West Side Warrior Blog

Closing Deadline Extended for First-Time Homebuyer Credit

2010-07-16T08:02:00.002-06:00

The closing deadline for the First-Time Homebuyer Credit was recently extended to September 30, 2010. This does not extend the date to have entered into a binding contract on the purchase of a principal residence. You are still required to have entered into a binding contract on or before April 30, 2010.

From irs.gov, here are five facts from the IRS about the First-Time Homebuyer Credit and how to claim it.

If you entered into a binding contract on or before April 30, 2010 to buy a principal residence located in the United States you must close on the home on or before September 30, 2010.
To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
To be considered a long-time resident homebuyer, your settlement date must be after November 6, 2009 and you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased.
The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
To claim the credit you must file a paper return and attach Form 5405, First Time Homebuyer Credit, along with all required documentation, including a copy of the binding contract. New homebuyers must attach a copy of the properly executed settlement statement used to complete the purchase. Long-time residents are encouraged to attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statements, property tax records or homeowner’s insurance records.

http://www.irs.gov/newsroom/article/0,,id=225079,00.html

Warrior Accounting July Newsletter Available

2010-07-13T07:00:00.003-06:00

Our July Newsletter is available at http://www.warrioracs.com/newsletter.php . Features and tips include:

Saving for College with 529 Plans
Hurricane Season: Safeguard Your Tax Records
Affordable Care Act Tax Provisions
Tax Credits for Home Improvements
Do You Need to pay Estimated Taxes
Getting Married? Filing Status Considerations
Coverdell Education Savings Accounts
Deducting Your Home Office
Don't Panic! Eight Things to Know If You Receive an IRS Notice
Hiring Summer Employees? QuickBooks Can Track Their Time

2nd Quarter 2010 Federal Tax Developments

2010-07-07T11:02:00.003-06:00

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 (courtesy of RIA Newsstand).

Deadline extended for closing home purchase to qualify for homebuyer credit. Relief has been provided to taxpayers who couldn't meet a key June 30, 2010, closing date for qualifying for the homebuyer credit. As a general rule, both the regular first-time homebuyer credit of $8,000 and the reduced credit of $6,500 for long-term residents generally expired for homes purchased after Apr. 30, 2010. However, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit could be claimed if the purchase closed before July 1, 2010. Under the relief measure, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit may be claimed if the purchase is closed before Oct. 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.

Guidance addresses tax breaks for hiring new employees. Employers are exempted from paying the employer 6.2% share of Social Security (i.e., OASDI) employment taxes on wages paid in 2010 to newly hired qualified individuals. These are workers who: (1) begin employment with the employer after Feb. 3, 2010 and before Jan. 1, 2011, (2) certify by signed affidavit, under penalties of perjury, that they haven't been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer; (3) do not replace other employees of the employer (unless those employees left voluntarily or for cause), and (4) aren't related to the employer under special definitions. The payroll tax relief applies only for wages paid from Mar. 19, 2010 through Dec. 31, 2010.

Employers may qualify for an up-to-$1,000 tax credit for retaining qualified individuals. The workers must be employed by the employer for a period of not less than 52 consecutive weeks, and their wages for such employment during the last 26 weeks of the period must equal at least 80% of the wages for the first 26 weeks of the period.

The IRS has issued guidance on these tax breaks in the form of frequently asked questions. They carry valuable information on subjects such as the scope of the exemption, how it interacts with other tax breaks, and when an employer must receive the employee's certification of former unemployment status. For example, the IRS explains that the exemption and credit can be claimed for a new employee replacing a downsized employee.

Detailed guidance released on new small business health care credit. The IRS has issued detailed guidance on the small employer health insurance credit created by the recently-enacted health reform legislation. Under the new law, effective for tax years beginning after Dec. 31, 2009, an eligible small employer (ESE) may claim a tax credit for nonelective contributions to purchase health insurance for its employees. An ESE is an employer with no more than 25 full-time equivalent employees (FTEs) employed during its tax year, and whose employees have annual full-time equivalent wages that average no more than $50,000. However, the full credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000. The new guidance adopts a liberal approach to the new law's requirements, including three alternative methods for figuring total hours of service (important for determining how may FTEs an employer has), and also explains how small employers claim the credit if their State provides a credit or subsidy for employee health coverage. The IRS has released a state-by-state table of average health insurance premiums for the small group market for the 2010 tax year. The table is needed to calculate the credit for this year.

Guidance issued on new under-age-27 rule for health coverage of children. The IRS has issued guidance on the tax treatment of health coverage for children under age 27 under the new health reform law. The new under-age-27 rule, which went into effect March 30, 2010, applies broadly to employer-provided coverage or reimbursements, cafeteria plans, flexible spending arrangements (FSAs), health reimbursement arrangements (HRAs), voluntary employees' beneficiary associations (VEBAs), and the above-the-line deduction for a self-employed individual's medical care insurance costs.

Availability of FICA exception for medical residents to be resolved. The Supreme Court has agreed to review a 2009 decision of the Court of Appeals for the Eighth Circuit, which upheld the validity of regulations that generally prevent medical residents from qualifying for the FICA student exception. Under these regulations, an employee includes a medical resident who works 40 hours or more for a school, college or university is not eligible for the student exception. The Supreme Court will now decide their validity. Its decision will have important ramifications for the many teaching hospitals and their residents.

States address estate planning uncertainty. As of now, there is no estate or generation-skipping transfer (GST) tax for individuals who die this year. There are issues as to how formula clauses in wills and trusts using estate or GST tax terms (e.g., “the applicable exclusion amount,” or “the marital deduction”) will be construed, if the decedent dies in 2010. Several states have addressed this situation by enacting laws providing a special rule of construction under which formula clauses that refer to certain estate and GST tax terms generally will be construed as referring to the federal estate tax and GST tax laws which applied to estates of decedents dying on Dec. 31, 2009. These statutes could impact the amount that will pass under one's will to a person's spouse and children.

Deadline extended for retirement plans in federally declared disaster areas in eight States. The IRS has administratively extended to July 30, 2010, the April 30, 2010, deadline for restating affected pre-approved defined contribution plans and, if applicable, for submitting determination letters to the IRS, and the Code Sec. 401(b) remedial amendment period for these retirement plans. The relief applies to sponsors of defined contribution plans that were affected by the storms and other severe weather in counties in Alabama, Connecticut, Massachusetts, Mississippi, New Jersey, Rhode Island, Tennessee and West Virginia that were federally declared disaster areas in the period from March 1 through May 31, 2010.

Therapeutic Discovery Project Program implemented. The IRS has established the guidelines for applying for the new Therapeutic Discovery Project Program created by the recently enacted health reform legislation. The program will provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support good jobs and increase U.S. competitiveness. Small firms may apply for certification for tax credits or grants under the program on Form 8942, which must be postmarked no later than July 21, 2010.

Temporary regulations fill in statutory gaps on new indoor tanning tax. The IRS has issued temporary regulations on the health reform's legislation's new 10% excise tax on indoor tanning services provided on or after July 1, 2010. The regs address practical considerations that may not have been contemplated when the law was drafted. For example, they addresses prepayments for tanning services and services provided as part of a gym membership.

Warrior Accounting June Newsletter Available

2010-06-10T06:14:00.003-06:00

Our June Newsletter is available at http://www.warrioracs.com/newsletter.php . Features and tips include:

Summer Travel Tax Deductions
Cut Taxes on the Sale of Your Home
Timing Mistakes That Cost Thousands of Dollars
Are Your Social Security Benefits Taxable
Getting the Right Amount of Tax Withheld
Tips on Tips
Generating Professional Reports with Quickbooks
Review Your Insurance Policies
Lower Your Utility Costs
Analyze Budget vs. Actuals
Tax Due Dates

2010 First Quarter Federal Tax Developments

2010-05-21T07:59:00.002-06:00

The first quarter of 2010 brought many tax developments from Congress, the IRS and the courts. The following are some of these important federal tax developments below.

