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5 posts from April 2012

04/17/2012

April 17th Deadline is Here

Today, April 17th, is the deadline for filing your 2011 Individual Income Tax Return. Remember that even if you request an extension giving you an additional six months to file your completed return, you must still pay what you owe in taxes by today's deadline or face penalties and interest charges. Find out more about filing an extension, how to pay taxes you owe and other tax topics in our recently posted blog entries or give us a call for more information at 816.741.7882.

04/13/2012

New 1099 Rule Causing Tax Preparation Backlog

A new IRS rule for reporting investment transactions is causing filing headaches and delays, resulting in a tax preparation backlog.

For the first time, the IRS is requiring brokers and other investment advisors to report independently to the IRS all investment transactions including all gains, losses, and cost basis.  That also means that they are sending various Forms 1099 to taxpayers for the first time.Tax calculation paperwork

Though the new rule was enacted last June, final guidance was not made available until January 27, 2012.  Accordingly, this year the Form 1099 filing deadline was extended two weeks until February 15th.  However, this did not change your mid-April deadline to file your individual income tax return.

This reporting change is causing processing problems both at the IRS and in the brokerage community.  Some taxpayers are experiencing longer than expected delays caused by late and corrected/reissued broker Forms 1099.  This can create a need to re-calculate tax records and amend already filed returns.  Some clients are even receiving more than one corrected Form 1099!

What’s the result?  As you might guess, the IRS rule change is creating a last minute income tax reporting rush.  Many accounting firms that prepare complicated individual and business tax returns, as we do at McRuer CPAs, are receiving clients’ tax records much later than usual.  This can create a backlog late in the tax preparation season.

What to do?  If you are experiencing delays related to this change or have received corrected Forms 1099, we can help.  The best option may be to request an automatic extension of time to file your 2011 individual income tax return.  The extension is easy to request, it’s automatic, it’s free and most importantly, it provides both you and your tax preparer the necessary time to thoughtfully consider your tax situation.  This assures that you are paying your proper tax liability and no more.  This year, an extension allows a taxpayer to delay filing a completed tax return until October 15, 2012.

It is important to remember that when an extension is granted, it does not extend the amount of time you have to pay the taxes you owe.  If you are unsure about this amount, we can help you by providing an estimated payment amount by the April 17th deadline.  You may then file your completed return no later than October 15, 2012.

At McRuer CPAs we are available to help taxpayers who are experiencing these delays and confusion.  If we may assist you, please contact us.  816-741-7882

04/11/2012

April 17th Tax Deadline Approaches for 2011 Income Tax Filing

Cropped tax calculationDeadline Reminder to Taxpayers:  You have just a few more days to file your income tax return. 

The official deadline for filing your 2011 Individual Income Tax Return is April 17th.   That includes Forms 1040, 1040a or 1040EZ.  This is also the deadline date for taxpayers who owe quarterly estimated income tax payments for their 2012 income taxes.

The filing deadline has been delayed from the standard April 15th date, because when the 15th falls on a Saturday, Sunday or legal holiday, the due date is automatically delayed until the next business day.  This tax season, the 15th falls on a Sunday and the 16th is a state holiday in the District of Columbia.  So, the final date to file federal individual income tax returns is April 17, 2012.

If the extra days still do not allow your tax return to be completed and filed on time, then you may consider filing an extension.  Requesting an extension through Form 4868 provides you an extra six months to file your completed return.  This year, an extension delays the need to file a completed return until October 15th.  You may also have more time to file if you are currently living out of the country or are on active military duty outside of the United States.

Yet, don’t forget that even if you are filing an extension, you must still pay the taxes you owe by the April 17th deadline or you risk paying more due to penalties and interest. This is true even if you don’t yet know the exact amount you owe.  In that case, you must still submit a payment voucher and make a payment no later than the 17th to avoid penalties.

Contact us at McRuer CPAs if you need more information at: 816.741.7882.

Tax Penalty Relief for Farmers in MF Global Controversy

Farm CombineThousands of Midwestern farmers affected by the MF Global bankruptcy last October are now also facing tax questions.

Because of ongoing litigation, most of the farmers did not receive their Form 1099 from the bankrupt company in time to file their 2011 tax calendar year return.  The deadline was March 1st.

In a new update, the IRS says it will allow the affected farmers to apply for a waiver of the estimated tax penalty and has issued instructions on how to do so by using Form 2210-F. 

MF Global’s bankruptcy was the 8th largest in U.S. history affecting tens of thousands of equities and commodities clients. 

Defamed leaders are under investigation to explain a shortfall of more than one billion dollars from client accounts that may have been used illegally to cover a faulty investment in European Sovereign Bonds.

MF Global traces its roots back to sugar trading in the 1700s. It diversified from cash commodities to commodities futures in the 1970s.  Several incidents in the management of funds have been reported since that time including a scandal involving wheat futures trading.

Learn more about tax penalty relief.

04/04/2012

Ouch! I’ve been Audited!

So, you thought you did everything right, but you’ve received that terrifying letter from the IRS saying, “You’ve been selected for an audit.”   It’s frustrating, but it’s best to take action steps right away, including a call to your tax advisor.

How are you selected?  The IRS has a confidential computerized scoring system that determines the “norm” for income and deductions.  If your individual or business tax return falls outside the norm, the likelihood that you’ll be audited increases.  Experience shows that the amount of deductions relative to personal income and the ratio of business income compared to claimed profits seem to be the factors that most often cause a return to be automatically selected for an audit.

What do you do first?  Take a breath and get organized.  It’s about the law, not emotions.

Consult with your tax advisor before responding to the IRS so you will be better prepared for the kinds of questions you may be asked and you'll know your rights.  For example, your CPA can work directly with the IRS on your behalf on a professional basis speaking the same language as the IRS avoiding possible emotional responses that can cause disruptions.

It's important to maintain a positive attitude as you compile all the requested records.

Tips to consider:

  • Develop a game plan with your tax advisor before submitting your response.
  • Respond in a timely and friendly manner.
  • Give the IRS agent only the information and documents that are being requested.
  • Take nothing in the room you wouldn't show the auditor.
  • Never give the IRS the only copy you have of a document and don’t leave your original documents with an auditor.
  • Let your tax advisor review documents before you sign them and make certain you fully understand what you’re signing.
  • You have the right to request copies of any documents you sign.
  • When given a bill, you may agree to pay it or request a hearing with an appeals officer.
  • You have the right to appeal the audit’s findings.

Types of Audits:   A Correspondence Audit is a letter from the IRS requesting copies of receipts or documents to prove your deductions.  An Office Audit is submitted by letter, too, and requests specific documents be physically brought by you or your representative to a local IRS office. 

A Field Audit is a request made by phone to conduct an audit at your place of business.  It is crucial that you have representation for this kind of audit. 

A Taxpayer Compliance Measurement Program or TCMP Audit involves a total audit in which every part of the return must be substantiated with documentation.  This is the most intensive and expensive audit.

The IRS reports that nearly 4 percent of filed tax returns are audited.  That is nearly double the rate compared to previous years. 

Honestly, because so many laws are subject to interpretation, any tax return can be targeted by the IRS.  Bottom line: if you’re audited, communication is key to successfully navigating through tough questions and managing responses favorably.

At McRuer CPAs, we’re here to help should you need us.  816.741.7882.

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