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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘tax filing’

8 Tax Facts about Penalties for Late Filing and Paying Taxes

Posted by William Byrnes on June 18, 2014


In Tax Tip 2014-56, the IRS provided 9 tax facts that a taxpayer needs to know about late filing and late paying tax penalties after the deadline of April 15.  By example, taxpayers should be made aware that the failure-to-file penalty is usually 10 times greater than the failure-to-pay penalty.  So the IRS encourages taxpayers to file on time, even if they cannot pay on time.

1. If a taxpayer is due a federal tax refund then there is no penalty if the tax return is filed later than April 15.  However, if a taxpayer owes taxes and fails to file the tax return by April 15 or fails to pay any tax due by April 15,  then the taxpayer will probably owe interest and penalties on the tax still after April 15.

2. Two federal penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.

3. The failure-to-file penalty is usually much more than the failure-to-pay penalty.  In most cases, it is 10 times more!!!  So if a taxpayer cannot pay what is owe by April 15, the taxpayer should still file a tax return on time and pay as much as possible to reduce the balance.

4. The failure-to-file penalty is normally 5% of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25% of the unpaid taxes.

5. If a taxpayer files a return more than 60 days after the due date (or extended due date), the minimum penalty for late filing is the smaller of $135 or 100% of the unpaid tax.

6. The failure-to-pay penalty is generally 0.5% per month of your unpaid taxes.  It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due.  It can build up to as much as 25% of the unpaid taxes.

7. If the 5% failure-to-file penalty and the 0.5% failure-to-pay penalty both apply in any month, the maximum penalty amount charged for that month is 5%.

8. If a taxpayer requested the 6-month extension of time to file the income tax return (until October 15) by the tax due date of April 15 and paid at least 90% of the taxes that are owed, then the taxpayer may not face a failure-to-pay penalty.  However, the taxpayer must pay the remaining balance by the extended due date.  The taxpayer will still owe interest on any taxes paid after the April 15 due date.

9. A taxpayer may avoid a failure-to-file or failure-to-pay penalty if able to show reasonable cause for not filing or paying on time.

tax-facts-online_medium

Because of the constant changes to the tax law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. For over 110 years, National Underwriter has provided fast, clear, and authoritative answers to financial advisors pressing questions, and it does so in the convenient, timesaving, Q&A format.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.  The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Rick Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.


If you are interested in discussing the Master or Doctoral degree in the areas of financial services or international taxation, please contact me: profbyrnes@gmail.com to Google Hangout or Skype that I may take you on an “online tour” 

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8 Things to be Aware of for Deducting Medical and Dental Expenses for 2013 !

Posted by William Byrnes on April 11, 2014


IRS Tax Tip 2014-21 points out that if a taxpayer intends to claim a deduction for medical expenses, there are new rules that apply that may affect these deductions for 2013.  The IRS listed eight things that a taxpayer should be aware of about the medical and dental expense deduction:

1. AGI threshold increase.  Starting in 2013, the amount of allowable medical expenses must exceed 10% of adjusted gross income (AGI) to be able to claim this deduction. The threshold was 7.5% of AGI in prior years.

2. Temporary exception for age 65.  The AGI threshold is still 7.5% of AGI if the taxpayer or spouse is age 65 or older.  This exception will apply through Dec. 31, 2016.

3. Must itemize.  To claim medical and dental expenses the taxpayer must itemize deductions on the federal tax return.  Thus, if a taxpayer claims the standard deduction, then no deduction for medical expenses.

4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.

5. Costs to include.  A taxpayer can include most medical or dental costs that paid for that taxpayer, the spouse and the dependents.  Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.

6. Expenses that qualify.  The costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums for medical care, as does the cost of some long-term care insurance.  The cost of prescription drugs and insulin also qualify.  For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.

7. Travel costs count.  A taxpayer may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees.  For the use of a car, it may be possible to deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.

8. No double benefit.  A taxpayer can’t claim a tax deduction for medical and dental expenses paid with funds from a Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free – the salary used to fund these accounts is usually not included in taxable income.

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

tax-facts-online_mediumThe company also points out that the expert authors—Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.