Health care reform. In March, President Obama signed comprehensive health care reform legislation (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act). The health care reform package does not mandate employer-provided coverage but beginning in 2014 large employers that do not offer coverage will pay a penalty. Large employers that offer coverage but the coverage fails to meet minimum essential standards will also pay a penalty. Tax credits for small employers are available immediately for 2010 tax years. Individuals must obtain minimum essential coverage after 2013 unless they are treated as exempt; otherwise they will pay a penalty. Starting in 2013, the new law broadens the Medicare tax base for higher income taxpayers, including amounts paid on investment income, and, after 2017, imposes an excise tax on high-dollar health insurance plans.

HIRE Act. President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act in March, providing businesses with payroll tax relief, a worker retention tax credit and enhanced Code Sec. 179 expensing. Payroll tax forgiveness applies to wages paid to covered workers who are on the employer's payroll after March 18, 2010 and before January 1, 2011. The covered employee must begin employment after February 3, 2010 and before January 1, 2011. The HIRE Act also allows employers to claim a worker retention credit for qualified employees.

Estate tax. The federal estate tax does not apply to decedents dying after December 31, 2009 and before January 1, 2011. Also, beginning in 2010, the stepped up basis at death rules are replaced with modified carryover basis at death rules applicable to estates holding assets with unrealized capital gains of more than $1.3 million. In December 2009, the House passed the Permanent Estate Tax Relief Act, which would permanently extend the top federal estate tax rate of 45 percent with a $3.5 million exclusion ($7 million for married couples). The Senate, however, has failed to take up the House bill. Some action this year is expected.

Individual tax rates. President Obama urged Congress in his Fiscal Year (FY) 2011 federal budget proposals to extend the individual marginal rate cuts enacted in 2001 but allow the top two individual marginal income tax rates to revert to 36 percent and 39.6 percent respectively after 2010. Higher income individuals also would pay 20 percent tax on qualified dividends and capital gains after 2010 under the president's proposal. Congress is expected to take up the individual marginal rate cuts and the dividend/capital gains tax rates over the summer of 2010.

Homebuyer credit. In January, the IRS issued an updated version of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. Because of documentation requirements for claiming the credit, taxpayers who claim the credit on their 2009 return must file a paper return and attach Form 5405 and a properly executed copy of a settlement statement used to complete the purchase. The IRS noted that settlement documents can vary from one location to another. For a newly constructed home where a settlement statement is unavailable, a copy of the certificate of occupancy generally will be accepted, the IRS advised.

Audit rates. IRS statistics released in March indicate that the examination rate for individual taxpayers between FY 2008 and FY 2009 remained generally static at an overall audit rate of one percent for individuals. The audit rate was 1.86 percent for taxpayers with adjusted gross incomes (AGIs) between $200,000 and $500,000 and 5.35 percent for taxpayers with AGI between $1 million and $5 million.

Maximum fair market values. The IRS released in January the maximum fair market values (FMVs) for business automobiles, trucks and vans first placed into service in 2010 and for which the vehicle cents-per-mile rule and the fleet-average valuation rule may apply. The maximum FMVs for use of the vehicle cents-per-mile valuation rule in 2010 are $15,300 for a passenger automobile and $16,000 for a truck or van, which includes automobiles built on a truck chassis, such as minivans and sport-utility vehicles (SUVs) built on a truck chassis.

Vehicle depreciation. Depreciation limits for business automobiles, trucks and vans first placed in service in 2010 as well as the annual income inclusion amounts for vehicles first leased in 2010 were released by the IRS in February. The maximum depreciation limits for passenger automobiles first placed in service during the 2010 calendar year are $3,060 for the first tax year; $4,900 for the second tax year; $2,950 for the third tax year; and $1,775 for each tax year thereafter. The amounts for trucks and vans first placed in service during the 2010 calendar year are $3,160 for the first tax year; $5,100 for the second tax year; $3,050 for the third tax year; and $1,875 for each tax year thereafter. If Congress decides to extend bonus depreciation for another year into 2010, first year amount will increase by $8,000, as was the case in 2009.

Uncertain tax positions. In February, the IRS announced a controversial proposal to require certain businesses to report directly on their annual income tax returns any uncertain tax positions determined under financial accounting standards. The IRS is developing a new schedule to implement the reporting requirement. The new reporting requirement will not take effect immediately and will not apply to tax returns filed in 2010 for the 2009 tax year.

409A correction program. Because of the complex and detailed requirements for plans to comply with Code Sec. 409A and the severe consequences for violations, employers urged the IRS to develop a document correction program. In January, the IRS announced a document correction program for Code Sec. 409A nonqualified deferred compensation plans. The program is a follow-up to the 409A correction program for operational failures.

Passive activity losses. After a number of court losses, IRS acquiesced "in result only" to a 2009 decision by the Court of Federal Claim's decision ( Thompson v. U.S. ) holding that a member's interest in a limited liability company taxed as a partnership is not a limited partnership interest for passive activity loss (PAL) purposes under Code Sec. 469. The IRS also indicated that it will issue more guidance and amend existing regulations.

Tax shelter penalties. The IRS has extended until June 1, 2010 its moratorium on collecting penalties under Code Sec. 6707A for undisclosed tax shelter transactions. Additionally, the agency also will continue to delay until June 1, 2010 filing new notices of federal tax lien for collecting amounts due solely to Code Sec. 6707A penalties. Both the House and Senate have passed bills ameliorating the penalty for small businesses.

Retirement plan payments. A taxpayer who received early distributions from two individual retirement annuities was liable for the Code Sec. 72(t) 10 percent additional tax, the U.S. Tax Court held in February ( Prough v. Commissioner ). The taxpayer failed to establish the distributions met the substantially equal periodic payments exception. The Obama administration is reportedly studying the annuitization of retirement plan payments.

Housing allowances. The IRS issued its table of adjusted limitations in March on housing expenses for 2010, adding new foreign locations and slightly raising the housing allowance for most locations. Code Sec. 911 allows U.S. taxpayers living abroad to exclude their foreign earned income and housing costs from gross income. The Tax Increase Prevention and Reconciliation Act of 2005 allows the IRS to adjust the standard formula limitation for determining the amount of employer-paid housing excluded from foreign earned income, based on geographic differences in housing costs relative to housing costs in the U.S.

Like-kind exchanges. In March, the IRS unveiled a much-anticipated safe harbor for participants in multiple-party like-kind exchanges under Code Sec. 1031 that have experienced hardship because of the default of qualified intermediaries (QIs) during the economic downturn. The safe harbor for reporting gain or loss is available to taxpayers that initiated deferred like-kind exchanges but failed to complete the exchange due to a QI's default on its obligation to timely acquire and transfer replacement property when its assets are frozen in bankruptcy or receivership.

Royalties. In March, the Court of Appeals for the Second Circuit found that a taxpayer can deduct royalties paid to license trademarks for selling the products. The Second Circuit's decision is significant because it is the first to address the treatment of intellectual property royalties under the uniform capitalization rules of Code Sec. 263A.

Student FICA exception. In a major concession, the IRS agreed in March to accept claims that medical residents qualify under the student FICA exception and are entitled to refunds for FICA (Social Security) taxes. The new IRS policy, however, does not apply to current payments but only to tax periods ending before April 1, 2005. Generally, courts have held that medical residents were not subject to FICA taxes because their services were incident to and for the purpose of pursuing an educational course of study.

