Which Group Describes You? | Tax Tip of the Week | No. 203 June 19, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentOne in Three People Likes Doing Income Taxes
The following is an interesting survey we came across recently:
True, most Americans (56 percent) have “a negative reaction” to doing their income taxes and 26 percent say they “hate” doing them – but there’s still 34 percent who also say they either like (29 percent) or love (5 percent) doing their taxes, according to a pre-Tax Day survey of 1,003 adults done by the Pew Research Center.
When asked why they like doing their income taxes, 29 percent of respondents said that they expect to get a refund, 17 percent “just don’t mind it” or they are good at it, and 13 percent said that doing their taxes gives them a sense of control. The same percentage cited a feeling of obligation.
Other, detailed findings:
•Among those who dislike or hate doing their taxes, most cited the hassles of the process or the amount of time it takes: 31 percent said that it is complicated, requires too much paperwork or that they are afraid of making mistakes, while 24 percent said that it is inconvenient and time-consuming.
•Twelve percent said they dislike doing their taxes because of how the government uses tax money. Five percent of those who dislike or hate doing their income taxes said that it is because they pay too much in taxes.
•Forty-one percent of those with family incomes of less than $30,000/year said they like or love doing their income taxes, compared with 30 percent of those with incomes of $75,000 or more.
•Three out of five Republicans said they dislike or hate doing their taxes.
•Among Independents, 62 percent dislike or hate doing their taxes and 31 percent “like or love it.”
•Among Democrats, 46 percent either dislike or hate doing their taxes, while two out of five like or love it.
•A third of Americans surveyed said they do their own taxes, while 56 percent said someone else prepares their taxes.
No matter which group describes your attitude about preparing income tax returns—-we are here to help when you need us.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
Every Little Bit Helps…. | Tax Tip of the Week | No. 202 June 12, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment$1 Billion Rebate to Ohio Employers
After being proposed by Gov. Kasich, the Ohio Bureau of Workers’ Compensation Board of Directors has now approved a nearly $1 billion rebate to employers in Ohio who were part of the state fund workers’ compensation coverage from July 1, 2011 to June 30, 2012.
The Bureau intends to issue the rebate between now and the end of August of this year. The rebate is based upon, roughly, a 56% premium rebate to employers.
This activity was generated as a result of the Bureau determining that its reserves were higher than expected/necessary. Employers should understand that if they were self-insured during the above-referenced rating year, they are not entitled to receive the rebate.
The Bureau of Workers’ Compensation may contact employers directly for additional information needed to issue the rebate check, so a prompt response to any information requested by the Bureau would obviously be in your company’s best interest.
Please Note: This Tax Tip is a reprint of a notice sent by our legal friends at Coolidge Wall Co. Special thanks go to David Korte.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
Noncustodial Parents Beware | Tax Tip of the Week | No. 201 June 5, 2013
Posted by bradstreetblogger in : Tax Planning Tips, Tax Preparation, Tax Tip, Taxes, Taxes, Uncategorized , add a commentWe Have Been Urging This Form for Years….
In a divorce situation when the couple has minor children, it is common to see the divorce decree will allow one spouse to claim the children as dependents in even years and the other spouse in odd years.
Over time, unfortunately, the custodial spouse seems to “forget” this sometimes. To protect the noncustodial spouse, the IRS requires a Form 8332 ( www.irs.gov/pub/irs-pdf/f8332.pdf) to be attached to the tax return.
A recent court case (Shenk, 140 TC No. 10) underlines the importance of properly using the Form 8332. In this court case Mr. Shenk argued he was entitled to claim exemptions taken by his ex-wife. The failure to have her sign an 8332 to release her claim to the exemption also cost him head-0f-household filing status and the ability to claim the child tax credit for the kids. Since Mr. and Mrs. Shenk divorced prior to 2009, more liberal rules could have been applied to substantiate his filing. He could have attached a signed copy of the separation agreement or divorce decree in lieu of Form 8332.
For divorces after 2008, the IRS will only accept a properly signed Form 8332 in cases where an ex-spouse improperly claims exemptions of minor children. This case is one of several that the courts have maintained that this form is the only acceptable remedy.
We have been urging attorneys, and separating parents, for years to get this form signed at the time of the divorce when all the other paperwork is being executed.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
A New Status Tool is Available on the IRS Website | Tax Tip of the Week | No. 200 May 29, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentWhere’s My Amended Return?