The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.  Use coupon code Tax15 and Save 15%!

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Eight Tax Savers for Parents

Posted by William Byrnes on March 3, 2014


IRS Tax Tip 2014-11

The IRS published eight tax benefits parents should look out for when filing their federal tax returns this year, excerpted below.

1. Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.

2. Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.

5. Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.

6. Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.

7. Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. For more information, see Publication 970.

8. Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See Notice 2010-38 for information.

IRS YouTube Videos:

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“Dirty Dozen” Tax Scams for 2014

Posted by William Byrnes on February 19, 2014


The Internal Revenue Service today in its NewsWire (IR-2014-16) released its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.  The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

The following are the Dirty Dozen tax scams for 2014:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Pervasive Telephone Scams

The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims.

These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

Characteristics of these scams can include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.

After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

In another variation, one sophisticated phone scam has targeted taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add “IRS Telephone Scam” to the comments of your complaint.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

False Promises of “Free Money” from Inflated Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person’s name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before cutting a check to the victim, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers should take care when choosing an individual or firm to prepare their taxes. Honest return preparers generally: ask for proof of income and eligibility for credits and deductions; sign returns as the preparer; enter their IRS Preparer Tax Identification Number (PTIN); provide the taxpayer a copy of the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has a web page to assist taxpayers. For tips about choosing a preparer,  details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS works on a wide range of international tax issues with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected billions of dollars in back taxes, interest and penalties so far from people who participated in offshore voluntary disclosure programs since 2009. It is in the best long-term interest of taxpayers to come forward, catch up on their filing requirements and pay their fair share.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

  • To help disaster victims, donate to recognized charities.
  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
  • Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False Income, Expenses or Exemptions

Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.

Those who promote or adopt frivolous positions risk a variety of penalties.  For example, taxpayers could be responsible for an accuracy-related penalty, a civil fraud penalty, an erroneous refund claim penalty, or a failure to file penalty.  The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.

Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.  Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony.

Falsely Claiming Zero Wages or Using False Form 1099

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI’s primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme (e.g., accountants, lawyers).  Secondarily, but equally important, is the investigation of investors who knowingly participate in abusive tax schemes.

What is an abusive scheme? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer’s scheme to evade taxes.  These schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments.  The schemes are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.

Form over substance are the most important words to remember before buying into any arrangements that promise to “eliminate” or “substantially reduce” your tax liability.  The promoters of abusive tax schemes often employ financial instruments in their schemes.  However, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

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IRS Smartphone App Now Available

Posted by William Byrnes on February 18, 2014


Excerpt from the IRS Special Edition Tax Tip 2014-05 ….

The latest version of the innovative IRS2Go app is now available.  Here’s what you can do with the redesigned IRS Smartphone app IRS2Go, version 4.0, available in English and Spanish:

  • Check the status of your refund.  The new version of IRS2Go includes an easy-to-use refund status tracker so taxpayers can follow their tax return step-by-step throughout the IRS process. Just enter your Social Security number, filing status and your expected refund amount. You can start checking on the status of your refund 24 hours after the IRS confirms receipt of an e-filed return or four weeks after you mail a paper return. Since the IRS posts refund updates on a daily basis, there’s no need to check the status more than once each day.
  • Find free tax preparation.  You may qualify for free tax help through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. A new tool on IRS2Go will help you find a VITA location. Just enter your ZIP code and select a mileage range to see a listing of VITA/TCE sites near you. Select one of the sites and your Smartphone will show an address and map to help you navigate.
  • Get tax records.  You can request a copy of your tax bill or a transcript of your tax return using IRS2Go. The post office will deliver to your address on record.
  • Stay connected.  You can interact with the IRS by following the IRS on Twitter @IRSnews@IRStaxpros and @IRSenEspanol. You can also watch IRS videos on YouTube, register for email updates or contact the IRS using the “Contact Us” feature.

