TAX CALENDAR- January 1-31, 2012

January 6, 2012

Deposit payroll tax on Jan 1-3 if the semiweekly deposit rules applies to you.

January 10, 2012

Employees who work for tips. If you received $20 or more in tips during December, report them to your employer. You can use Form 4070, Employee's Report of Tips to Employer.

January 11, 2012

Deposit payroll taxes for payments on January 4-6. if the semiweekly deposit rules applies.

January 13, 2012
Deposit payroll taxes for payments on January 7-10, if the semiweekly deposit rules applies.

January 16, 2012 Holiday Martin Luther King's Birthday.

January 17, 2012

Individuals. Make a payment of your estimated tax for 2010 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2010 estimated tax. However, you do not have to make this payment if you file your 2011 return (Form 1040) and pay any tax due by January 31, 2012.

Farmers and Fishermans: Pay your estimated tax for 2011. Use form 1040ES.

Employers: Deposit payroll tax for December 2011 if the monthly deposit rules applies.

January 19, 2012

Deposit payroll taxes for payments on January 11-13, if the semiweekly deposit rules applies.

January 20, 2012Deposit payroll taxes for payments on January 14-17, if the semiweekly deposit rules applies.

January 25, 2012Deposit payroll taxes for payments on January 18-20, if the semiweekly deposit rules applies.

January 27, 2012Deposit payroll taxes for payments on January 21-24, if the semiweekly deposit rules applies.

January 31, 2012Individuals who must make estimated tax payments. If you did not pay your last installment of estimated tax by January 17, you may choose (but are not required) to file your income tax return (Form 1040). Filing your return and paying any tax due by today prevents any penalty for late payment of the last installment. If you decided to wait, then file and pay your tax by April 17.

(Disclosure: We are not responsible for due dates since it is not within our control, but the IRS.  We are not responsible for choices you made either based on the information provided here, you must consult your tax consultant or get an appointment with us to better explain the IRS due dates and related regulations that may apply to your particular situation.  Allways refer back to the IRS website for a more up-to-date nformation.)

Source: IRS.gov



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Do you qualify as an "Acredited Investor", under the SEC rules?

Interested in purchasing Unregistered Securities? 

New Security and Exchange Commission regulations prevent you from including your primary residence value as an Asset in the calculation.  In the past, investors were allowed to count their principal residence value plus other investments and in the agregate mee the $1 million Net Worth thereshold.   

Who are these Unregister Securities?
These securities may could be; hedge funds to derivatives and private debt.  Generally, these instruments could be less transparent and risky than other publicly registered offerings.  Because, they are highly leverage and risky these securities are only limited to oly acredited investors.

Why the change?

The Security and Exchange Commission (SEC) wants to define an accredited investor the same way is defined under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

(Source:  SEC website, 2010 Dodd-Frank legislation.)

Revised wording on 12/26/2011.




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Tax, Accounting, and Auditing: Year end tax tips...do not close the year without ...

Tax, Accounting, and Auditing: Year end tax tips...do not close the year without ...: With a few days to end the year, you must not overlook this last minute tips to reduce your 2011 taxes. Charitable Contributions – Itemiz...

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Year end tax tips...do not close the year without reading this..

With a few days to end the year, you must not overlook this last minute tips to reduce your 2011 taxes.

Charitable Contributions – Itemize deductions, Schedule A, donations to qualified charities no later than Dec. 31 can be deductible for 2011.  Clothing or household items, must be in good used condition or better to be deductible

       Documentation required: canceled check, a bank statement, credit card statement or a written statement from the charity, showing the name of the charity and the date and amount of the contribution for all cash donations. Rules varied with the amount donated. Consult your CPA.

       Caveat: charges to a credit card by Dec. 31 are deductible for 2011, even if the bill isn't paid until 2012.

Energy-Efficient Home Improvements – Green-energy home improvements to qualify for either of two home energy credits.  What's included?  Generally, insulation, new windows and water heaters to your main home can provide up to $500 in tax savings.