Return preparers. The IRS announced in January the results of a study of its oversight of tax return preparers. All paid signing preparers will be required to register with the IRS. Unenrolled preparers (practitioners who are not CPAs, attorneys, enrolled agents and, in some cases, licensed public accountants) will be required to successfully complete continuing education classes and competency testing.

Reproduced with permission from CCH’s Client Letter, published and copyrighted by CCH Incorporated, 2700 Lake Cook Road, Riverwoods, IL 60015.

Digital Copier A Digital Time-Bomb?

2010-05-14T06:12:00.006-06:00

If you have a digital copier, did you know that it probably contains a hard drive that has stored every image processed by the machine. CBS News recently did a report that everyone with a digital copier needs to watch:

http://www.cbsnews.com/stories/2010/04/19/eveningnews/main6412439.shtml

John Wooden quote on progress and change

2010-05-13T08:11:00.002-06:00

"All progress requires change. But not all change is progress." - John Wooden - the "Wizard of Westwood"

Quarterly W-2 Reporting?

2010-05-12T10:36:00.004-06:00

The President's 2011 Budget proposal would require quarterly W-2 reporting. The proposal states that the Administration will work with the States so that the overall reporting burden on employers is not increased.

This is only a proposal but, if this provision gets passed, I just can't wait to see how this is not going to increase the reporting burden on small business. Small businesses would have to report MORE payroll detail increasing the chances for error. Electronic reporting generally reduces error but there are still a lot of small businesses who do not report electronically.

http://www.whitehouse.gov/omb/budget/fy2011/assets/socsec.pdf

Warrior Accounting May Newsletter Available

2010-05-10T06:15:00.004-06:00

Our May Newsletter is available at http://www.warrioracs.com/newsletter.php . Features and tips include:

Household Employees and Withholding Taxes
Haven't Filed an Income Tax Return? What to Do
Hiring New Employees? New HIRE Tax Benefits
Small Business and Health Care
Looking for Status of Refund?
IRS Impersonation Schemes Flourish
The Post-Tax Blues: How to Accelerate Receivables
When to Review Your Life Insurance Coverage
A Slip of the Lip May Bring on a Tax Audit
Check Your Credit Report
Review Budget vs. Actuals
Make Withholding Adjustments
Tax Due Dates

2010-04-25T19:46:00.000-06:00

"You have achieved success if you have lived well, laughed often and loved much." - Author Unknown

Warrior Accounting April Newsletter Available

2010-04-10T07:12:00.004-06:00

Our April Newsletter is available at http://www.warrioracs.com/newsletter.php . Features and tips include:

Spring Cleaning: Tax Records You Can Throw Away
Beware of Tax Consequences of a Job Loss
Cash Management Tips for Small Business
Last Minute Tax Advice
Claiming the Child Tax Credit
Are You Eligible for a Tax Credit
Tax Incentives for Higher Education
Spring Cleaning: Personalize and Tidy Up Your Quickbooks Desktop
Review Your Retirement Plans
Inventory Your Non-Financial Assets
Review Budget vs Actuals
Schedule Estimated Tax Payments
Review Retirement Contributions

Tax Extension Misconception

2010-04-08T09:41:00.003-06:00

I still have many people ask me to file an extension since they don't have the money to pay their tax bill. Extensions give you extra time to file your return. An extension does NOT extend the time to pay your balance due. You will owe interest on any amount not paid by the April 15 deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date.

Three Ways To Pay Your Federal Income Tax

2010-04-07T08:01:00.002-06:00

IRS Tax Tip 2010-68

http://www.irs.gov/newsroom/article/0,,id=108508,00.html

People who owe taxes but can’t pay the full amount owed by the April deadline should still file their return on time and pay as much as they can to avoid penalties and interest. If you can’t pay the full amount, you should contact the IRS to ask about alternative payment options. Here are some of the alternative payment options you may want to consider:

Additional Time to Pay Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 30 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interestto self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on IRS.gov.
Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Consumer Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95.Do not add the convenience fee or flat fee to your tax payment.

The processing companies are:

Official Payments Corporation:
To pay by debit or credit card: 888-UPAY-TAX (888-872-9829),
www.officialpayments.com/fed

Link2Gov Corporation:
To pay by debit or credit card: 888-PAY-1040 (888-729-1040),
www.pay1040.com

RBS WorldPay, Inc.
To pay by debit or credit card: 888-9PAY-TAX (888-972-9829),
www.payUSAtax.com

For more information about filing and paying your taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).

Explore. Dream. Discover.

2010-03-19T17:22:00.002-06:00

"Twenty years from now you will be more disappointed by the things that you didn't do than the ones you did do. So, throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sail. Explore. Dream. Discover." - Mark Twain

Warrior Accounting March Newsletter Available

2010-03-10T05:43:00.003-07:00

Our March Newsletter is available at http://www.warrioracs.com/newsletter.php . Features and tips include:

Homeowner Records: What To Keep and How Long
Getting The Most From Auto Expenses
How Children Lower Taxes
You Can Still Make a 2009 IRA Contribution
Itemizers Can Deduct Certain Taxes
Estimated Tax Payments - Q&A
Two New Tax Credits to Lower Your Tax Bill
Getting Quickbooks Ready for Tax Preparation
College Planning
Mortgage Review
Required Minimum Distribution
Review Budget vs. Actuals
Estimated Tax Payments

IRS outlines steps for those with financial problems

2010-03-09T14:40:00.003-07:00

The Internal Revenue Service announced several additional steps it is taking this tax season to help people having difficulties meeting their tax obligations because of unemployment or other financial problems. - http://www.irs.gov/newsroom/article/0,,id=220001,00.html

Sling And A Stone-3 new original songs posted

2010-02-21T16:45:00.001-07:00

Check out Sling And A Stone's - www.slingandastone.net - 3 new original songs posted in the music section of their website. My personal favorite, Traveler, ROCKS!!! Check it out!

Tax Q - Can I deduct home improvements?

2010-02-17T08:00:00.003-07:00

Home improvements to your personal residence are generally not tax deductible. What home improvements do is increase the cost basis of your personal residence. If you sold your home, a higher cost basis would reduce any gain on the sale. The gain on the sale may not be taxable if you qualify for the home sale exclusion.

Tax Tales-Don't confuse me with my sister

2010-02-14T08:40:00.002-07:00

Client was in the other day and reminded us not to confuse her sister's tax return with her tax return.

Well, figuring:

They don't even look alike,
Both have been clients for a few years,
We verify names, addresses, and social security numbers,
Client's review their return and sign efile authorizations before filing

It's pretty safe to say we won't make that mistake.

Tax Tip-Homebuyer Tax Credit-purchase from relative

2010-02-13T10:37:00.004-07:00

A personal residence purchased from a relative is NOT eligible for the Homebuyer Tax Credit. In addition, a related person includes an individual related to the spouse of the person buying the home.

Tax Tales-Age limit to filing tax return?

2010-02-13T07:30:00.003-07:00

Client recently had heard that taxpayers don't have to file if they are over age 55.

Um, that would be FALSE!

Tax Tip - Didn't receive your W-2?

2010-02-10T10:48:00.001-07:00

Issue Number: IRS Tax Tip 2010-28

Four Steps to Follow If You Are Missing a W-2

Getting ready to file your tax return? Make sure you have all your documents before you start. You should receive a Form W-2, Wage and Tax Statement from each of your employers. Employers have until February 1, 2010 to send you a 2009 Form W-2 earnings statement. If you haven’t received your W-2, follow these four steps:

1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address. After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS If you do not receive your W-2 by February 16th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:

Employer’s name, address, city and state, including zip code and phone number
Dates of employment
An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2009. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return You still must file your tax return or request an extension to file by April 15, even if you do not receive your Form W-2. If you have not received your Form W-2 by April 15th, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

4. File a Form 1040X On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IRS Tax Tip-Five Tax Changes for 2009

2010-02-03T12:06:00.002-07:00

From the IRS Newsroom:

Issue Number: IRS Tax Tip 2010-23

As you get ready to prepare your 2009 tax return, the Internal Revenue Service wants to make sure you have all the details about tax law changes that may impact your tax return.