If you have filed an amended return (Form 1040x) and want to check on its status, the IRS now has a new tool to make that easier. You can now go to “Where’s My Amended Return?”
For years the Service has hosted a widely popular “Where’s My Refund?” status tool. We applaud them for adding this new feature.
Please note, however, it is still taking the IRS 8-12 weeks to process an amended return.
Let us know how you like it!
As always, give us a call with any questions or concerns you may have.
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
…until next week.
A Look Back at 2012 and a Preview of 2013 Tax Tip of the Week | No. 199 May 22, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentIRS Practice and Procedure Changes
In 2012, a $305 million IRS budget reduction resulted in $5 billion less in enforcement revenue.
On January 6, 2012, the IRS announced the results of its most recent measurement of annual losses to the U.S. Treasury due to taxpayer noncompliance, also known as the tax gap. This study reflected the IRS’ estimates of noncompliance for tax year 2006. The IRS’ conclusion: In only five years, the tax gap increased from $345 billion in 2001 to $450 billion in 2006. In 2012, the IRS implemented new programs and made changes to its procedures to try to close the tax gap. But budget cuts also meant that the IRS had to conduct compliance activity with $305 million less. The result was $5 billion less in revenue from enforcement activities.
Despite budget challenges, the IRS expanded some programs and improved others. Here are some of the most significant changes in IRS compliance that took place in 2012 – and a look ahead at what to expect in 2013.
Examinations
In 2012, the IRS continued to focus on correspondence (mail) examinations, which contributed to an overall audit coverage rate of slightly more than 1% for individual taxpayers. This rate dropped slightly in 2012 due to a reduction in examination personnel. The IRS will continue to focus on Schedule A deductions and tax credits in these examinations.
In 2012, the IRS started to focus closely on flow-through entities, and increased field examinations of partnerships and S corporations by 18.7%. In 2013, the IRS will focus on partnerships, looking closely at abusive transactions and underreported income, and on S corporations, looking closely at officer compensation and losses taken in excess of basis. IRS field agents will also continue to investigate small businesses, including e-commerce, for underreported income in 2013.
In 2012, the IRS emphasized accuracy-related penalty assessments and held preparers responsible for return errors and omissions, especially in areas of rental property and deducting S corporation losses in excess of basis. This trend will continue in 2013.
Penalties
In 2012, the IRS continued to pursue penalties to deter noncompliance. Since 2005, accuracy-related penalties assessed against individual taxpayers have increased 757%. In 2013, the IRS will continue to press for accuracy-related penalties in CP2000 underreported adjustments and audits.
For 2011 individual returns, the IRS provided a six-month grace period for unemployed and self-employed taxpayers who experienced a significant reduction in income. For certain taxpayers who filed Form 1127-A, this grace period allowed an extension of time to pay, without penalty, until Oct. 15, 2012. The IRS has not extended this provision for 2012 returns.
In 2012, the Treasury Inspector General for Tax Administration (TIGTA) criticized the IRS about what TIGTA described as a lack of uniformity in applying penalty abatement, and specifically criticized the IRS for not facilitating access to the first-time abatement relief option for failure to file, failure to pay, and failure to deposit penalties. First-time abatement is an administrative waiver that many taxpayers qualify for, but that the IRS does not readily publicize and that practitioners often don’t understand or request. In 2013, look for more pressure on the IRS to provide a form to simplify the process of requesting all types of penalty abatement.
Collection
In 2012, the IRS instituted additional Fresh Start initiatives to help struggling taxpayers pay their taxes. As part of these initiatives, the IRS relaxed streamlined installment agreement rules for individuals by increasing the threshold from $25,000 to $50,000, and the time to pay from 60 months to 72 months. The IRS also increased the qualifying amount for business trust fund express installment agreements from $10,000 to $25,000 to help businesses pay employment taxes and avoid the filing of a federal tax lien.
In 2012, the IRS made significant changes to its offer in compromise (OIC) program terms to provide more access to the program. The IRS revised the future income calculation and made changes to allow taxpayers more expenses in determining the offer amount. In 2012, these changes allowed many more taxpayers to qualify for and receive an OIC.