Residential Energy Efficient Property Credit- another Green Credit.  The credit equals 30 percent of the cost of qualifying solar, wind, geothermal, or heat pump property.

Portfolio Adjustment – Very important, you must do this every year.  Generally  net capital losses up to the amount of capital gains, then again $3,000 from other income. The trick is on the carryforward; you must know how to do the matching on your portfolio and going forward planning.

Retirement Accounts – Elective deferrals for next year final date is Dec 31, 2011.  401(k) plans or similar workplace retirement programs. 

        -Do not forget to set up a new IRA or add money to an existing IRA and still have it count for 2011.  If 50 or over, up to $6,000, $1,000 more. 

Retirement Savings Contribution Credit-  Available to low- and moderate-income workers who voluntarily contribute to an IRA or workplace retirement plan. The maximum Saver’s Credit is $1,000, and $2,000 for married couples. 

Qualified Charitable Distribution – For TP who are 70½ or over, you can make a distribution paid directly from your individual retirement account to a qualified charity.  The maximum annual exclusion is $100,000.

      Mayor benefit is- can be used to satisfy any required minimum distributions. Available even if you do not itemize deductions.

Small Business Health Care Tax Credit – a tax credit of up to 35 percent of the premiums paid; provided you paid up to 50%+ of the premiums.  Employers with fewer than 25 full-time employees who pays an average wage of less than $50,000 a year may qualify.

Merry X-Mass and Happy New year, and remenber that most of you need to have a tax check up at least once a year.

Source: IRS.gov



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2015 Mileage Standard Rates

Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 

• 57.5 cents per mile for business miles driven  

• 23 cents per mile driven for medical or moving purposes

• 14 cents per mile driven in service of charitable organizations

Source (IRS.gov)

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IRS historical perspective

The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of commissioner of Internal Revenue and enacted an income tax to pay war expenses. The income tax was repealed 10 years later. Congress revived the income tax in 1894, but the Supreme Court ruled it unconstitutional the following year.

In 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax. That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.

In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments.

In the 50s, the agency was reorganized to replace a patronage system with career, professional employees. The Bureau of Internal Revenue name was changed to the Internal Revenue Service. Only the IRS commissioner and chief counsel are selected by the president and confirmed by the Senate.

The IRS Restructuring and Reform Act of 1998 prompted the most comprehensive reorganization and modernization of IRS in nearly half a century. The IRS reorganized itself to closely resemble the private sector model of organizing around customers with similar needs.

Source IRS.gov





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Small Business fraud

According to the Article published by a Linkend group member, Terry Corbell, "Small companies are fleeced by an aggregate $2.9 trillion from employee fraud -- suggesting the need for financial controls".  (Research done by the Association of Certified Fraud Examiners or ACFE.)

ACFE research showed:

• The median loss is $150,000, or 5 percent of the annual revenue.
• Twenty-five percent of the persons responsible for the fraud had been trusted employees-at least 10 years in the company.
• Thirthy percent of the companies have 100 or fewer workers.
• It took the company about a year and a half before discovering the shortages.
• More than 85 percent of the perpetrators didn’t have records of ever committing fraud.

Some considerations that could explain the findings are: 

• Some long-time employees seem to have a sense of entitlement when working at small companies that probably pay less than large firms.
• Small companies are probably more trusting of workers and are likely less sophisticated in financial controls while being focused on marketing for survival.

 What can you do to mitigate these findings:  

• These findings suggests the need for the implementation of sound financial internal controls on the day to day operations.
• The need for some insurance protection against losses.  
• The need of a thrird-party professional to review your finances, and internal control structure.
• Cooperation between your insurance company and your accountant to explain/understand your risk and controls so you can better be protected at a reasonable cost. 

Opinion- Personal in Nature:

These findings are alarming considering that for a small business with total sales of $500,000 could be at risk of lossing thousand of dollars in a given year (i.e., 5 percent of total Revenues) from fraud perpetrators.  