Information on IRS2Go and other > IRS social media products <

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

The company also points out that the expert authors—Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.

tax-facts-online_medium

The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

Earned Income Tax Credit (EITC): The IRS Inappropriately Bans Many Taxpayers but a 22.7% Improper Payment Persists Regardless

Posted by William Byrnes on February 11, 2014


The National Taxpayer Advocate provides the following  > report information < on the Earned Income Tax Credit (EITC).

Earned Income Tax Credit and Family Credits

The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low to moderate income-earning individuals and families. If you qualify, the credit could be a maximum amount of up to $6,044 in 2013. This means you could pay less or no federal tax or even get a refund.

The EITC is based on your earned income and whether or not there are qualifying children in your household. You must file a tax return to claim the EITC and if you have children, they must meet the relationship, age and residency requirements.

What is the EITC?

A taxpayer may qualify for the EITC if you worked any part of last year and made less than $51,000 in 2013.  Read more about the EITC, how to file for it, and how to receive a refund:

IRS Incorrectly Bans Many Taxpayers from Claiming EITC

The National Taxpayer Advocate reported that the IRS Incorrectly Bans Many Taxpayers from Claiming EITC (see > Taxpayer Advocate Report on EITC < )  Excerpted from the National Taxpayer Advocate report…

Section 32(k) of the Internal Revenue Code (IRC) authorizes the IRS to ban taxpayers from claiming the earned income tax credit (EITC) for two years if the IRS determines they claimed the credit improperly due to reckless or intentional disregard of rules and regulations.  This standard requires more than mere negligence on the part of the taxpayer.

According to IRS Chief Counsel guidance, a taxpayer’s failure to participate in an EITC audit does not justify imposing the ban.  Once the IRS imposes the ban, any EITC claimed in the next two years will be disallowed even if the taxpayer is otherwise eligible for the credit.

IRS data shows:

  • The IRS imposed the ban improperly almost 40 percent of the time in 2011;
  • Taxpayers who were (but for the 2011 ban) eligible for the credit in the following two years were deprived of a tax benefit that averaged more than $4,600 for the two years combined.

In a representative sample of two-year ban cases, the Taxpayer Advocate Service (TAS) found:

  • In 19 percent of the cases, the IRS imposed the ban solely because EITC had been disallowed in a previous year;
  • In only 10 percent of the cases did a taxpayer’s response to the audit raise the possibility that he or she had the requisite state of mind to justify the two-year ban;
  • In 69 percent of the cases, the ban was imposed without required managerial approval;
  • In almost 90 percent of the cases, neither IRS work papers nor communications to the taxpayer contained the required explanation of why the ban was imposed; and
  • Taxpayers’ average income was about $15,500.

Low income taxpayers face unique obstacles in learning EITC rules and substantiating their entitlement to the credit, but IRS procedures do not take this into account. Instead, the IRS applies the two-year ban on the basis of unexamined assumptions about the taxpayer’s state of mind or even presupposes reckless or intentional disregard of the rules and regulations, potentially causing significant harm to taxpayers who may be entitled to EITC in a subsequent year.

Treasury > reports < that the other benefit programs results in high administrative costs and low error because of the necessity of the pre-qualification for benefits by a caseworker, whereas the EITC’s program’s administrative costs are less than 1% of the program benefits.  The Treasury report continues that “the IRS screens EITC claims against certain criteria and also conducts approximately 500,000 audits of claims annually.”

Almost a Quarter of EITC Payments are in Error

Yet, considering that the IRS improperly bans taxpayers from the EITC program and performs 500,000 audits of EITC claims annually, 22.7% of the EITC is improperly paid.  A challenging problem to be addressed.  Low administrative cost but high rate of improper denial of eligibility and high rate of improper payment.  Send me (or use comments below) suggestions of how these problems may be mitigated.

2012: $55.4B Total Payments (Outlays) with $12.6B Improper Payments = 22.7% Improper Payment Rate

FISCAL REPORTING YEAR IMPROPER AMOUNT (IN BILLIONS) IMPROPER RATE
2010 $16.9 26.3%
2011 $15.2 23.5%
2012 $12.6 22.7%
2013 $13.2 22.8%
2014 $11.8 22.8%

Treasury’s EITC Program Comments

A number of factors unique to the EITC program trigger errors.  The complexity of the law contributes to confusion around eligibility requirements, mainly qualifying child relationship and residency rules.  Other factors include high program turnover of one-third annually, return preparer errors, and fraud.