Here are the top five changes that may show up on your 2009 return.

1. The American Recovery and Reinvestment Act

ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who received unemployment compensation.

2. IRA Deduction Expanded

You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income is less than $65,000 or $109,000 if you are married filing a joint return.

3. Standard Deduction Increased for Most Taxpayers

The 2009 basic standard deductions all increased. They are:

$11,400 for married couples filing a joint return and qualifying widows and widowers
$5,700 for singles and married individuals filing separate returns
$8,350 for heads of household

Taxpayers can now claim an additional standard deduction based on the state or local sales or excise taxes paid on the purchase of most new motor vehicles purchased after February 16, 2009. You can also increase your standard deduction by the state or local real estate taxes paid during the year or net disaster losses suffered from a federally declared disaster.

4. 2009 Standard Mileage Rates

The standard mileage rates changed for 2009. The standard mileage rates for business use of a vehicle:

55 cents per mile

The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:

24 cents per mile

The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents per mile.

5. Kiddie Tax Change

The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009.

For more information about these and other changes for tax year 2009, visit IRS.gov.

Quick Tip-LOOK AT YOUR PAYSTUB!

2010-01-26T16:57:00.002-07:00

An employee of a client came in recently and complained that her W-2 was incorrect. Her gross wages were $13,000 with only $29 federal income tax withheld. We checked her W-4 and she claimed married with 5 withholding allowances. The W-2 and her withholding was correct (the higher the number of withholding allowances, the less income tax that is withheld from a paycheck).

We see this issue a lot. What we find is that a majority of people NEVER look at their paystub. A very simple solution is to LOOK AT YOUR PAYSTUB and compare the wages on your paystub to the income tax withheld. If your average tax rate on your tax return is 15%, and your income tax withholding on your paycheck is only 10% of your wages, you may have a balance due when you prepare your income tax return.

Donations to Haiti - Ten Facts

2010-01-26T07:51:00.003-07:00

The IRS has a Special Edition Tax Tip (2010-01) regarding claiming donations made to Haiti.

If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.

A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
The new law applies only to cash contributions.
Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
You must itemize your deductions in order to claim these donations on your tax return.
You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.

For more information see IRS Publication 526, Charitable Contributions andPublication 3833 , Disaster Relief: Providing Assistance through Charitable Organizations. To determine if an organization is a qualified charity visit IRS.gov, keyword "Search for Charities". Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.

http://www.irs.gov/newsroom/article/0,,id=218679,00.html

Homebuyer Tax Credit-processing delay

2010-01-23T10:51:00.002-07:00

For taxpayers taking the homebuyer tax credit on your 2009 tax returns, the IRS won't start processing your return until mid-February as IRS computers are being reprogrammed to handle the rule changes. In addition, returns claiming this credit cannot be efiled due to the attachment requirements. As paper returns require extra processing time, don't expect your refund right away.

Required Minimum Distributions (RMD)-Multiple IRAs

2010-01-23T09:44:00.004-07:00

Q. If I have more than one IRA, can I calculate in total and take my RMD from one account, or do you have to take RMD's from each account?

A. If a participant has more than one IRA, determine a separate RMD for each IRA based on designated beneficiaries of each IRA. However, the total RMD for all IRAs can be taken from any one or more of the IRAs

2009 Tax-Cancellation of Debt

2010-01-21T23:42:00.004-07:00

Generally, cancellation of debt is taxable income. There are exceptions such as bankruptcy, insolvency, or when the cancelled debt is qualified principal residence indebtedness. If no exceptions apply, cancelled debt is included in income in the year the debt is cancelled.

2009 Tax-Child and Dependent Care Expenses

2010-01-21T08:17:00.002-07:00

The child and dependent care tax credit is a tax credit of 20-35% (percentage based on a scale depending on your adjusted gross income (AGI)) of $3,000 ($6,000 for two or more qualifying persons) of qualified childcare expenses.

Note: expenses must be for care provided so the taxpayer and spouse can work or actively look for work. The credit is tied to earned income so no credit is allowed if there is no earned income for the taxpayer and spouse.

If you are under an employer plan and have dependent care benefits reported on box 10 of your W-2, the amount of benefits that can be excluded from income is the smallest of:

$5,000 ($2,500 if Married Filing Separately and not considered unmarried)
Qualified expenses incurred in 2009. It does not matter when the expenses were paid
Taxpayer's earned income
Spouse's earned income

Need a Transcript of a Past Tax Return?

2010-01-20T09:25:00.003-07:00

How to Obtain a Transcript of Your Past Tax Information

IRS Tax Tip 2010-13

Taxpayers who need their past tax return information can obtain it from the IRS. Here are nine things to know if you need copies of your federal tax return information.

1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.

2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.

3. 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 you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.

4. A tax account 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.

5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.

6. To request a tax return transcript through the mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. 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.

7. You should receive your tax return transcript within 10 working days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript.

8. If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.

9. Visit the IRS Web site, IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

http://www.irs.gov/newsroom/article/0,,id=105370,00.html

2009 Tax-Health Savings Account (HSA) Limitations

2010-01-20T05:56:00.002-07:00

The 2009 Health Savings Account Limitations:

Self-only, under age 55: $3,000
Self-only, age 55 or older: $4,000
Family, under age 55: 5,950
Family, age 55 or older: $6,950

The minimum annual deductible:

Self-only coverage: $1,150
Family coverage: $2,300

The maximum annual deductible and out-of-pocket expense limit:

Self-only coverage: $5,800
Family coverage: $11,600

Existing Homeowner Tax Credit-Effective Dates

2010-01-18T06:15:00.002-07:00

The effective dates for the $6,500 existing homeowner tax credit are for the purchase of a principal residence after November 6th, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

2009 Tax-Kiddie Tax

2010-01-18T05:46:00.004-07:00

For 2009, the Kiddie Tax applies when a child's unearned income (generally investment income such as interest, dividends, capital gains) is over $1,900 and is taxed at the parents' marginal rate if that rate is higher than the child's. A child can file a separate return or elect to report income on the parents' return (Form 8814).

Tax Treatment of Child's Income (For dependents with no earned income):

On Child's Return:

First $950: Not taxed
Second $950: Taxed at 10% (0% for capital gains and qualified dividends)
Amounts over $1,900: taxed at parents' rate for ordinary income and/or capital gains.

On Parent's Return:

First $950: Not taxed
Second $950: Taxed at 10%
Amounts over $1,900: Added to parents' income as ordinary income, qualified dividends, or capital gain distributions.

2009 Tax-Filing Requirements

2010-01-15T18:10:00.003-07:00

For 2009, you generally need to file a tax return if your gross income is at least:

Single, under age 65: $9,350

Single, age 65 or older: $10,750

Head of Household, under age 65: $12,000

Head of Household, age 65 or older: $13,400

Married Filing Jointly, both spouses under 65: $18,700

Married Filing Jointly, one spouse 65 or older: $19,800

Married Filing Jointly, both spouses 65 or older: $20,900

Married Filing Separately, any age: $3,650

Qualifying Widower, under age 65: $15,050

Qualifying Widower, age 65 or older: $16,150

If you are not required to file a return but had income tax withheld, you should file a return to get a refund. You may also want to file a return if you qualify for the making work pay credit, the earned income credit, the additional child tax credit, the refundable American Opportunity credit, the first-time homebuyer credit, the refundable credit for prior year minimum tax, or the health coverage tax credit.