I recognize that most small businesses cannot afford a full-time CPA in their organization, but they could afford to engage for few weeks a professional with strong credentials (i.e., CPA, CFE, or CIA) for a fraction of a cost of a full time employee.  This professional could come to your business at least once a year and look out your weakenesses and recommend improvements in your internal controls to help you prevent and mitigate away from these alarming events.  The cost of hiring a CPA outweight many times over your potential losses.  

Definitions:
CPA= Certified Public Accountant
CIA=Certified Internal Auditor
CFE=Certified Fraud Examiner

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Taxpayers can be assessed accuracy-related penalties.

These IRS penalties can be the result of many factors, and I am not pretending to outline all posibilities. One that comes to mind is the Omission of Income. In this case maybe the taxpayer acted on the belief that the item in question was not income contrary to a specific IRS regulations and the like.  Maybe because, the taxpayer is under the belief that their is not a specific regulation that address the transaction in question. 

The general rule start from the premise that everything is income unless specifically exempt from taxes. That in itself stress the importance of having a tax professional on your side to look all transactions you had been involved. 

It can get even worst if the understament is over $5,000 or 10% of the tax required to be shown on your tax return. In this case the required accuracy-related penalty is 20% of the underpayment amount, or $400 ($5,000 x 20%).

Be careful and make sure that all items of income are included, it is the taxpayer responsibility.  They are exeptions, rules and procedures to be followed not discussed here.

For more information you may want to go to http:///www.irs.gov

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Taxpayer Indentification Number

Definition of TIN.

TIN is a Taxpayer Identification Number.

Types of TIN.

They are many types of TINs: Social Security Number (SSA), Employer Identification Number (EIN), Individual Taxpayer Identification Number (ITIN), Adoption Taxpayer Identification Number (ATIN), and Preparer Identification Number (PTIN).

Self-employee:

If you are self employee, you probably are using a SSA, EIN, TIN, and or a PTIN; depending on many factors such as type of work and entity.  You must provide the correct TIN number to the vendor you provide services to so that he or she can prepare/submit the necessary forms to you and the IRS at year end.

Employers:

All employers are required to obtain the correct TIN from vendors they get service from to be in compliance with the IRS regs and applicable IRC law.  Failure to do obtain the correct TIN and do the due deligence documentation required can make you subject to penalties.  In the event you do everything possible to obtain accurate information you are required make all payments to the payee subject to backup withholding. In some cases is 28% and others 30% of the amount paid. 

Payments that can be subject to backup withholding include: interest, dividends, rents, royalties, non-employee compensation, broker and bartering exchange transactions.

Due Diligence from Employers: (some of notice are below)

1-Ascertain that the TIN provided is correct

2-Update information from provider

3-Solicit and proerly document all efforts to obtain correct information

4-Make all efforts by the due date

5-Have Policies and Procedures

Failure to know the IRS regulations and keep documentation cannot relief you from being penalized by the IRS.

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Earned Income Credit changes for 2012

IRS Issues Proposed Regulations - That Would Require Tax Preparers to File Due Diligence Checklist with All EITC Claims Submitted in 2012.  THIS IS A PROPOSAL not a requirement just yet.  

IR-2011-98, Oct. 6, 2011

Proposal reads:

Preparers wold be require, beginning in 2012, to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC). It is the same form that is currently required to be completed and retained in a preparer’s records.  So, the propsed regulation require you, the preparer, to attach along with the tax return.

Objective

The due diligence requirement, enacted by Congress over a decade ago, was designed to reduce errors on returns claiming the EITC, most of which are prepared by tax professionals.

Currently we have...

The IRS created Form 8867, Paid Preparer's Earned Income Credit Checklist, to help preparers meet the requirement by obtaining eligibility information from their clients. Preparers have been required to keep copies of the form, or comparable documentation, which is subject to review by the IRS. To help ensure compliance with the law and that eligible taxpayers receive the right credit amount, the proposed regulations would require preparers, effective Jan. 1, 2012, to file the Form 8867 with each return claiming the EITC.