The IRS will continue to address EITC noncompliance through its aggressive compliance program which includes examinations, reviews of income misreporting, systemic corrections during tax return processing, and an enhanced focus on paid return preparers.  Because tax return preparers handle two-thirds of returns claiming the EITC, the Department of the Treasury expects the implementation of new preparer requirements for registration, competency testing, continuing education, and compliance checks will improve EITC compliance, decrease fraud, and reduce overall program noncompliance.

Additional information on the program is also provided annually in the department’s Performance and Accountability Report

For more than half a century, Tax Facts has been an essential resource designed to meet the real-world tax-guidance needs of professionals in both the insurance and investment industries.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This brand-new resource provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

“Our brand-new Tax Facts title is exciting in many ways,” says Rick Kravitz, Vice President & Managing Director of Summit Professional Network’s Professional Publishing Division. “First of all, it fills a huge gap in the resources available to today’s advisors. Small business is a big market, and this book enables advisors to get up-and-running right away, with proven guidance that will help them serve their clients’ needs. Secondly, it addresses the biggest questions facing all taxpayers and provides absolutely reliable answers that help advisors solve today’s biggest problems with confidence.”

The company also points out that the expert authors—Robert Bloink, Esq., LL.M., and William H. Byrnes, Esq., LL.M., CWM®—are delivering real-life guidance based on decades of experience.

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The authors’ knowledge and experience in tax law and practice provides the expert guidance for National Underwriter to once again deliver a valuable resource for the financial advising community,” added Kravitz.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

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Earned Income Tax Credit (EITC) for Low- and Moderate-Income Workers: a Significant Tax Benefit

Posted by William Byrnes on February 10, 2014


Last Friday (January 31, 2014) the IRS opened the tax filing season for 2013 taxes.  In Newswire (IR-2014-9 and -10), also released January 31, the IRS seeks to reach out to low and moderate income workers to alert them to take advantage of the Earned Income Tax Credit, known as the “EITC”.  The IRS stated that the EITC is often overlooked by the low and moderate workers, many whom do their own tax filing.

This year, taxpayers have until Tuesday, April 15, 2014 to file their 2013 tax returns and pay any tax due.  The IRS expects to receive more than 148 million individual tax returns this year, and more than 80% of tax returns are now filed electronically.

Approximately 75% of tax filers typically receive refunds, 90% of these refunds issued in less than 21 days.  Last year, taxpayers received an average refund of $2,744.  The IRS stated that “E-file” when combined with a direct deposit is the fastest way to receive a refund.  75% of refund recipients now choose direct deposit.

The Earned Income Tax Credit (EITC)

The IRS estimates that 20% of eligible low and moderate income workers miss out on taking advantage of the the EITC, and thus lose any potential refund generated by it.  Either the taxpayer does not claim the EITC when filing or does not file a tax return at all because their income is below the filing threshold.   The IRS further stated that one-third of the taxpayers eligible for EITC changes each year as their personal circumstances, such as work status or family situation, changes, affecting eligibility. 

The EITC varies depending on income, family size and filing status.  Last year, over 27 million eligible workers and families received more than $63 billion total in EITC, with an average EITC amount of $2,300.

Workers, self-employed people and farmers who earned $51,567 or less last year could receive larger refunds if they qualify for the EITC.  That could mean up to $487 in EITC for people without children, and a maximum credit of up to $6,044 for those with three or more qualifying children. Unlike most deductions and credits, the EITC is refundable. In other words, those eligible may get a refund even if they owe no tax

Common EITC Mistakes

Taxpayers are responsible for the accuracy of their tax return regardless of who prepares it.  The rules for EITC are complicated.  The IRS urges taxpayers to seek help if they are unsure of their eligibility (read about Taxpayer Clinics below).