Recapture of First Time Homebuyer Credit

2010-01-14T11:10:00.002-07:00

Q. If a taxpayer purchased a residence and received the $8,000 First Time Homebuyer Tax Credit, then sold the residence in the following year, would they have to pay back the tax credit?

A. Yes, there is a recapture rule. Recapture applies if the home is sold, or ceases to be a principal residence, within three years of the date of purchase. If this happens, the credit is treated as additional tax in the year sold or ceases to be a principal residence, not to exceed gain on disposition.

2009 Tax-Education Credit/Hope Credit

2010-01-14T07:03:00.002-07:00

The American Opportunity/Hope Credit modifies the existing Hope Credit for the 2009 and 2010 tax years.

The 2009 American Opportunity/Hope Tax Credit:

100% of the first $2,000 of qualified expenses paid (Hope Credit)
25% of the next $2,000 of qualified expenses paid (American Opportunity Credit)

Phase-out Ranges:

Married filing jointly phase-out range: $160,000 - $180,000
Single and Head of Household phase-out range: $80,000 - $90,000
Married Filing Separately: no credit is allowed

Notes:

Maximum benefit: $2,500 per student
Up to 40% of the American Opportunity Credit is refundable
Qualified expenses: tuition, fees, and course materials required for enrollment at an eligible institution.
Available for the first four years of education

2009 Tax-Child Tax Credit

2010-01-13T05:59:00.002-07:00

2009 Child Tax Credit is $1,000 per qualifying child, but there is also an adjusted gross income phaseout. The credit is reduced by $50 for each $1,000 of adjusted gross income above:

$110,000 if you file married filing jointly
$75,000 if you file single, head of household, or qualifying widower
$55,000 if you file married filing separately

Now, there is an Additional Child Tax Credit for taxpayers if any portion of the regular child tax credit was disallowed because the tax was reduced to zero before the entire credit was used (it does not apply if the child tax credit was reduced due to the AGI phaseout above). The Additional Child Tax Credit is the lesser of:

The disallowed portion of the regular child tax credit, or
15% of the taxpayer's earned income in excess of $3,000

2009 Tax-Standard Deduction

2010-01-12T07:38:00.002-07:00

2009 Standard Deduction for those who don't itemize deductions:

Single or Married Filing Separately (MFS): $5,700

Married Filing Jointly (MFJ) or Qualifying Widow (QW): $11,400

Head of Household (HOH): $8,350

Additional deduction if 65 or older, or blind:

MFJ, QW, or MFS: $1,100

Single or HOH: $1,400

Dependents: standard deduction is the greater of $950 or earned income plus $300, up to the regular standard deduction.

Property Tax: standard deduction is increased up to $500 ($1,000 for MFJ) for property tax paid by taxpayers who do not itemize deductions.

Sales Tax Paid On Purchase Of New Motor Vehicle: see http://bit.ly/9uDd4

2009 Tax-Personal Exemptions

2010-01-11T06:44:00.003-07:00

2009 Personal Exemptions:

Regular Exemption amount per person: $3,650

Exemption if AGI is above maximum phaseout amount: $2,433

2009 Tax-Standard Mileage Rates

2010-01-08T05:58:00.002-07:00

2009 Standard Mileage Rates:

Business: $0.55

Medical: $0.24

Moving: $0.24

Depreciation: $0.21

Charitable: $0.14

2009 Tax Changes-Sales Tax on New Vehicle

2010-01-07T07:57:00.003-07:00

Individuals who purchased a new motor vehicle after February 16, 2009, may be able to deduct any state or local sales or excise taxes on the purchase. The deduction is claimed on Schedule A (Form 1040) by taxpayers who are itemizing deductions and are not electing to deduct state and local general sales taxes. For taxpayers not itemizing deductions, these taxes increase the standard deduction.

2009 Tax Changes-Education Tax Credit

2010-01-06T05:34:00.002-07:00

Per IRS Publication 17 - American opportunity credit - This new education tax credit (a modification of the Hope credit) is available for 2009 and 2010. The maximum credit per student is $2,500 (100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses). The credit is available for the first 4 years of postsecondary education, and 40% of the credit is refundable for most taxpayers. The threshold at which this credit is reduced is higher than that for the Hope and lifetime learning credits. For 2009, the amount of your credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). You cannot claim a credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

2009 Tax Changes-Unemployment Compensation

2010-01-05T05:27:00.002-07:00

For 2009, individuals don't have to pay tax on unemployment compensation up to $2,400 per person; amounts over $2,400 are still taxable.

2009 Tax Changes-Cash for Clunkers

2010-01-04T06:24:00.001-07:00

A $3,500 or $4,500 voucher or payment made for such a voucher under the “cash for clunkers” program to buy or lease a new fuel-efficient automobile is not taxable for federal income tax purposes.

IRS Announces 2010 Standard Mileage Rates

2009-12-03T09:50:00.003-07:00

The Internal Revenue Service issued the following 2010 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes:

50 cents per mile for business miles driven
16.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

Homebuyer Tax Credit extended; bill includes e-filing mandate

2009-11-09T06:44:00.003-07:00

President Obama signed the extension of the First-Time Homebuyer Tax Credit to cover purchases of a principal residences to May 1, 2010. The credit was also expanded to existing homeowners. A $6,500 tax credit is available for purchases of a new principal residences by homeowners who have lived in their current principal residence five consecutive years out of the last eight years.

The bill also includes an efiling requirement by all tax preparers who prepare ten or more individual tax returns in a calendar year. This requirement is effective for returns prepared after December 31, 2010.

Microsoft Discontinues Accounting Software

2009-11-03T08:04:00.002-07:00

Microsoft Discontinues Accounting Software

Posted using ShareThis

Form an LLC for Free (aside from state fees)

2009-11-03T05:28:00.004-07:00

Through a Profit 501 tweet, I found a great site to help small business owners form an LLC (Limited Liability Company) for FREE - FormLLCDirect . From the FormLLC Direct website, FormLLCDirect is a 100% FREE service that was created by top corporate and tax attorneys who worked at some of the largest law firms in the country. The website helps you create your LLC Articles of Organization and obtain the LLC's Tax ID number. There is a fee for the LLC operating agreement but FormLLCDirect has negotiated a special discount for all FormLLCDirect users with MyLLCAgreement.com.

IRS simplifies transcript requests for mortgage applicants

2009-10-28T07:21:00.003-06:00

AccountingWEB posted an informative article regarding transcript requests for mortgage applicants - http://www.accountingweb.com/topic/tax/irs-simplifies-transcript-requests-mortgage-applicants

Why Not Have The IRS Calculate Taxes for You?

2009-10-23T14:51:00.002-06:00

The White House's agenda is getting a little scary:

Government-run health plan (an organization that also manages social security, medicare, medicaid, and the US Postal Service),
Trying to control the press (isolating Fox News),
Is having the IRS send taxpayers a tax form with amounts already filled in next on the agenda?

Per the NSAlert - October 23, 2009

Why Not Have IRS Calculate Taxes for You?

One of the Speakers at the CERCA conference on October 14 also addressed the idea of “simplicity,” which in this instance took the form of the IRS sending taxpayers a tax form with amounts already filled in. Ian Liddell Grainger, a member of the United Kingdom's Parliament, and chairman of the U.K. All Party Parliamentary Group on Taxation, vehemently opposed this idea, which is similar to the U.K. system in which the government calculates employees' taxes and employers withhold those amounts from employees' paychecks. He said the IRS system, in which individuals figure out their own taxes and submit them to the government voluntarily is far superior.

