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12 posts from March 2012

03/29/2012

The EFTPS Tax Payment Option

The Electronic Federal Tax Payment System, or EFTPS, is a free service that offers a way to pay personal and business taxes by phone or the internet. 

EFTPS was launched in 1996 to help taxpayers make automatic direct deposit payments.  It also provides a government run payment plan option to pay taxes over time.

Tax form pic 2Under an EFTPS installment payment agreement, a low interest rate is charge on the outstanding tax balance. It does not mean the taxpayer will escape fees and/or penalties for late payments; however, a taxpayer enrolled in this kind of monthly direct deposit plan can spread the impact of such fees out over time until the balance is paid in full.

During today’s unpredictable economy, many taxpayers are finding that they cannot pay all the taxes they owe by the tax deadline.  The secure online EFTPS payment option helps ease the financial impact.

Payments can be made any time, day or night, or they can be scheduled in advance online.

There are more than 12 million taxpayers currently enrolled in the system with transactions now totaling nearly $25 trillion.   Find out more:  EFTPS Payment Option Information.

03/26/2012

Tax Prep Software Proves Painful

They are offered with many catchy names that sound like they can help you “defeat the enemy” of taxation, but beware.

Do-it-yourself tax preparation software can only help you as much as you already know. 

Let us explain.Taxpayer headache

Recently we’ve been seeing a host of new clients who were audited by the IRS after they used tax preparation software to complete their own tax returns.  The top issues that have been resulting in audits on self-prepared taxes include:

  • Claiming deductions the taxpayer was not eligible for
  • Miscalculating the amount of taxes owed
  • Filing the wrong forms
  • Filing the right forms with the wrong amounts
  • Miscalculating amounts of income or deductions
  • Misapplying tax credits
  • Lacking proof to back tax credit claims
  • Misunderstanding tax terms and calculations guidelines
  • Missing or under-representing the amount of fees for late payment of taxes

The list goes on.  Software with names like Intuit’s TurboTax®, TaxSlayer™, 2nd Story Software’s TaxACT®, and H&R Block’s TaxCut®, just to name a few, are meant to be tools to help in the preparation of taxes.  aIf a taxpayer doesn’t know the right questions to ask or which forms are correct, they may miss vitally important information.

Often the “live” tax preparation specialists (if the software offers such assistance) have limited training on more complicated tax issues.  They also do not have access to taxpayer records to make certain the right questions and issues are being discussed.

For taxpayers who file relatively simple forms, such tax software packages can be helpful.  Last year, the IRS reports that 9.8 million tax returns were self-prepared and e-filed. 

Taxpayers who file a Form 1040 with Schedule A with a state return and a non-itemized Form 1040 and state return may find tax preparation software a bargain for fast and easy filing.

Yet, taxpayers who have more than one income stream, multiple deductions and credits, or have endured a change in marital status, employment or suffered a major illness, face many different kinds of tax issues that require more in-depth review.

Tax form pictureNo one wants to face an IRS audit.  Using a CPA as your qualified tax preparation specialist can ease headaches, decrease the chances that you’ll be audited, prevent costly errors and omissions, and restore peace of mind.

At McRuer CPAs, we fix “I did it myself” taxes.  If you or someone you know is already struggling with tax preparation software, that’s a sign that it may be time to call a professional.   We’re here to help.  Give us a call at:  816.741.7882.

Dirty Dozen Tax Scams

The IRS has issued its annual list of what it calls the “Dirty Dozen Tax Scams”.  As we live in the digital age, there are a number of online scams to watch out for ranging from identity theft to false e-filing to phishing. 

Phishing is pronounced like “fishing”.  But, be careful not to bite on this lure.

Phishing is a method scammers use to pretend they represent a cause, company or organization, such as the IRS, Federal Express, the Red Cross and the like, in an email.  They are seeking your personal information and money. 

In recent IRS scam attempts, the subject lines use attention grabbers like: “IRS needs more information”, “Government Alert: IRS Investigation”, “IRS Rebate waiting for you”, “You May File for an IRS Tax Credit” or “Internal Revenue Service Official Notification”.  

The emails may also seem to be sent from the Electronic Federal Tax Payment System or EFTPS that handles the tax deposits and installment payments of millions of taxpayers.

When opened, these emails may use what looks like an official IRS logo.  They are also written in official sounding language.  They state some reason for needing your personal information, such as verification of an account in order to send a tax refund.  They request social security numbers, birth dates, bank account numbers and/or credit card numbers.  Some link to an official-looking form with a time-sensitive deadline hoping victims will reply before thinking.

They may even provide an active return email to a contact person.  That address may be close to the official “xxx@irs.gov”, but is usually set up as something like:  customerservice@help.com or refund@gov.com.  However, if used to “reply”, it may lead the user to a scammer who will then respond by email to continue the steps to steal personal information.