There are several requirements to consider:

  • Your filing status can’t be Married Filing Separately.
  • You must have a valid Social Security number for yourself, your spouse if married, and any qualifying child listed on your tax return.
  • You must have earned income. Earned income includes earnings such as wages, self-employment and farm income.
  • You may be married or single, with or without children to qualify. If you don’t have children, you must also meet age, residency and dependency rules.
  • If you are a member of the U.S. Armed Forces serving in a combat zone, special rules apply.

Some common EITC errors are:

  • Claiming a child who does not meet the relationship, age or residency tests
  • Filing as “single” or “head of household” when married
  • Over or under reporting of income and or expenses to qualify for or maximize EITC
  • Missing Social Security numbers or Social Security Number and last name mismatches for both taxpayers and the children

Online Tools at IRS.gov Available to Help

People can find out if they qualify for the EITC by answering a few questions about income, family size and filing status, among other things using the EITC Assistant, a special online tool.  The EITC Assistant will help determine eligibility and will figure an estimated EITC refund.  A taxpayer can even get a printout explaining why he or she qualifies or has been denied.

Free Taxpayer Clinics Help Taxpayers File – Located Around the USA

Eligible taxpayers can also use another helpful online resource, the VITA Site Locator tool to locate one of nearly 13,000 community-based volunteer tax sites consisting of over 90,000 volunteers that can help them file their return for free.  (In San Diego, Thomas Jefferson School of Law has an active VITA program).

Tele-Tax, for example, help taxpayers see if they qualify for various tax benefits, such as the Child Tax Credit and Additional Child Tax Credit for eligible families, the American Opportunity Tax Credit for parents and college students, the saver’s credit for low-and moderate-income workers saving for retirement and energy credits for homeowners making qualifying energy-saving home improvements. The automated IRS services can also help home-based businesses check out the new simplified option for claiming the home office deduction, a straightforward computation that allows eligible taxpayers to claim $5 per square foot, up to a maximum of $1,500, instead of filling out a 43-line form (Form 8829) with often complex calculations.

Free Online Tax Software for Filing

When taxpayers are ready to fill out and file their returns, another online option enables anyone to e-file their returns for free. Free File offers two free electronic filing options: brand-name tax software or online Fillable Forms. Taxpayers who make $58,000 or less can choose free options from 14 commercial software providers. There’s no income limit for the second option, Free File Fillable Forms, the electronic version of IRS paper forms, which is best suited to people who are comfortable preparing their own tax return.

Online Refund Tool

Even after taxpayers file, there are more online tools that can provide them with valuable assistance long after tax season ends. One of the most popular is Where’s My Refund? a tool available on IRS.gov that enables taxpayers to track the status of their refund. Initial information will normally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after the taxpayer mails a paper return to the IRS. The system updates every 24 hours, usually overnight, so there’s no need to check more often.

Can’t Afford to Pay the Tax Bill by April 15th?  Use the Online Payment Agreement Tool 

For taxpayers whose concern isn’t a refund, but rather, a tax bill they can’t pay, the Online Payment Agreement tool can help them determine whether they qualify for an installment agreement with the IRS. And those whose tax obligation is even more serious, the Offer in Compromise Pre-Qualifier can help them determine if they qualify for an offer in compromise, an agreement with the IRS that settles their tax liability for less than the full amount owed.

Are You Withholding Enough or Too Much Tax During the Year?

Another useful year-round tool, the IRS Withholding Calculator, helps employees make sure the amount of income tax taken out of their pay is neither too high nor too low. This tool can be particularly useful to taxpayers who, after filling out their tax returns, find that the refund or balance due was higher than expected.

Beware of EITC Scams and Frauds

Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.  If an EITC claim was reduced or denied after tax year 1996 for any reason other than a mathematical or clerical error, taxpayers must file Form 8862, Information To Claim Earned Income Credit After Disallowance, with the next tax return to claim the EITC.