One of its many problems, Grainger said, is that taxpayers are unaware of the codes that revenue officials use to designate their tax liability and are afraid to challenge the government when they think their taxes are wrong. The assumption is that prepopulating tax returns reduces the compliance burden for individual taxpayers. “That's not really the case,” he said. “What it actually does is encourage the taxpayer to be absent from compliance activities—in other words, you are taking the taxpayer out of the loop.”

NSAlert readers may remember that Austan Goolsbee, the president's economic adviser, said in July that a tax reform commission is seriously considering this prepopulated return idea, but that the president was not close to proposing it yet. Grainger said he is hoping to meet with government officials to dissuade them from the idea.

Small Business Resources Worth Checking Out

2009-10-14T07:23:00.002-06:00

I ran across an interesting website this morning that might be worth checking out: Start, Run & Grow Your Business .

Also, for small business bookkeeping, you might want to check out Outright.com . It is a FREE online bookkeeping product. I am going to take a closer look at it when I get past this 10/15/09 extension deadline. From what I have seen so far, it looks like a great bookkeeping solution for small business, and it's FREE.

Quickbooks: Fraudulent Emails

2009-09-28T10:34:00.002-06:00

Intuit Security is investigating fraudulent emails that were sent to some customers that claimed to be from The Intuit Online Team. This was not sent by Intuit and is a Phishing Scam. More information is available at http://security.intuit.com/alerts/alert.php?a=5 .

Five Facts about the Home Office Deduction

2009-09-16T08:07:00.003-06:00

With technology making it easier than ever for people to operate a business out of their house, many taxpayers, enterpreneurs and small business people may be able to take a home office deduction when filing their 2009 federal tax return next year.

Here are five important things the IRS wants you to know about claiming the home office deduction.

Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

As your principal place of business, or
As a place to meet or deal with patients, clients or customers in the normal course of your business, or
In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business

For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Great Note Saving/Organizing App

2009-08-05T07:42:00.004-06:00

I've found a great answer to saving/organizing ALL (and I mean ALL) of my notes, research, web pages, business cards, sticky notes, etc. I've been use Evernote (http://www.evernote.com) for a couple of weeks now and am finding it extremely useful. Here is an explanation from their website - "Evernote allows you to easily capture information in any environment using whatever device or platform you find most convenient, and makes this information accessible and searchable at any time, from anywhere. Did we mention that it's free?...Capture what you like, find it when you want. Stop forgetting things. Capture everything now so you will be able to find it all later."

Personally, I've saved recipes, tax research articles, audio research articles, business cards, and my ongoing task list. If I need to something I've saved, I just do a search. For example, I recently came across a good teriyaki sauce recipe on a website so I "clipped" it to my Evernote account. A few days later, I needed the recipe again. I went to my Evernote account, searched teriyaki, and there was the recipe.

Tax Tip - Renewed Tax Breaks for 2008 and 2009

2009-02-05T15:20:00.002-07:00

The following tax breaks were renewed for the 2008 and 2009 tax years:

Deduction for state and local sales taxes on Form 1040 Schedule A
Educator expense deduction
Tuition and Fees deduction
Residential Energy-Efficient Property Credit was extended through 2016. This includes solar electric, solar water heating, fuel cell property, small wind energy, and geothermal heat pump property.

Per IRS TT-2009-24

1099 Tax Forms May Arrive Later For Many Investors

2009-01-31T22:20:00.004-07:00

Per an IRS News Release

IR-2009-11, Jan. 30, 2009

Many investors will receive their year-end tax statements later than in past years, but these forms are likely to be more accurate, according to the Internal Revenue Service.

A new law, enacted last fall, changed the deadline from Jan. 31 to Feb. 15, when brokers, including brokerage firms, mutual fund companies and barter exchanges, must furnish year-end Form 1099-B to their customers, Where a broker furnishes these forms by mail, this means that the forms must be mailed, not received by that date.

Delayed Tax Refunds

2009-01-30T21:24:00.003-07:00

Our tax software, ATX, reports that refunds may be delayed for those claiming the recovery rebate credit.

The IRS has announced that if the amount claimed does not match the amount that the IRS has on file, the return will go to the IRS error resolution system. The refund may be delayed by one deposit cycle (one week). For example, a deposit that the taxpayer is expecting on Friday, January 30, may not be made until Friday, February 6.

Tax Tip - Donation Valuation Guide

2009-01-16T07:56:00.002-07:00

A frequent request from clients is how to value items they've donated throughout the year. The Salvation Army provides a good link - click here to go to the Salvation Army's Valuation Guide .

Note: IRS does not send unsolicited emails

2009-01-12T08:05:00.004-07:00

Per IRS Tax Tips:

Be aware of e-mail scams that fraudulently use the IRS name or Logo as a lure. The goal of the scam is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft and steal your money.

The IRS does not send unsolicited e-mails about a person’s tax account or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.

If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site,

Do not reply.
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 Web site and entered confidential information, visit our Identity Theft page on IRS.gov.

You can help shut down these schemes and prevent others from beingvictimized. If you receive a suspicious e-mail that claims to come from the IRS, you can forward that e-mail to a special IRS mailbox, phishing@irs.gov The e-mail must be forwarded using special instructions at IRS.gov, or it loses the encoding needed to track it to its source. The IRS can use the information, URLs and links in the suspicious e-mails you forward to trace the hosting Web site and alert authorities to help shut down the fraudulent sites. After you forward the e-mail to us, delete the message.

FREE Online Personal Finance Software

2009-01-10T09:00:00.002-07:00

I've been looking around for the past few months for a inexpensive online personal finance software to replace my desktop version of Quicken. I found two FREE offers - Mint.com and Quicken Online . For me Mint.com is the best for my situation. Mint.com immediately pulls in your balances, purchases, stock trades, etc. to give you a complete picture of your finances. Mint.com connects securely with more than 7,000 US financial institutions, saving you hours of tedious data entry. Quicken Online also does the same thing. Here are the major differences that I have seen:

In Mint.com I can code a transaction to more than one category (split a transaction). At this time Quicken Online does support splitting a transaction. When I make a purchase at a grocery store, I generally buy more than just groceries. There are usually 2 or more categories involved on a shopping trip. I need to be able to split the transaction into multiple categories or it will completely throw off our family budget.
In Quicken Online, you can enter upcoming transactions which allows you to track a current balance rather than waiting for items to clear accounts. Mint.com doesn't currently offer entering upcoming transactions. I keep a separate check register so I always know my checking account balance so this isn't as critical for me.

So, if you are looking to set up a budget to track your spending habits, here are two FREE options.

Colorado not mailing 2009 estimated payment booklet

2009-01-09T06:21:00.003-07:00

For taxpayers who make estimated tax payments, the Colorado Department of Revenue announced that it will not mail 2009 individual estimated income tax payment forms. Instead, taxpayers may download the 2009 104EP forms from the Taxation Estimated Payments Web page. Another option is online estimated payments by credit card or echeck at www.Colorado.gov/paytax. The state will save more than $50,000 by eliminating the printing and mailing costs associated with these estimated income tax payment forms.

FREE Quickbook Pro 2009 - Monday, 12/22/08

2008-12-21T19:33:00.005-07:00

I've learned of a possible one-day promotion at Staples on Monday, December 22nd, where you can obtain Quickbooks Pro 2009 for free. Here is how it possibly works:

The regular price at Staples is $199.99.
The customer will receive $40 in instant savings.
The customer at the store will receive a $159.99 mail-in rebate form.
When the customer mails in the rebate form they will receive, some weeks later, a rebate for $159.99.
Once the customer obtains the rebate, their base costs are zero: $199.99 - $40.00 - $159.99 = $0.
The buyer may still be responsible for sales tax at the time of purchase; sales tax is not free.

