Education Credits and Depreciation issues

The IRS wll begin processing Tax Returns with Education Credits and Depreciation charges this week.  The forms in question are:

• Form 8863- Education Credits (February 14, 2013)
• Form 4562- Depreciation and Amortiization (February 10, 2013)

Why the delay?

The IRS will be able to accept the education credits and depreciation forms following the completion of reprogramming and testing of its systems. Work continues on preparing IRS systems to accept the remaining tax forms affected by the American Taxpayer Relief Act (ATRA) enacted by Congress on Jan. 2.

 

What follows next?

 

The remaining forms affected by the January legislation the first week may begin processing earlier in March. A specific date will be announced later. 

Education Credits:

 

Form 8863- Education Credits. Form 8863 is used to claim two higher education credits like the American Opportunity Tax Credit and the Lifetime Learning Credit.

 

Depreciation and Amortization Charges:

 

Form 4562- Depreciation and Amortization. This applies to 1040 business filers.

 

What you mean by the delay?

 

Your tax return will not be processed until the patches are made and your tax refund may be delayed. 

 

 

More information is available on the IRS website or by contacting your CPA.

 

 Source: IRS.GOV

 

Hit Counter

January 30, 2013 to begin processing 1040s?

IRS Plans Jan. 30 Tax Season Opening For 1040 Filers

WASHINGTON — Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30 for some taxpayers. 

The IRS estimate that 120 million households that file early will be affected. The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.

The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.

Why the delay?

The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. ‬While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.

Who Can File Starting Jan. 30?

The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who can file past Jan 30?  

There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting these tax returns between late February and into March 2013.  Examples of tese forms are: Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms will be available soon on the IRS website-IRS.gov.

Updated information will be posted on IRS.gov.

Hit Counter

2012 Tax Relief Bill is pass

The US Senate passed a bill extending most of the tax breaks in effect in 2012, including the AMT patch and the extenders provisions.  The bill is expected to pass in the House and be signed into law by the President, soon. Some taxpayer may have to wait again, like they did in 2011, until mid February until the IRS may all adjustments to forms and computer processing code.

This bill was passed because of fear of the economy going into recession on more time. Details will follow, so consult with your tax accountant (i.e., CPA) for more up-to-date information.

Source: IRS.gov



Hit Counter

2013 IRS Tax Calendar- January 15, 2013

January 15, 2013

Pay the final 2012 estimated income taxes (Form 1040-ES). Include fiduciary estimated tax payments (Estate and Trust).

Hit Counter

Hurricane Sandy Relief Resurces

Small Tax-Exempt Organizations

Small tax-exempt organizations affected by Hurricane Sandy have until February 1, 2013 to apply for reinstatement of their exempt status.   

Who Qualifies?  The organization’s principal place of business or its records must be located in the covered disaster area. Organizations located outside the affected areas must still apply for transitional relief by December 31, 2012.

Employer-Sponsored Retirement Plans

The Internal Revenue Service announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Sandy and members of their families.

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

Hit Counter

Year end tax saving tips

Year-end tax savings tips

We all want to save in taxes and there are few suggestions:

• Pay the 2013 property taxes due in December 2012.
• Take advantage of all Tax Provisions that expire by year-end this year instead of next year.
• Realize capital gains by year end.
• Bunch all medical deductions, if you can, in one year.
• Selling capital assets this year.
• Etc...

Why this can be beneficial?

It will all depend on your income, the new tax changes, and the expiring provisions coming into next year.  They are talks about a raise in the tax rates, expiration and elimination of some tax provisions, and higher income thresholds. Everything is on the table for congress next month and there is speculation of a compromise.

Hire an Accountant or a Tax Attorney to see how these could impact your taxes.

Hit Counter

IRS factors to consider by courts in determining whether an individual is an employee or an independent contractor

The IRS defines an "employee" for employment tax purposes as "any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee."   The facts that provide evidence can fall in three major categories: Behavioral Control; Financial Control; and Types of Relationship.

What fators weight more than others?

Under common law rules, prior court cases had placed emphasis on the direct control and the method and manner in which the work is to be done.

Few of the many factors the IRS consider are:

1- the degree of control exercised by the principal;

2-whch party invests in the work facilities used by the worker;

3-the opportunity of the individual for profit or loss;

4-whether the principal can discharge the individual

5-whether the work is part of the principal's regular business;

6-the permanency of the relationship;

7-whether the worker is paid by the job or by the time;

8-the relationship the parties believed they were creating;

9-the provision of employee benefits;

10-training provided by the employer;

11-set hours of work;

12-doing work on the employer's premises;

13-furnishing tools and materials;

14-worker not making his/her services available to the general public on a regular and consistent basis;

15-requiring the worker to submit oral or written reports;

16-requiring the worker to provide the job on a sequence or order set by the employer;

17-a requirement that the work be performed personally;and

18-any other factors that the court determine relevant and based on the evidence presented under the circumstances.

The Texas Workforce Commission (TWC) have their own set of rules in their determination.  For a clear understanding of the man factors, you must consult the TWC, IRS regulations.

Source(s): various IRCs like Sec 3121 and  Sec. 3003.

May want to consult your tax attorney. 

Hit Counter

TAX CREDIT- Do you took advantage of this Tax Credit?

Expanded Work Opportunity Tax Credit- Available for Hiring Qualified Veterans:

The VOW to Hire Heroes Act of 2011 added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer’s share of social security tax.

DUE DATE:

The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013.

AMOUNT OF CREDIT:

As high as $9,600 per qualified veteran for for-profit employers or up to $6,240 for qualified tax-exempt organizations.  The credit will also depend on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. However, the amount of the credit for qualified tax-exempt organizations may not exceed the organization’s employer social security tax for the period for which the credit is claimed.

PRE-SCREENING AND CERTIFICATION

All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit.

FORM TO FILE

An eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their respective state workforce agency within 28 days after the eligible worker begins work.

The Form due date was June 19, 2012, for veterans hired on or after Nov. 22, 2011, and before May 22, 2012. The 28-day rule will again apply to eligible veterans hired on or after May 22, 2012.

SOURCE: http://www.irs.gov

Hit Counter

2012 Tax Calendar

Let's look at what is due on the last week of August 2012:

August 29, 2012:

• Deposit Payroll tax for payments on August 22-24 if the semiweekly deposit rules appplies.

August 31, 2012: 

• File Form 730 and pay tax on wagers accepted during July. 
• File Form 2290 and pay the tax for vehicles first used during July. 
• Deposit payroll tax for payments on August 25-28 if the semiweekly deposit rules applies.  

Source:  http://www.irs.gov


Hit Counter

IRS Compliance

The IRS has increased their compliance efforts to close the estimated tax gap of $345 billion dollars, so taxpayers should expect more scrutiny from the IRS.  With the help of technology and data mining, the IRS have many tools at their disposal to inquire about out of the ordinary and complex transactions than in the past.  The most common issues are automatic non-matching documents and the like as we moved to use e-filing tax returns and documents.  The IRS issues non compliance letters for multiple reasons and many have specific numbers requiring careful attention by the taxpayer and tax preparer.  CPAs and tax professionals must stay current on best practices to help taxpayers deal with these issues.  

The IRS commissioner, Doug Shulman, said in May of this year that the IRS created an office of compliance data analytics that help determine possible non compliance tax returns.

Be prepare, keep good records, and consult a tax professional or CPA if you receive an IRS notice.

Source:  IRS.gov

Hit Counter