, to the extent that your employer pays you back for any of those costs, those portions of the expenses are not deductible.
• Diets and Health Club Dues. Most diets and health club dues aren't deductible even if your doctor has recommended that you lose some weight in order to improve your health. Unfortunately you cannot deduct the cost of expenses that are merely beneficial to your health. To be deductible, the diet or exercise plan must be specifically prescribed by a doctor for a diagnosed medical condition, not as preventative care. Some limited exceptions apply.
• Primary Telephone Landlines. The IRS considers a primary telephone line routinely personal and thus, not deductible. You may not pro rate the cost of the phone even if you can prove non-personal use. You can, however, deduct long distance and other related charges if you can prove business use.
• Home Improvements. Home improvements are considered personal expenses and therefore not deductible. But wait... under current law, you can get a tax credit for the purchase and installation of certain energy-efficient improvements.
• Campaign Expenses. Thinking of running for office? Expenses incurred as part of your election campaign aren't deductible on your federal income tax return. In addition contributions made to a candidate are not deductible.
• Commuting Costs. While it's true that you can deduct certain travel expenses related to your job (such as traveling from one workplace to another in the course of your job or business; visiting clients, vendors or customers; and going to a business meeting away from your workplace), you can't deduct the costs of commuting to and from work.
• Charitable Services. You may deduct the cost of goods and cash that you donate to qualified organizations but you cannot deduct the value of your time.
• Pet Care. You may not deduct the cost of taking care of your pet even if your pet incurs significant medical expenses. An exception applies with respect to guide dogs and service animals -- you can include the costs of buying, training and maintaining those animals as part of your deductible medical expenses.
• Attorney's Fees. Attorney's fees may be deductible for businesses, but as a general rule, individual taxpayers cannot deduct most legal fees. This includes attorney's fees related to divorces, disputes over property boundaries and personal injury cases. Those legal disputes are considered personal in nature, which means the IRS won't allow you to take a deduction for them. related to producing or collecting taxable income.

IRS ANNOUNCES SMART PHONE APP

WASHINGTON — The Internal Revenue Service today unveiled IRS2Go, its first smartphone application that lets taxpayers check on their status of their tax refund and obtain helpful tax information.

"This new smart phone app reflects our commitment to modernizing the agency and engaging taxpayers where they want when they want it," said IRS Commissioner Doug Shulman. "As technology evolves and younger taxpayers get their information in new ways, we will keep innovating to make it easy for all taxpayers to access helpful information."

The IRS2Go phone app gives people a convenient way of checking on their federal refund. It also gives people a quick way of obtaining easy-to-understand tax tips.
Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

"This phone app is a first step for us," Shulman said. "We will look for additional ways to expand and refine our use of smartphones and other new technologies to help meet the needs of taxpayers."
The mobile app, among a handful in the federal government, offers a number of safe and secure ways to help taxpayers. Features of the first release of the IRS2Go app include:

Get Your Refund Status Taxpayers can check the status of their federal refund through the new phone app with a few basic pieces of information. First, taxpayers enter a Social Security number, which is masked and encrypted for security purposes. Next, taxpayers pick the filing status they used on their tax return. Finally, taxpayers enter the amount of the refund they expect from their 2010 tax return.

For people who e-file, the refund function of the phone app will work within about 72 hours after taxpayers receive an e-mail acknowledgement saying the IRS received their tax return. For people filing paper tax returns, longer processing times mean they will need to wait three to four weeks before they can check their refund status.

MILEAGE RATES FOR 2011

Q. Is there a new mileage rate for 2011?

A. I published this earlier but just in case you missed it, the standard mileage rates went up. The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 51¢ per each business mile traveled after 2010. That's 1¢ more than the 50¢ allowance for business mileage during 2010. Further, the 2011 rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 19¢ per mile, 2.5¢ more per mile than the 16.5¢ for 2010.

Projection -- with gas rates going up so quickly I would not be surprised to see the IRS issue higer rates mid year. I will keep you posted.

IF YOU ARE INVOLVED WITH SMALL NONPROFITS I THOUGHT YOU MIGHT WANT TO KNOW THIS

On January 18, 2011 the IRS has announced a change in the reporting requirements for small tax-exemption organizations. Beginning in 2007 (for tax year 2006), organizations with gross receipts of less than $25,000 were required to file a form 990-N (sometimes called an “e-Postcard”) with the IRS each year. Beginning in 2011 (meaning the 2010 tax year), the threshold for use of the e-Postcard has changed to gross receipts of $50,000 or less.

Some exceptions apply to the threshold. For example, supporting organizations must continue to file the form 990 (or 900-EZ). Additionally, a private foundation must still continue to file a form 990-PF. Failure to comply with reporting requirements could result in a loss of tax-exempt status.

TAX BREAKS FOR HIGHER EDUCATION

I receive a lot of question on tax breaks for higher education. There are several tax breaks. Here is a summary of two of the credits that most people qualify for.

Larry Kopsa CPA


There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay post secondary tuition and fees for yourself, your spouse or your dependent.

• The credit may be claimed by the parent or the student, but not by both.
• If the student was claimed as a dependent, the student cannot file for the credit.
• For each student, you can choose to claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter's tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.
• If you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

Here are some key facts about these valuable education credits:

The American Opportunity Credit

• The credit can be up to $2,500 per eligible student.
• It is available for the first four years of post-secondary education.
• Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• The student must be pursuing an undergraduate degree or other recognized educational credential.
• The student must be enrolled at least half time for at least one academic period.
• Qualified expenses include tuition and fees, coursed related books supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.
  

Lifetime Learning Credit

• The credit can be up to $2,000 per eligible student.
• It is available for all years of post secondary education and for courses to acquire or improve job skills.
• The maximum credited is limited to the amount of tax you must pay on your return.
• The student does not need to be pursuing a degree or other recognized education credential.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.