There are numerous other blogs reporting this offer:

http://techspheres.wordpress.com/2008/12/19/free-quickbooks-pro-monday-only/

http://blog.bftcpa.com/2008/12/free-quickbooks-pro-at-staples-on-monday-12222008.html

http://www.foltzwerk.com/2008/12/19/monday-only-free-quickbooks-at-staples/

Now, I say possibly as I have searched Staples and Intuit websites and haven't found anything to substantiate the offer. I've read some posts from other Quickbooks Pro Advisors who have stated that they have called Staples stores in their area and it appears some stores have just learned of the promotion today (Sunday).

If it turns out to be a legitimate promotion, it is a great deal.

IRS Lien Relief for Refi's and Sales

2008-12-19T08:33:00.002-07:00

Taxpayers looking to refinance or sell their home, but have federal tax lien filed against them now have an option for lien relief. Per the IRS article - "If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances." To read the entire article, here is link:

http://www.irs.gov/newsroom/article/0,,id=201343,00.html

Recordkeeping - How long do I need to keep...

2008-12-16T06:36:00.006-07:00

One of the most frequently asked questions I get is how long to keep certain tax documents. My answer is generally, it depends. Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time. However, if the IRS believes you have significantly underreported your income (by 25 percent or more), or believes there may be indication of fraud, it may go back six years in an audit. To be safe, here is a Record Retention Guide link that can help you determine what to keep and what to throw. One caution - don't just throw old records in the trash. With identity threat being a serious threat in today's world, invest in a shredder.

Tax Savings Checklist

2008-12-16T06:17:00.002-07:00

With 2008 is winding down, you only have a couple of weeks left to make moves to trim your 2008 tax bill. We've provided a checklist of possible tax savings strategies on our Warrior Accounting website.

2009 Standard Mileage Rates

2008-11-24T08:54:00.002-07:00

The IRS announced the following 2009 standard mileage rates to calculate the deductible costs of operating a car, van, pickup, or panel truck for business, charitable, medical or moving purposes.

55 cents per mile for business miles driven
24 cents per mile for medical or moving purposes
14 cents per mile in service of charitable organizations

Taxpayers have the option of calculating the actual costs of using a vehicle rather than using the standard mileage rates. Be aware that the standard mileage rate cannot be used for a vehicle after using a depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction.

Frugality - get used to it

2008-11-20T08:57:00.003-07:00

I read a great article in Yahoo news titled "The New Frugality: Americans return to thriftiness" by Dan Sewell. The article states that a recent WSL Strategic Retail survey detected a "savings is cool" culture is developing with more than half of the people polled agreeing in taking pride in the ways they've found to save money. With the economy still headed in a downward direction, we better get used to being frugal. The buy now, pay later era is pretty much over. We need to learn to live within their means. Fortunately, my wife I saw signs of the downturn months ago and got our budget in order. We've quickly learned to say no to impulse buying and now plan a good portion of our purchases. One example is that I've created a grocery price book that has helped us reduce our monthly grocery costs while actually increasing the stockpile of our pantry and freezer. Another example is that we were in need of a dresser for my son's bedroom. My wife kept a daily watch on Craiglist for a couple of weeks and found a great deal.

Warrior Accounting's New Website

2008-11-06T06:41:00.007-07:00

The Warrior Accounting website has gone through a complete overhaul.

Here are some of the new features we think you'll like:

FREE REPORTS
We have many free reports on our site. The reports are easy to read and are broken down into these 12 categories.

Personal Tax Saving Strategies
Avoiding Tax Troubles
Saving For College
Retirement Planning
Wealth Accumulation Strategies
Estate Planning
Business Tax Saving Strategies
Starting A Business
Running Your Business
Growing Your Business
Securing Business Loans
Selling / Exiting Your Business
Take a look for yourself by clicking on this link:
http://www.warrioracs.com/reports.html

SUBSCRIBE TO OUR FREE NEWSLETTER
By subscribing to our FREE newsletter, each month you'll receive 3 new articles designed to help
you achieve your financial goals. To subscribe, please click on this link: http://www.warrioracs.com/newsletter.shtml

INTERACTIVE FINANCIAL CALCULATORS
You can run "what if" scenarios with our interactive financial calculators. For example you can...

Estimate your annual income tax refund or liability.
Analyze the effectiveness of direct marketing campaigns.
Find out how much Life Insurance you need.
Balance your checkbook.
Find the best repayment options to pay off your credit card balance.
Determine how much you need to save each month to pay for your children's college education.
Find out how big of a mortgage you can afford.
And many more.
Try our interactive financial calculators by clicking on this link: http://www.warrioracs.com/calculators.html

SECURE FILE TRANSFER
Are you a current client and need a previous years tax return in a hurry? No problem! We can post it on a secure section of our web site and give you a password so only you can access the file. Then you can print your return right from the site.

TAX FORMS
You no long have to take that trip to the post office or the IRS. You can quickly print the latest tax forms including W4's and I9's.

Home Foreclosure - What Will It Do to Your Tax Bill?

2008-10-28T09:33:00.003-06:00

The following link is a very good article I came across on PRNewswire.com that explains what a home foreclosure could do to your tax bill.

Home Foreclosure - What Will It Do to Your Tax Bill?

Missing Your Refund Or Stimulus Payment?

2008-10-23T16:50:00.003-06:00

I read in my weekly NATP newsletter that the IRS has $266 million in undelivered refunds and stimulus payments. If you are one who is missing a federal refund or stimulus payment, you may want to make sure you mailing address is current with the IRS. If you have moved since you filed your last tax return, you can file Form 8822, Address Change Request.

Small Business Bailout?

2008-10-08T08:50:00.009-06:00

I believe that small business is, and always has been, the backbone of the US economy. Don't believe that? Look at this Fact Sheet prepared by the National Federation of Independent Business.

Now we small business owners have to get through this mess that some our our big business leaders have created. The mindset of many of these big business leaders is just mindboggling. The way I see it greed and stupidity of some big business leaders have tore apart our economy. Here are a couple of examples:

Leham Brothers were giving out millions in bonuses 4 days before they went under.

Less than a week after the federal government committed $85 billion to bail out AIG, the company paid more than $440,000 for the a retreat for executives, including nearly $200,000 for rooms, $150,000 for meals and $23,000 in spa charges.

I've seen a few articles titled - Whose going to bailout small business? I don't think that requires an answer as small business owners know the answer. Obviously, we small business owners are on our own.

Since we are on our own, I want to pass along a great small business resource I read about in the AccountantsWorld Daily Headline News. Buzgate.org focuses on helping individuals to learn about, connect with, and utilize the resources they require to succeed in small business. As a non-commercial, educationally focused gateway, buzgate.org provides a reliable, trusted network where users can build knowledge and establish productive business-to-business relationships.

Bargain Books

2008-10-01T21:45:00.005-06:00

I generally try and use the public library for books I want to simply read, but don't want to keep. Everyone so often I will come across a book that I want for my personal library. If you are looking for a resource to buy books for your personal library, try searching BookCloseout.com . They offer over 5 million remainder books at discount prices. The books are generally 50% or more off the original list price. I have also found good bargain books on Amazon.com and Ebay.

Entity Review - S and C Corporations

2008-10-01T21:43:00.001-06:00

C Corporations and S Corporations are the two main types of corporations. There are several differences between S and C Corporations but the main two differences relate to shareholders and taxes.

S Corporations are generally used by small businesses, offer limited personal liability, and limited to 100 shareholders. C Corporations do not have a shareholder limit and is the preferred entity if a business owner has aspirations of going public (selling publicly traded shares on the stock market).