Installment agreement and OIC changes in 2012 were part of a multiyear effort by the IRS to help struggling taxpayers with better payment alternatives. In 2013, we will likely continue to see a kinder, gentler IRS in regard to payment alternatives.
IRS Matching Programs
2012 was a breakthrough year for IRS automated matching programs. In 2012, it’s likely that the IRS exceeded the 4.7 million individual CP2000 (underreported) notices that it sent in 2011. In 2012, this was the only major IRS compliance program that generated increased enforcement revenue over 2011. However, the IRS was not limited to information matching on individual returns.
In 2012, the IRS initiated a business information-matching program and a Form 1099-K matching program. The IRS sent new notices in late 2012 questioning businesses on the accuracy of their returns, based on information statements filed under business employer identification numbers (EINs). The IRS also matched Forms 1099-K to business returns and sent inquiries to taxpayers with potential discrepancies, requesting explanations for possible unreported income.
Editor’s Note: We are seeing a huge increase in correspondence audits in our office. Two key things to remember: most of the notices are incorrect and most importantly bring the notice to us quickly!
The IRS may get more aggressive, but they have to play by the rules. We are here to make sure the rules work for you.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
Another New Requirement is Coming…..Tax Tip of the Week | No. 198 May 15, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentIRS to Require EIN Holders to Provide Updated Info
The Internal Revenue Service has issued final regulations requiring any person who has been assigned an Employer Identification Number to provide updated information to the IRS.
The regulations affect people and businesses with EINs and are aimed at enhancing the IRS’s ability to maintain accurate information about persons who have been assigned EINs. The regulations are expected to take effect in 2014.
The final regulations require any person assigned an EIN to provide updated information to the IRS in the manner and frequency prescribed by forms, instructions or other appropriate guidance.
The IRS noted in the regulations that the collection of this information is necessary to allow the IRS to gather correct application information with respect to persons who have EINs. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.
“Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law,” said the regulations. Generally, tax returns and tax return information are confidential, as required by Section 6103 of the Tax Code.
The Treasury Department and the IRS originally published a notice of proposed rulemaking in the Federal Register, on March 14, 2012, requiring persons issued EINs to provide updated application information to the IRS. The IRS did not receive any requests for a public hearing, but several written comments were received. After considering all the comments, the proposed regulations were adopted without amendment.
Two commentators objected to the increased burden on entities resulting from the updating requirement and questioned the necessity of the requirement, and two suggested that the estimated annual average burden of 15 minutes provided in the Paperwork Reduction Act section of the proposed regulations underestimated the actual burden to entities and their agents. One commentator also argued that this rule is “material” because the related costs could reach over $100,000,000.
The Treasury and the IRS considered the objections, but concluded that updating the application information was necessary for effective tax administration. They noted that some EIN applicants continue to list individuals temporarily authorized to act on behalf of EIN applicants (sometimes referred to as “nominees”) as principal officers, general partners, grantors, owners, and trustors on EIN applications. “The listing of nominees or other individuals who are no longer associated with the entity prevents the IRS from gathering and maintaining correct and current information with respect to the responsible party for the EIN applicant,” said the IRS and the Treasury. “The requirement in the final regulations to provide updated application information will allow the IRS to ascertain the true responsible party for persons who have an EIN. This knowledge will prevent unnecessary delays by allowing the IRS to contact the correct persons when resolving a tax matter related to a business with an EIN. In addition, this information will help the IRS combat schemes that abuse the tax system through the use of nominees, which results in the concealing of the true responsible party for entities that hide assets and income.”
The Treasury and the IRS also concluded that the costs related to this rule are not “material.” Any associated burden on entities resulting from this requirement would be minimal, and the costs and burden would be outweighed by the benefits to tax administration. They argued that an entity with an EIN would always know the identity of its appropriate responsible party, which is generally defined as the individual with the authority to control, manage or direct the entity and the disposition of its funds and assets. The updating requirement in the final regulations requires entities to keep the IRS informed of the identity of the responsible party.
Editor’s Note: At this time we do not know who this effects or how the reporting is to be filed. We will be watching this closely and keep you posted.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
What the IRS Wants You to Know | Tax Tip of the Week | No. 195 April 24, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentDon’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.
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 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 www.irs.gov. Click on “phishing” on the home page.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
Thank You! | Tax Tip of the Week | No. 194 April 17, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentThe Week After Tax Season
Aaaah……The week after tax season (and the first full weekend home in two and half months) is the best week in a tax accountant’s life!
