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A Way to Potentially Lower Your Federal Income Tax Debt | Tax Tip of the Week | No. 152 June 27, 2012

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Update on Offer in Compromise Rules

A couple of weeks ago (TTW # 150) we looked at the revised collection and installment payment rules under the IRS’s “Fresh Start” initiative.  “Fresh Start” is a new program that the IRS hopes will help taxpayers clear up their tax problems in a shorter period of time than the past.

This week we will look at the revised Offer in Compromise (OIC) rules.  An OIC is an agreement between a taxpayer and the IRS settling the taxpayer’s tax liability for less than the full amount owed. 

An OIC is generally not accepted if the IRS believes the taxpayer can pay the liability in full as a lump sum or in an installment agreement. The IRS looks at each taxpayer’s income and assets to determine whether and how much the taxpayer can pay (the IRS calls this “reasonable collection potential”). Part of this analysis involves calculating allowable living expenses, which are set using national standards, to determine average expenditures for the cost of basic necessities in similar geographic areas. The ability to pay is also determined by looking at the taxpayer’s future income. 

Under the new rules, in calculating a taxpayer’s reasonable collection potential, the IRS will now look at only one year of future income (down from four years) for Offers in Compromise that will be paid in five or fewer months, and two years of future income (down from five years) for offers paid in six to 24 months. The program will now also permit equity in income-producing assets (e.g., a machine used in manufacturing) to be excluded from the calculation of reasonable collection potential for an ongoing business. 

In addition, the IRS has narrowed the definition of “dissipated assets,” which are assets that were sold, transferred, or spent on things that are not necessary living expenses after the tax was assessed, or within six months before the tax was assessed. 

To respond to what the IRS characterizes as “real-world situations,” allowable living expenses used to determine a taxpayer’s reasonable collection potential now include credit card payments and bank fees. Allowable living expenses now also include payment of federally guaranteed student loans and payment of a certain percentage of delinquent state and local taxes.  

For more information, the IRS has updated Form 656-B  “Offer in Compromise Booklet” and Form 656.

If you think you are candidate to be considered for an OIC give us a call. 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

Tax Tip of the Week Video Series:

http://youtu.be/BlhqUiVEsJo

…until next week.

 

An Update on Capitol Hill | Tax Tip of the Week | No. 151 June 20, 2012

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Congress Facing Slide Toward “Fiscal Cliff”

“It looks like Congress is serious about avoiding the scheduled expiration of trillions of dollars’ worth of tax cuts that some believe would risk pushing the tentative U.S. economy over a “fiscal cliff.”

The House Ways and Means Select Revenue Measures Subcommittee held a hearing Friday on various expiring and already-expired tax breaks.

“The days of simply rubber-stamping the extenders package are behind us,” said subcommittee chair Pat Tiberi, R-Ohio.

Donald B. Marron, Director of the Urban-Brookings Tax Policy Center, discussed the so-called “fiscal cliff” facing the country with the expiration of the traditional tax extenders along with the Bush tax cuts at the end of the year.

Marron noted that expiring and expired tax provisions make up most of the direct deficit reduction, including:

• $221 billion for the income, estate, and gift tax cuts originally set in motion in 2001 and 2003, plus the expired “patch” to the Alternative Minimum Tax

• $95 billion for the 2 percentage point cut in employee payroll taxes

• $65 billion for dozens of other temporary tax provisions

The hearing came a few weeks after a similar hearing at which a succession of lawmakers presented their views on which tax provisions were among their priorities. Friday’s hearing focused more on the principles of good tax policy, and the specific metrics against which Congress should test the merits of particular provisions.

In a speech Monday at the Bipartisan Policy Center, Senate Finance Committee Chair, Max Baucus, D-Montana, said he sees no chance for a major budget, tax and entitlement reform agreement before the November election. However, he signaled a strong interest in using the lame-duck session to lock Congress into an agreement to complete a major overhaul of the tax code and entitlements by mid-2013.

Baucus sees the virtue of extending some or all of the tax cuts through mid-2013, to give Congress and the administration sufficient time to reach an agreement on major tax and entitlement reform. The continued threat of a massive tax increase would be a strong incentive for Congress to address the government’s problems of overspending coupled with inadequate revenues, which together are driving up the deficit and debt.

We’ll keep you posted.

This week’s Tax Tip is courtesy of the Ohio Society of CPAs

As always, give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

Tax Tip of the Week Video Series:

http://youtu.be/BlhqUiVEsJo

…until next week.

 

Penalty Relief and Expanded Installment Agreements | Tax Tip of the Week | No. 150 June 13, 2012

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

New IRS Collection Rules

The IRS announced an expansion of the “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making installment agreements available to more people.

Wage earners (employees) who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties during a six-month grace period (October 15, 2012 for 2011 taxes). In addition, the IRS is doubling the dollar threshold from $25,000 to $50,000 for taxpayers to be eligible for automatic installment agreements to help more people qualify for the program, as well as extending the maximum payment period from 60 months to 72 months.

This initiative also changes the rules on getting an Offer in Compromise accepted.

For more information, review IR-2012-31.

Then give us a call if you need help in settling your debt with the IRS.

As always, give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

Tax Tip of the Week Video Series:

http://youtu.be/BlhqUiVEsJo

…until next week.

 

QuickBooks Made Easy | Tax Tip of the Week | No. 149 June 6, 2012

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

You Need to do Your Bookkeeping!  

So, you’ve purchased QuickBooks with the expectation that it will solve all of your bookkeeping problems, right? Then, you find out you don’t even know where to begin!

QuickBooks can be a very powerful tool in organizing your massive amounts of financial data, but you simply need a handful of tools to get you started. The very first step is setting up a checking account! If you set up your checking account and enter your deposits and withdrawals, you’ve already gone a long way towards becoming a rock star bookkeeper!  Did you know that the second most important task is reconciling your checking account each month?

Obviously you will want to do more complex transactions, such as entering credit card charges, preparing estimates and invoicing your customers, charging sales tax, etc.  You can even enter time and billing for jobs, and print Profit & Loss reports for each job and/or location. A few tips and tricks will get you headed in the right direction – remember, QuickBooks can do literally thousands and thousands of tasks, but, in all probability, you only need to perform about five or six of these tasks.

We have two Certified QuickBooks ProAdvisors on staff that will be happy to help you get going in the right direction. It’s better to start out right than to spend your valuable time doing data entry and finding out hours later that it all needs to be redone!

As always, give us a call if you have any questions.

This week’s author:  Hilary Hitchcock, CPA,  QuickBooks ProAdvisor  

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

Tax Tip of the Week Video Series:

http://youtu.be/BlhqUiVEsJo

…until next week.