Regarding taxes, S Corporations do not pay corporate taxes. The profits and losses of the corporation pass through to the individual shareholder's personal income tax returns. Unlike sole proprietorships and general partnerships, profits that pass through to the individual shareholders are not subject to self-employment tax (social security and medicare tax). Self-employment tax cannot be completely avoided since the IRS states that shareholders that provide services on behalf of the S Corporation should be paid a reasonable wage that is subject to social security and medicare tax.

A C Corporation is a taxpaying entity with the profits being subject to double taxation. Double taxation occurs as profits from a C Corporation are subject to income taxes at the corporate level and again at the individual shareholder level when profits are distributed as taxable dividends.

Entity Review - LLC (Limited Liability Company)

2008-10-01T21:42:00.001-06:00

LLC's (Limited Liability Company) have become very popular as they generally protect their owners from personal liability and can be less complicated when compared to a corporate entity. As an LLC is a legal entity (there is not a specific tax return for an LLC entity), member(s) can make an election on how they want to be taxed. If a tax election is not made, a single member LLC will be taxed as a sole proprietor and a multi-member LLC will be taxed as a partnership.

Please note that LLC laws are state specific with each state having different requirements. Please review your state laws prior to setting up.

Entity Review - Sole Proprietorship

2008-10-01T21:40:00.001-06:00

Sole Proprietorships are the most simple and least complicated form of business entity. You don't need to do much to be a sole proprietor - just "hang out a sign" that you are in business. I would generally only recommend a sole proprietorship if you aren't making a lot of money, have no employees, and your business liability risk is low. If you do decide to be a sole proprietor, get some business insurance.

A risk with being a sole proprietorship is unlimited liability. What this generally means is that if your business is sued, your personal assets are wide open if a lawsuit is brought against your business. This makes your business entity decision very important as it seems that many people like to file lawsuits when they are wronged.

Pick up the phone

2008-10-01T10:45:00.006-06:00

John Jantsch of Duct Tape Marketing (highly recommended, by the way) wrote a great article recently regarding technology and meetings. With gas prices and time being so valuable, small business owners need to start thinking outside the box with respect to meetings.

Although face-to-face meetings are sometimes warranted, it is my experience that many meetings could generally be held over the phone. Think about it - let's say you have a 1/2 hour meeting schedule across town to discuss a new idea. If it is a 15 minute drive to the meeting you might leave a 1/2 before the meeting so you're not late, hold your 1/2 meeting, then drive back to your office. For that 1/2 meeting, you just burned 1 1/4 hours, not to mention the gas burned to get there and back from the meeting. You have to ask yourself - was it that critical to meet face-to-face? There is plenty of inexpensive technology resources available, such as Zoho Meeting and FreeConference.com, if additional resources are needed for a meeting.

First-Time Homebuyer Tax Credit

2008-09-27T19:44:00.001-06:00

A first-time homebuyers tax credit was included in the recent Housing and Economic Recovery Act of 2008. Here is the catch - if you elect to take the credit, you have to repay the tax credit over a 15-year period. So, if you take the maximum tax credit of $7,500 on your 2008 federal income tax return, you would need to begin repaying the credit on your 2010 return - $500 per year for 15 years. Basically, the tax credit is a 15-year interest-free loan.

Accountants, Small Business, Customer Service

2005-09-14T07:12:00.000-06:00

All of our clients are individuals and small businesses. One question we generally ask prospective clients who are looking for a new accountant is why they are looking for a new accountant. The number one reason? Communication - their former accountant takes days or weeks to return phone calls. It doesn't take much time to return a phone call - and I'll get up to 20 messages a day during tax season. Some accountants refuse to give out their cell phone numbers. Cell phones are an extension of our accounting firm. We are striving to make customer service and communication the cornerstone of our business.

New Mileage Rates effective 9/1/05

2005-09-10T14:50:00.000-06:00

Announcement 2005-41 advises taxpayers that the Internal Revenue Service is modifying Rev. Proc. 2004-64, 2004-49 I.R.B. 898, by revising the optional standard mileage rates for business, medical, and moving expenses. Effective September 1, 2005, the standard business mileage rate is 48.5 cents per mile and the standard mileage rate for medical and moving expenses is 22 cents per mile.

This will appear in Internal Revenue Bulletin 2005-41, which will be published October 11, 2005.

IRS Launching New S Corp Compliance Study

2005-07-05T17:12:00.000-06:00

IRS LAUNCHING NEW SUB CHAPTER S COMPLIANCE STUDY*

Now that IRS has just about wrapped up work on the first phase of the National Research Program audits that targeted individual taxpayers, IRS is shifting attention to Sub Chapter S corps and other pass-through entities. The IRS will select 5,000 Sub S returns for detailed scrutiny in a study that will last about two years. IRS will use data gained from NRP audits and the S corporation study to modify the parameters by which they select returns for audit in an effort to better target compliance efforts and reduce the number of “no change” audits.

*From the 6/30/05 NSAlert.

Fear of audit? Keep good records.

2005-06-21T06:33:00.000-06:00

The US Tax Code allows many deductions to reduce taxable income. Some taxpayers won't take a deduction simply out of fear that they will be audited. Keeping good records and documentation goes a long way in reducing the anxiety of the possibility of being audited.

If I kept bad records, I, too, would always be worried about being audited. Generally, if the IRS questions one of your deductions - no documentation, no deduction. Setting up a good tax recordkeeping system can not only save you tax dollars, it can also reduce a lot of unnecessary anxiety.

Important Tax Dates

2005-06-16T07:05:00.000-06:00

Missing an important tax deadline can be really irritating. Click on the following link for a list of important tax dates:

http://www.warrioracs.com/TaxImportantDates.html

Tip: List them on your calendar so they don't sneak up on you.

Small Business Payroll Solution

2005-06-15T16:22:00.000-06:00

Payroll can be a very time-consuming and expensive process for the small business owner.

Please take a moment and ask yourself these three questions:
1) Is doing your own payroll taking time away from running your business?
2) Are you spending too much money on costly payroll service bureaus like ADP and Paychex?
3) Have you had to pay a penalty because of payroll tax errors or missed deadlines?

If you answered yes to any of the above, go to http://www.warrioracs.com/Paycycle.pdf !

FUTA Tax Deposits

2004-12-02T05:34:00.000-07:00

Effective January 1st, 2005, employers are required to make a quarterly deposit for federal unemployment taxes if the accumulated tax exceeds $500. The current threshold is $100. It is reported that this will reduce burden for more than 4 million small businesses.

Accounting software

2004-11-11T06:38:00.000-07:00

There are so many choices small business can choose for accounting software - Quickbooks(QB) Simple Start, QB Basic, QB Pro, QB Premier, QB Premier Industry Specific, Peachtree, MAS90, Shoebox Records, ACCPAC, Quicken, Microsoft Money, an Excel spreadsheet. I have seen so many small business owners go out and buy a $300+ piece of software when all they really needed was a basic software package for under $100. Sometimes consulting with an accountant can save a small business some money...

Home Office

2004-11-08T17:42:00.000-07:00

It's amazing how one question can generate such different answers among accountants. The home office deduction is a great example. Some accountants advise their clients that the home office deduction is too risky. Generally, if a taxpayer qualifies for it and can substantiate the deduction, take it.

Here we go...

2004-11-05T14:54:00.000-07:00

Finally a down day to get caught up on this blogging phenomenon. Not even sure how blogging works. Best way to learn is to dive right in and see how it works. Business article I read said to launch a blog soon or I'll just be following the crowd. Generally, accountants are the last to adopt to change - my firm likes to be on the cutting edge.