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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