Tax Help Through YouTube, Twitter, Tumblr

The IRS also offers more than 100 short instructional videos, tax tips and other useful resources year-round through a variety of social media platforms. They include:

2014_tf_on_individuals_small_businesses-m_1The newest addition to the Tax Facts Library, Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.  See http://www.nationalunderwriter.com/tax-facts-on-individuals-small-business.html

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
» Healthcare
» Home Office
» Contractor vs. Employee — clarified!
» Business Deductions and Losses
» Business Life Insurance
» Small Business Valuation
» Small Business Entity Choices
» Accounting — including guidance on how standards change as the business grows
» Capital Gains
» Investor Losses
» New Medicare Tax and Net Investment Income tax
» Individual Income Taxation

Posted in Reporting, Taxation | Tagged: , , , , , | Leave a Comment »

Five Great Reasons to E-file Your Tax Return

Posted by William Byrnes on February 3, 2014


The IRS has published IRS Tax Tip 2014-04 addressing “E-Filing”.

The IRS reports that 122 million taxpayers e-filed in 2013 for the 2012 tax year: IRS e-file.  The IRS provides five reasons why a taxpayer should e-file your tax return:

1. Accurate and complete.  E-file is the best way to file an accurate and complete tax return. The tax software does the math for you, and it helps you avoid mistakes.

2. Safe and secure.  IRS e-file meets strict guidelines and uses the best encryption technology. The IRS has safely and securely processed more than 1.2 billion e-filed individual tax returns since the program began.

3. Faster refunds.  E-filing usually brings a faster refund because there is nothing to mail and your return is less likely to have errors, which take longer to process. The IRS issues most refunds in less than 21 days. The fastest way to get your refund is to combine e-file with direct deposit into your bank account.

4. Payment options.  If you owe taxes, you can e-file early and set an automatic payment date anytime on or before the April 15 due date. You can pay by check or money order, or by debit or credit card. You can also transfer funds electronically from your bank account.

5. E-file’s easy.  You can e-file your federal return through IRS Free File, the free tax preparation program available only at IRS.gov. You can also use commercial tax software or ask your tax preparer to e-file your return. If you qualify, IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly will e-file your return for free.

IRS YouTube Videos:

2014_tf_on_individuals_small_businesses-m_1The newest addition to the Tax Facts Library, Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.  See http://www.nationalunderwriter.com/tax-facts-on-individuals-small-business.html

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
» Healthcare
» Home Office
» Contractor vs. Employee — clarified!
» Business Deductions and Losses
» Business Life Insurance
» Small Business Valuation
» Small Business Entity Choices
» Accounting — including guidance on how standards change as the business grows
» Capital Gains
» Investor Losses
» New Medicare Tax and Net Investment Income tax
» Individual Income Taxation

Posted in Taxation | Tagged: , , , , | Leave a Comment »

Why Should You File a 2013 Tax Return?

Posted by William Byrnes on February 2, 2014


The IRS released its first Tax Tip of the calendar year (IRS Tax Tip 2014-01).  I have excerpted it below for your convenience:

Even if you don’t have to file a tax return, there are times when you should. Here are five good reasons why you should file a return, even if you’re not required to do so:

1. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

2. Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use the EITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return and claim it.

3. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return.

4. American Opportunity Credit.  Are you a student or do you support a student? If so, you may be eligible for this credit. Students in their first four years of higher education may qualify for as much as $2,500. Even those who owe no tax may get up to $1,000 of the credit refunded per eligible student. You must file Form 8863, Education Credits, with your tax return to claim this credit.

5. Health Coverage Tax Credit.  Did you receive Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation? If so, you may qualify for the Health Coverage Tax Credit. The HCTC helps make health insurance more affordable for you and your family. This credit pays 72.5 percent of qualified health insurance premiums. Visit IRS.gov for more on this credit.

To sum it all up, check to see if you would benefit from filing a federal tax return. You may qualify for a tax refund even if you don’t have to file. And remember, if you do qualify for a refund, you must file a return to claim it.

IRS YouTube Videos:

Do You Need to File a Federal Income Tax Return?

You can also use the Interactive Tax Assistant tool on IRS.gov to see if you need to file.

Many people will file a 2013 Federal income tax return even though the income on the return was below the filing requirement. The questions below will help you determine if you need to file a Federal Income Tax return or if you need to stop your withholding so you will not have to file an unnecessary return in the future.