Don’t be fooled.  The IRS does not send unsolicited emails to taxpayers.  The IRS never requests personal nor financial information by email.  The IRS does not use text messages or social media channels to make first connections with taxpayers, rather those mediums are used only as information resources following a taxpayer’s own initial request.

If you receive this kind of email, simply delete it.  Or, if you’d like to help federal investigators catch these scammers, forward the email to phishing@irs.gov

If you have already received such an email and answered the email with your personal information, contact the IRS immediately by phone as well as your professional tax preparation service provider for more information.

Learn more about the new Dirty Dozen Tax Scams Report at: Dirty Dozen Tax Scams List from the IRS

03/17/2012

Health Costs and Tax Credits for Small Business

Small businesses are being reminded about the tax credit available for providing employees health care insurance.

To qualify a small business must:

  • cover at least 50% of the cost of single health care coverage for each employee.
  • have fewer than 25 full-time equivalent employees.
  • have average wages of less than $50,000 per year.

The tax credit applies for the years 2010 to 2013 and reaches up to 35% of the cost of providing health care insurance.  In 2014, the rate is scheduled to increase to 50% for small business employers.

A simple step-by-step guide can help you determine the amount of tax credit you may receive.

Tax credits reduce the total amount of tax you owe dollar-for-dollar. This health care tax credit can be applied backwards or forward to other tax years.

To download the step-by-step guide to figure the amount of tax credit you may qualify for, click on this link: Online Guide to Determine Health Care Insurance Tax Credit

03/16/2012

Fresh Start Gets a Fresh Boost

Though last year’s Fresh Start Initiative has had a slow start, the IRS this week announced some major updates that are designed to accelerate interest in the program. 

Fresh Start is intended to help taxpayers during today’s troubling economic times who are finding it hard to pay all of the taxes they owe by the due date.

The IRS has expanded the program to include more relief from late payment penalties and double the amount of taxes that can be paid through the IRS installment program. 

Fresh Start was announced last year and provides a variety of options to ease the burden on individuals and businesses that owe back taxes. It includes a decrease in the number of instances in which the IRS issues tax liens.

Regarding Late Payment Penalty Charges

Taxpayers that cannot pay their total 2011 taxes owed by April 17th may now avoid paying the 1% per month penalty until October 15, 2012. A taxpayer must still pay a 3% annual interest charge on the outstanding balance until it is paid in full. 

Regarding Installment Agreements

The amount of taxes that can be paid through the IRS installment agreement plan without the need to submit a financial statement has now been doubled to $50,000. The maximum allowable payment term has also been expanded from 60 months to 72 months. 

Taxpayers who participate in the program must agree to monthly automatic withdrawal direct debit payments.

The IRS was criticized for not doing enough to help taxpayers who, in many cases, were facing a greater tax burden due to tax increases, but were earning less income as individuals or in business due to the lagging economy.

Millions of taxpayers already depend upon the IRS installment program to pay their taxes.  The updates to Fresh Start could double the number of people who choose the option.

At McRuer CPAs we provide a comprehensive service that offers tax planning strategies to help ease the burden taxpayers are obligated to pay as well as make certain they only pay what they owe.   If you cannot pay all that you owe by the deadline, the IRS installment plan is one option with a relatively low interest rate that may help, yet we may be able to offer you more options.  Contact us for more information.

To read online about Fresh Start’s new updates, here is the link to this week’s information release and video: Fresh Start Initiative Information

03/15/2012

Church Members Scam Threat

Scammers are targeting seniors and members of church congregations with bogus promises of free money from the American Opportunity Tax Credit. 

This tax credit is offered to qualifying taxpayers who are enrolled in college.  The scam promises a tax refund or “stimulus payment” is available to compensate for grocery expenses even if someone attended college many years ago.

Scammers make their money by charging victims a large amount of money to file the tax claim, but then disappear.  The victims are left with not only no tax refund, but also a hefty penalty for filing a false tax return.

Taxpayers are warned to watch out for these fake tax service providers who are selling refund and credit schemes through fraudulently acquired emails stolen from local church membership lists.

Tax Scams Warning

Identity Theft & the IRS

Online scams are an increasing menace and any person with an email can be targeted. 

Most online fraud is committed through “phishing” scams which use official sounding language to lure an email recipient into responding with personal information.

These emails show the IRS logo and request victims to reply back with their social security numbers, bank account information, credit card information and more.  Some link to an official-looking form with a time-sensitive deadline hoping victims will reply before thinking.

Know that the IRS NEVER sends unsolicited taxpayer notices by email.  Such notices are sent by the U.S. Postal Service and through your designated tax and legal services provider.