Further details can be found in REG-140280-09. Comments on the proposed regulations are due by Nov. 10, 2011, and a public hearing on the proposed regulations is scheduled for Nov. 7, 2011.

What's EITC

The EITC benefits low-and moderate-income workers and working families and the tax benefit varies by income, family size and filing status. Unlike most deductions and credits, the EITC is refundable –– taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.

Although as many as one in five eligible taxpayers fail to claim the EITC, some of those who do claim it either compute it incorrectly or are ineligible. The IRS is proposing this step as part of its efforts to ensure that the credit is afforded to taxpayers who qualify. For 2009, over 26 million people received nearly $59 billion through the EITC. Tax professionals prepare close to 66 percent of these claims.

Source: http://www.irs.gov/

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2011 IRS Mileage rates

On June 23, 20011, the Internal Revenue Service announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

Business Miles:

The rate will increase to 55.5 cents a mile and apply to miles driven from July 1, 2011, through Dec. 31, 2011.

Medical and Moving miles rates:

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011.

Charitable mile rate:

The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Actual cost vs Mileage rate:

The optional business standard mileage rate and the actual cost are methods generally used to compute the deductible costs of operating an automobile for business use.

The mileage rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Keep in mind that gasoline price is a significant factor in the mileage figure, but not the only factor to take into account. Other factors are depreciation and insurance and other fixed and variable costs of operating a vehicle.

Source: IRS.gov

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Tax Relief for Employers who wants to reclassify workers correctly

The IRS resently (7-21-2011) launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers-from self-employee to employees.

At low cost means:

..making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

IRS Program objective is...

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

Who is elegible?The applicant must:

1- Consistently have treated the workers in the past as nonemployees,

2- Have filed all required Forms 1099 for the workers for the previous three years, and

3- is not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.

Benefits for participating:

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Source: IRS.gov






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Tax, Accounting, and Auditing: Bartering is taxable Income

Tax, Accounting, and Auditing: Bartering is taxable In come: In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. ...

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Bartering is taxable In come

In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.

Form to report income.

Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.

Income tax reporting.

Taxes Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.

Source: htpp://www.irs.gov

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Tax relief on reporting as Income any Cancelation of Debt

Debt discharge income is reported on the IRS form 1099-C of an individual or business from a taxpayer's personal residence, rental properties , business debts or personal debts (e.g., credit card debts).

What is the tax remedy?

The IRS regulations allows you to exclude all or a portion of the debt canceled (i.e., income reported on 1099-C), if the taxpayer is either insolvent or is Bankrupt. 

Do you need to do any calculations?

Yes, you not only need to file a form with the IRS but you need to run the numbers and consider what constitute your Insolvency by consiidering all your Assets and Liabilities at their Fair Market Value and oustanding liabilities.  For some taxpayers this calculations can involve lots of calculations and considerations.  So there is tax relief if you have to consider thousands of dollars as Income and you are not getting actual money.

Get some help from a tax professional it is well worth it.

Source: IRS.gov

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Self-employed individual

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040. But in some situations your loss is limited.  (See Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) for more information.)

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions.

Do not wait until year end to determine if you have net earnings of $400 or more; do the calculations every quarter; 'cause you may be required to sent quarterly estimated payments to the IRS.

Source: http://www.irs.gov/

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Employment news

According to the U.S. Dept of Labor Economic News release of Sept. 16, 2011, the national jobless rate for the month of August 2011 remained unchanged at 9.1 percent but was 0.5 percentage point lower than a year earlier. For the month; we noted that twenty-six states reported rate increases, twelve states reported decreases, tand he remaining twelve states reported no rate change.  