We met a lot of new clients this year because of referrals from existing clients, and readers of our Tax Tip of the Week. Thank you! A referral is the best compliment we can ever receive.
Even though tax season is over—we will continue our Tax Tip of the Week mailing for the rest of the year. We will keep you updated on the constant changes as well as spotlighting specific tax planning ideas.
If there are any special tax topics you would like us to cover, just send us an email or give us a call.
Again, thank you for making this one of most rewarding tax seasons yet.
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
…until next week.
IRS Proposes Truncated Taxpayer Identification Numbers to Curb Identity Theft | Tax Tip of the Week | No. 192 April 3, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentIdentity Theft Update
The Internal Revenue Service has issued proposed regulations to create a new taxpayer identification number known as the IRS Truncated Taxpayer Identification Number, or TTIN, that can be used instead of a Social Security number, in response to the growing problem of identity theft related tax fraud.
The TTIN would provide an alternative to using a Social Security number (SSN), Individual Taxpayer Identification Number (ITIN), or IRS Adoption Taxpayer Identification Number (ATIN). The filer of certain information returns would be able to use a TTIN on the corresponding payee statements to identify the individual being furnished a statement. The TTIN would display only the last four digits of an individual’s identifying number and is shown in the format XXX-XX-1234 or ***-**-1234.
The IRS has been struggling to curb identity theft. From 2008 through the middle of 2012, the IRS identified more than 600,000 taxpayers who have been affected by identity theft. Last tax season, the IRS added filters to its system to check for signs of identity theft, stop suspicious tax returns and contact the taxpayer before the return is processed, but that in turn led to delayed tax refunds for millions of taxpayers. The IRS has also enhanced the use of Identity Protection Personal Identification Numbers for identity theft victims.
In 2011 the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves, according to the IRS Advisory Council. Through mid-April 2012, the IRS had stopped over 325,000 questionable returns with $1.75 billion in claimed refunds using filters specifically targeting refund fraud.
However, the impact of identity theft on tax administration is significantly greater than the amount the IRS detects and prevents, according to the Treasury Inspector General for Tax Administration. TIGTA’s analysis of tax returns using characteristics of IRS-confirmed identity theft has identified approximately 1.5 million tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. TIGTA estimates that the IRS could potentially issue $21 billion in fraudulent tax refunds over the next five years as a result of identity theft.
The IRS’s proposed regulations would affect the filers of certain information returns who will be permitted to identify an individual payee by use of a TTIN on the payee statement furnished to the individual, and those individuals who receive payee statements containing a TTIN. The TTIN can be used in payee statements on 1099, 1098 and 5498 series forms, except for the 1098-C. The IRS has already begun testing the use of the TTIN under a 2011 pilot program.
We will keep you posted if this becomes a final regulation.
As always, give us a call with any questions or concerns you may have.
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
…until next week.
Taxpayers Don’t Comply With Reporting Requirements for Noncash Charitable Contributions | Tax Tip of the Week | No. 191 March 27, 2013
Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a commentAre You in Compliance?
About 60% of taxpayers who claim large-dollar noncash charitable contributions on their returns may not be complying with Federal reporting requirements, according to a new report by the Treasury Inspector General for Tax Administration (TIGTA).
TIGTA’s report found that the IRS is not ensuring that taxpayers are complying with reporting requirements for claiming noncash charitable contributions. An estimated 273,000 taxpayers claimed about $3.8 billion in potentially erroneous noncash charitable contributions in Tax Year 2010, which resulted in an estimated $1.1 billion reduction in tax.
“Taxpayers can generally deduct noncash charitable contributions made to qualifying organizations during the tax year on their Federal tax returns,” said J. Russell George, Treasury Inspector General for Tax Administration. “However, taxpayers who do not comply with the reporting requirements for noncash contributions could be incorrectly reducing their tax liabilities and receiving tax refunds to which they are not entitled,” he added.
Taxpayers who donate motor vehicles must attach a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to their tax returns. However, the IRS is still not effectively identifying taxpayers who are not complying with reporting requirements for donations of motor vehicles.
This is an easy target for the IRS to take aim—make sure you have your records!
As always, give us a call with any questions or concerns you may have.
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
…until next week.
