Jan 31, 2011 due date...

Tax reports due today:

• Form 720 - 4th Qtr ending 12/31/2010
• Form 730- December 2010
• Forms 1098, 1099, W-2, and W-2G
• Form 2290, 940, 941, 943, 944/945

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IRS Begin processing tax return date

Beginning Feb. 14, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction. Based on filings last year, about nine million tax returns claimed any of these deductions on returns received by the IRS before Feb. 14.  Source IRS

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Tipical E-file Errors

Taxpayers can be missing thousand of dollars worth of tax credits if they do not know how to do the calculations correctly and/or do not understand the tax law.  For example:

Form 1040-EZ:  Work pay (could be worth $400-$800), Schedule M and govt retiree credit calculations.

Form 1040A:   Same as above, plus the education credits (Could be worth $1,000+) and the computation of education interest deductions (could be worth $1,000+).

Form 1040:  Work pay ($400-$800) Credit, Schedule M and govt retiree credit calculations.  Health savings account deductions, student loan interest deductions (could be worth $1,000+).

Source IRS (January to December 2010 data)

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Tax Tips for Self-employed Individuals

If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

Here are six things the IRS wants you to know about self-employment:

 

• Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.

• If you are self-employed you generally have to pay Self-employment Tax. Self-employment 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. You figure SE tax yourself using a Form 1040 Schedule SE.
•  
• If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.

• You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.  

• To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business.
• Source IRS 

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FY 2011 US Budget: Part 1

The tax gap, or diference between the amount owed under tax law and the amount actually paid on time, is estimated to be $345 billion.  Addressing this gap through improved voluntary compliance is a top priority of the treasury department.

The US budget provides $250 million in new enforcement initiatives to improve compliance.  These initiatives are expected to produce $1.9 Billion in additional annual enforcement revenues once the new hires reach full potential in 2013. 

What is this mean?  It means more audits and compliance issues for taxpayers.

Source: US Treasury



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Payroll Deposits

If you are required to make by-weekly payroll deposits to the IRS, you have until this Wednesday, January 26, 2011.  (Apply for payroll payments pay between January 19-21) And If you have not done your tax return yet, you can still notify me to set an appointment.   

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Work Pay Tax Credit

Are you eligible for the Making Work Pay Tax Credit in 2010?  it would depend on several factors like: What s your filing status?  How much you earned in 2010? Are you a dependent of someone else? These are some of the relevant questions .

  

Practical information to know about this tax credit:

• The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
• Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
• Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.
• Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.

You cannot take the credit if:

1. your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return,
2. you do not have a valid social security number or
3. you are a nonresident alien.

Source IRS


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Payments to the Government after 13/31/2011 requires a 3% or not?

Withholding on government payments delayed. For payments made after Dec. 31, 2011, governments at the federal, state and local levels will have to deduct and withhold tax in an amount equal to 3% of any payments they make to a person providing property or services. However, the IRS has announced that withholding and reporting requirements will not apply to any payment made by payment card, including credit cards, debit cards, and stored value cards, for any calendar year beginning earlier than at least 18 months from the date further guidance on this subject is finalized. Thus, the new requirements will not apply to payment card payments for the 2012 calendar year.

IRS source





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Are you filing a 1040 with Schedule A? You may want to delay filing 'til Feb.

The 2010 Tax Relief Act passed later in the year had caught the IRS of guard and they need time to reprogram its computers for the new changes.  This does not apply to all taxpayers.  Some taxpayers planning to file their 2010 tax returns early have been advised by the IRS to wait until mid- to late-February, 2011.

Who are affected? Affected taxpayers are those planning to file Schedule A or claim above-the-line deductions for higher-education tuition and fees or educator expenses.

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