Non farm employment over-the-year results as follows:  25 states experienced statistically significant changes in employment, 24 of the 25 were increases.  The largest increases occurred in TEXAS (+232,200), followed by California (+171,300), New York (+83,400), and Michigan (+79,800).  The only state with an over-the-year statistically significant decreases in employment was Georgia (-29,500).

For the Month of August; Texas unemployment rate stand at 8.5% , California at 12.1%, Michigan at 11.2%, and New York at 8.0%.

The Metropolitan area employment and unemployment news release for August is scheduled to be released on Wednesday, Sept. 28.  

Source: US Bureau of Labor Statistics 


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Cancelation of debt is reportable income...

Cancellation of debt income is taxable as ordinary income. Internal Revenue Code section 61 provides that gross income means all income from whatever source derived.

Section 61(a)(12) specifically includes “income from discharge of indebtedness” as an item of gross income.

COD income can arise in a number of areas, such as:

        •Cancellation of credit card debt

        •Foreclosure of personal residence, or

        •Cancellation of an automobile loan

SOURCE: IRS.gov  http://www.irs.gov/

 

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U.S. Securities still attractive for foreign Investors..

Foreign residents increased their holdings of long-term U.S. securities in July — net purchases were $24.6 billion. Net purchases by private foreign investors were $10.4 billion, and net purchases by foreign official institutions were $14.2 billion. At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $15.1 billion.

Taking into account transactions in both foreign and U.S. securities, the net foreign purchases of long-term securities were $9.5 billion. After adjustments, such as estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities, are included, the overall net foreign acquisition of long-term securities is estimated to have been negative $17.2 billion in July.

Foreign holdings of all dollar-denominated short-term U.S. securities and other custody liabilities decreased $36.5 billion. Banks’ own net dollar-denominated liabilities to foreign residents decreased $7.6 billion.

In sum, the net foreign acquisitions of long-term securities, the change in foreign holdings of short-term U.S. securities, and banking flows yielded monthly net TIC outflows of $51.8 billion. Of this, net foreign private outflows were $44.4 billion, and net foreign official outflows were $7.4 billion.

Source: US Dept of Treasury

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TAX RELIEF- Extended due date

Taxpayers who reside in, or have businesses in counties that were declared federal disaster areas can file certain returns late. This apply to the states of New York, New Jersey, North Carolina, and Puerto Rico.

Certain deadlines falling on or after August 25, and on or before October 31, have been postponed to October 31, 2011.  Includes corporations and other businesses that previously obtained an extension until September 15 to file their 2010 returns, and individuals and businesses that received a similar extension until October 17. 

The extended due date also applies to the estimated tax payment for the third quarter, normally due September 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after August 25, and on or before Sept. 9, as long as the deposits are made by September 9, 2011.

Source: IRS.gov

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Outsourcing the Payroll Functions?

Three Tips for Employers Outsourcing Their Payroll, according to the IRS website.

Background:

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.  Recent prosecutions of individuals and companies who - acting under the guise of a payroll service provider - have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following: 

1. The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you - the employer - are the responsible party.  The IRS can also hold you personally liable for certain unpaid federal taxes.

2. If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business.

3. Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.

For more information; the IRS web site – www.irs.gov has more information.

Source: IRS.gov

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IRS reduction on Interest Rates

The Internal Revenue Service announced that interest rates will decrease for the calendar quarter beginning Oct. 1, 2011. The rates will be: 

• 3 % for overpayments ( 2% for corporations),
• 3% for underpayments;
• 5% for large corporate underpayments; and
• 0% - 0.5% for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

  

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

 

The interest rates announced today are computed from the federal short-term rate during July 2011 to take effect Aug. 1, 2011, based on daily compounding.

 

Source:  IRS.gov

 

 

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Back to School Expenses, Taxes, and your Wallet.

Copping with School Expenses:

Back to School is just around the corner and with that $$$ ...for tuition, books, and supplies.   The good news is that they are some tax benefits that can help offset students costs.

Who qualify?

Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return.

Under which IRS Regulations?