The Internal Revenue Service is providing this information as a part of our customer service and outreach efforts to Reduce Taxpayer Burden and Processing Costs. Changing your withholding and/or not filing Unnecessary Returns will save both you and the government time and money.

Even if you do not have to file a return, you should file one to get a refund of any Federal Income Tax withheld.

To determine if you need to file a Federal Income Tax return for 2013 answer the following questions:

Occasionally, individuals have one-time or infrequent financial transactions that may require them to file a Federal Income Tax return. Do any of the following examples apply to you?

  • Did you have Federal taxes withheld from your pension and wages for this tax year and wish to get a refund back?
  • Are you entitled to the Earned Income Tax Credit or did you receive Advance Earned Income Credit for this tax year?
  • Were you self-employed with earnings of more than $400.00?
  • Did you sell your home?
  • Will you owe any special tax on a qualified retirement plan (including an individual retirement account (IRA) or medical savings account (MSA)? You may owe tax if you:
    • Received an early distribution from a qualified plan
    • Made excess contributions to your IRA or MSA
    • Were born before July 1, 1942, and you did not take the minimum required distribution from your qualified retirement plan.
    • Received a distribution in the excess of $160,000 from a qualified retirement plan.
  • Will you owe social security and Medicare tax on tips you did not report to your employer?
  • Will you owe uncollected social security and Medicare or Railroad retirement (RRTA) tax on tips you reported to your employer?
  • Will you be subject to Alternative Minimum Tax (AMT)? (The tax law gives special treatment to some kinds of income and allows special deductions and credit for some kinds of expenses.)
  • Will you owe recapture tax?
  • Are you a church employee with income in wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security or Medicare taxes?

2014_tf_on_individuals_small_businesses-m_1The newest addition to the Tax Facts Library, Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.  See http://www.nationalunderwriter.com/tax-facts-on-individuals-small-business.html

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
» Healthcare
» Home Office
» Contractor vs. Employee — clarified!
» Business Deductions and Losses
» Business Life Insurance
» Small Business Valuation
» Small Business Entity Choices
» Accounting — including guidance on how standards change as the business grows
» Capital Gains
» Investor Losses
» New Medicare Tax and Net Investment Income tax
» Individual Income Taxation

Authors Professor William Byrnes and Robert Bloink

Posted in Taxation | Tagged: , , , | 1 Comment »

Which Tax Form Should You File?

Posted by William Byrnes on January 30, 2014


The IRS released Tax Tip 2014-03 today: Which Tax Form Should You File?

The IRS is promoting its free tax software or Fillable Forms option that allows you to fill in your tax forms using a computer. You can e-file the completed forms for free!

The IRS offers the following tips for choosing the correct tax form:

You can generally use the 1040EZ if:

  • Your taxable income is below $100,000;
  • Your filing status is single or married filing jointly;
  • You are not claiming any dependents; and
  • Your interest income is $1,500 or less.

The 1040A may be best for you if:

  • Your taxable income is below $100,000;
  • You have capital gain distributions;
  • You claim certain tax credits; and
  • You claim adjustments to income for IRA contributions and student loan interest.

However, reasons you must use the 1040 include:

  • Your taxable income is $100,000 or more;
  • You claim itemized deductions;
  • You are reporting self-employment income; or
  • You are reporting income from sale of a property.

IRS YouTube Videos:

2014_tf_on_individuals_small_businesses-m_1The newest addition to the Tax Facts Library, Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small businesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.  See http://www.nationalunderwriter.com/tax-facts-on-individuals-small-business.html

Organized in a convenient Q&A format to speed you to the information you need, Tax Facts on Individuals & Small Business delivers the latest guidance on:
» Healthcare
» Home Office
» Contractor vs. Employee — clarified!
» Business Deductions and Losses
» Business Life Insurance
» Small Business Valuation
» Small Business Entity Choices
» Accounting — including guidance on how standards change as the business grows
» Capital Gains
» Investor Losses
» New Medicare Tax and Net Investment Income tax
» Individual Income Taxation

Authors Professor William Byrnes and Robert Bloink

Posted in Taxation | Tagged: , , , | Leave a Comment »

 
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