IRS Scam Report Warning on Identity Theft

03/13/2012

Residential Energy Credit

It’s like a 30% discount on the price of energy efficient solutions for your home.

A tax credit offering 30 percent of the cost of qualified alternative energy equipment for a residence is being offered through 2016.

Qualifying equipment includes alternatives like:

  • energy efficient solar hot water heaters
  • solar electricity generators
  • geothermal heat pumps
  • wind turbines

Generally, you may include labor costs when figuring the credit and you can carry forward any unused portions of the credit.

Not all energy-efficient improvements qualify so be sure you have the manufacturer’s tax credit certification statement.

Reminder:  tax credits are not deductions.  Rather, they help reduce the total amount of tax you owe dollar-for-dollar.

For more information and forms explaining Residential Energy Credits go to: Residential Energy Tax Credit Information

03/09/2012

VOW is WOW! for Hiring Veterans

Hiring a returning war veteran may not only land a business an excellent employee, but it may also provide a nice tax credit as part of the VOW to Hire Heroes Act. New updates are making it easier and faster to process tax credit requests, too.

The credit can reach up to $9,600 per veteran hired by a for-profit business and up to $6,240 for a non-profit organization.  Businesses may claim the tax credit on income tax returns.

New forms and an expanded list of qualifying employers now make it easier to obtain certification needed to verify that a veteran meets program guidelines. New faster electronic submission options are more quickly confirming the credit amount that’s due employers.

The amount of credit depends upon:

  • Length of the veteran’s unemployment before being hired
  • Hours a veteran works
  • Amount of first-year wages paid

~Soldier with Flag in IraqBusinesses that hire qualifying veterans with service-related disabilities also receive the tax credit, many at the maximum allowable tax credit amount.

All of this is an on-going effort to help veterans returning from wars and military actions abroad to adjust to civilian employment opportunities.

Supporters of the tax credit say often business owners who were first attracted to the idea of hiring a veteran because of the tax credit have gladly discovered that the veterans offer a broad skills base and a strong work ethic.

The Department of Labor reports that 20.2 million men and 1.8 million women in America aged 18 and over are veterans who have served on active duty in the U.S. armed forces.  Numbers reflect that male veterans who served in the Gulf War Era have an unemployment rate of 21.9%. 

Survey results also show approximately 25% of Gulf War Veterans have returned home with a service-connected disability.  Current numbers reveal roughly 10% of disabled veterans who are seeking work remain unemployed.

IRS Tax Forms 8850, 5884 and 3800 provide instructions on how to file for the VOW to Hire Heroes credit.  If you have any questions, please don’t hesitate to ask one of our experts at McRuer CPAs.

IRS Information on VOW Hire Heroes Act Tax Credit

03/08/2012

Married Business Partners and Filing Status

Many married couples enjoy the satisfaction and control of running their own business together.   In time, the question of operating the business as a partnership or a sole proprietorship arises. 

There are number of factors to consider, but generally, a “sole” proprietorship must be “solely” owned by one spouse.  The other spouse would be considered an employee and would be paid to work the business.

When both spouses are working the business together and that business is jointly owned by both spouses, then that business is generally classified as a partnership for Federal tax purposes.  

A partnership classification requires both spouses to follow more stringent record keeping and filing requirements including filing a partnership separate income tax return. 

Sometimes married co-owners fail to file properly as a partnership by reporting on a Schedule C in the name of one spouse.  The result is that only one spouse receives credit for Social Security and Medicare coverage purposes.

In order to work out the issues for couples who jointly own, but want to avoid some of the partnership filing and record keeping requirements, spouses can elect to be treated as a Qualified Joint Venture.  This follows the provisions of the 2007 Small Business and Work Opportunity Tax Act.

The Qualified Joint Venture classification provides that each spouse separately reports a share of all of the businesses’ items of income, gain, loss, deduction, and credit.  Under the election, both spouses will receive proper credit for Social Security and Medicare coverage.

Each spouse must file a separate Schedule C (or Schedule F) to report profits and losses and, if otherwise required, a separate Schedule SE to report self-employment tax for each spouse. 

Sound complicated?  It can be.  It depends upon the kind of business you own and operate, and your goals.  This issue is first a strategic tax planning consideration.  Here are just a few of the many questions to answer before making a choice:  What are your long-term goals?  What would happen if one spouse leaves or dies?  What kind of record keeping system works best for you and your spouse?

These issues are best resolved with the advice of an experienced professional.   Contact us for an appointment today at McRuer CPAs where we will help you find the solution that best fits you.  Call us at: (816) 741-7882.

Here's more information from the IRS:  http://www.irs.gov/businesses/small/article/0,,id=177376,00.html

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