American Opportunity Credit- The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education. Forty percent of this credit is refundable.  It covers, tuition and fees, course related books, supplies and equipment. Generally available to eligible taxpayers whose modified adjusted gross income is below $80,000 ($160,000 for married couples filing a joint return).

Lifetime Learning Credit In 2011-  A credit of up to $2,000 for qualified education expenses. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.  To qualify, your modified adjusted gross income must be below $60,000 ($120,000 if married filing jointly).

Some of the Terminology you should know: 

What constitute "Tuition and Fees Deduction?"

What is consider "Qualified Education expenses"

How you calculate your "Modified Adjusted Gross Income"?

Who is considered an "Elegible Student?"

How much you are allowed to include?

Source: IRS.gov

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Tax Planning

The Internal Revenue Service issued guidance on the treatment of basis for certain estates of decedents who died in 2010. The executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply.

Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939.

However, you need to hire a CPA to do the numbers for you, to see which is a better option. 

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Legal Entity Identifier (LEI)

WASHINGTON – This Month, the U.S. Department of Treasury’s Office of Financial Research (OFR) issued the following statement on the progress made to date and next steps forward in the global initiative to establish a Legal Entity Identifier (LEI).

The plan is to issue a notice of proposed rulemaking that would require the LEI to be used for data reported to the OFR. 

“The OFR will continue to work with policymakers, regulators, and the private sector to achieve a mutually agreeable, effective, and timely global LEI solution,” said Richard Berner, Counselor to the Secretary of the Treasury. “An LEI would serve as a cornerstone in fulfilling the G-20 mandate to improve market integrity and regulators’ ability to mitigate risks posed to the financial system.”

The Financial Stability Board (FSB) is hosting a workshop on September 28 and 29 to discuss how to coordinate work on LEI and move the initiative forward. Additionally, because of the work that has been done to date, the OFR believes that sufficient progress can be made to allow for an initial phase of implementation in 2012, consistent with the needs of regulatory authorities in a variety of jurisdictions. The OFR intends to issue a notice of proposed rulemaking consistent with that timeline. In the United States, the OFR’s objective remains to coordinate with the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC), which are issuing rules for reporting swap transactions to trade repositories, and for all three agencies to require the same system for identifying parties in reporting.

An LEI is a unique number that would identify a legally distinct entity that engages in financial market activities. Currently, there are many ways to identify entities, but there is no universal identification scheme for legal entities across markets and jurisdictions.

During the recent crisis, the lack of a universal entity identifier made it difficult for firms and regulators to assess market exposures to risky or failing institutions. An LEI would promote financial stability by illuminating those exposures. It would also contribute to market efficiency by enhancing transparency for investors, reducing reporting burdens and other operational costs for financial firms, and improving customer service. Indeed, the Dodd-Frank Wall Street Reform and Consumer Protection Act created a critical sponsor in the LEI’s development: the OFR.

The OFR has conducted extensive outreach to solicit participation and input from a broad group of policymakers and regulators, and to facilitate global coordination on important issues, such as scope, governance, and implementation. A task force of the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) has been evaluating the potential use of an LEI for over-the-counter (OTC) derivative reporting worldwide. In the United States, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) proposed rules for swap reporting and expressed a preference for using an LEI for that reporting, if it can be established through international consensus and is available in a timely manner. The Canadian Securities Administrators published a consultation paper calling for each participant conducting a derivative transaction in Canada to be assigned an LEI based on universal internationally accepted standards. And recently the Hong Kong Monetary Authority (HKMA) published a consultation paper on reporting to the Hong Kong Trade Repository (HKTR), which states that the HKTR will work with the HKMA to consider how to incorporate a global LEI into that reporting.

The OFR is working with the FSB Secretariat and other authorities to organize the September LEI workshop, which will include stakeholders and experts in finance, data, and technology from the public and private sectors. One objective for the workshop is for public sector participants to develop a roadmap for their next steps in the development and implementation of an LEI.

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