INTAXACT

Why Pay for Tax Representation?

david — Sat, 25 Feb 2012 17:19:55 +0000

Paying a tax professional to represent you before the IRS or any other taxing agency, is not for everyone and honestly could be an unnecessary waste of money. But here are five situations where it IS necessary?

You are afraid or unsure of how to deal with the IRS or taxing agency on your own. There is a definite “fear factor” that takes place when you receive that letter from the IRS. You cannot discount this as a reason to pay a tax professional for representation. Fearful people often get themselves into deeper trouble by saying too much when they contact the IRS. When speaking to the IRS, anything you say will be used against you. The objectivity of a tax professional can often be essential for resolving a tax case. It is hard to place a value on the PEACE OF MIND that comes from having a qualified individual handle your IRS dealings.

You owe large amounts of money to the IRS or other taxing agency. The larger the amount owed, the higher the stakes become. The IRS and other taxing entities get more aggressive when these amounts are higher. You will often benefit from having a tax professional lower the temperature of the negotiations and handling the matter for you.

Your assets and income have been levied by the IRS or other taxing agency. Many levies can be removed through use of several tools currently available. Levy releases require a great deal of work in a very short period of time. A qualified tax professional will know how get the levies removed or reduced quickly.

You have not filed for many years or the IRS filed returns on your behalf. The IRS will prepare a Substitute Filed Return (SFR), but they will not prepare it in a manner that gives the taxpayer all of the deductions or credits they may be entitled to claim. There is a tendency for a non-filer to overestimate the task of resolving their tax situation. Many taxpayers think that they need to file returns with information they lost in their last move or thrown away. In most cases, the situation is NOT as a bad as the taxpayer thinks. A licensed tax professional can often research a taxpayer’s records and properly determine the minimum number of returns that need to be prepared.

Your case has been assigned to a Revenue Officer, the Large Dollar Unit of ACS or Regular ACS. If your case is assigned to one of these, which means your case is serious. You will be subject to aggressive collection actions. People working in these roles are everyday people and are capable of making errors or overstepping their powers. They understand how effective the “fear factor” is and do not hesitate using that to their advantage. By engaging a professional representative automatically lowers the aggressive nature of the proceedings and ensures that your rights as a taxpayer are defended.

INTAXACT CPA’s have worked with the IRS and other taxing entities for over 20 years and are knowledgeable in how to make your tax problems go away. Contact an INTAXACT CPA today to get help now!

Small Business — Beware the 1099-K!

david — Mon, 30 Jan 2012 01:58:59 +0000

As hard as it is to believe, the IRS has concluded that some small businesses do not report all of their credit card income. They estimate that $120 billion in taxes go uncollected each year because of under reporting by small business. They would like to get their hands on these funds!

Recent media stories reported that small business welcomed a repeal of the requirement to issue 1099-MISC forms for all payments totaling more than $600, including goods and services. The general consensus was that the 1099-MISC reporting would put an undue burden on small business. Although there was great applause for this action, the Form 1099-K slipped past without much notice. Merchant Card and Third Party Networks like the very popular PayPal are now required to issue Form 1099-K to anyone with at least 200 transactions totaling $20,000 or more as part of the Housing Assistance Act of 2008. As with many new IRS initiatives, there will be exceptions for some taxpayers that do not meet this minimum requirement. There has been little to no discussion about the burden 1099-K reporting would place on Merchant Card, Third Party Networks, and especially small businesses without accurate accounting systems in place.

Experts generally agree that if the IRS sees some success from this effort, they will not hesitate to tighten up the limits or expand the reporting requirements. Having systems in place early will make it much easier to deal with changes that are sure to come.

According to Douglas H. Shulman, IRS commissioner, “Beginning in 2012, payment processors will be required to make an annual information report to the merchant and the IRS stating the gross amount paid to the merchant during a calendar year. This will help improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete.“

One of the problems many small business owners will encounter with the 1099-K reporting is that gross payments will be reported rather than the net amount actually received. This will require small businesses to keep track of the merchant and processing fees paid to ensure they are deducted as normal business expenses. Without deducting the processing fees, it would be easy for a small business to overstate their income.

If small business owners are using their PayPal accounts to receive money from friends and relatives as an easy means of transferring money, they may want to reconsider this practice. All of these funds will be reported on the 1099-K just like the actual sales income. If gifts or loans from friends and family are included in the amounts reported on the 1099-K, it may require some extensive explanation to the IRS about why the income reported on the tax return is significantly less than reported on the 1099-K.

Another little known aspect of the 1099-K reporting is that revenue is reported by month. This will cause many small business owners not making quarterly estimated payments to incur underpayment penalties. The IRS expects all small business owners to make estimated tax deposits each quarter. The monthly reporting of income will make it very difficult to claim that income was seasonal now that the IRS will be armed with the 1099-K information.

There have been numerous comments in a variety of forums and blogs about small business owners deciding to provide incorrect TIN or name information as a means to circumvent the reporting requirements. This practice is not recommended because the IRS will force the Merchant Card and Third Party Networks to begin withholding from these accounts at a 28% rate. Reviewing the accuracy of the information currently on file with your provider or filing an accurate W-9 or W-8 will prevent this problem from occurring.

Starting in 2012, it will become more and more important for small business owners to implement or adjust accounting systems as well as a deeper understanding of their businesses. Many small business owners are looking to CPA’s to help them with the accounting and incorporate that into their tax planning. Are you ready? Contact an INTAXACT CPA today!

What Is A Registered Tax Return Preparer (RTRP)?

david — Tue, 24 Jan 2012 17:06:16 +0000

The IRS requires all paid tax preparers to register with the IRS and obtain a PTIN. A preparer that is a CPA or an attorney are not required to pass a competency exam because of the continuing education requirements to maintain their licensure. Once a CPA or attorney obtains a PTIN, they are considered Registered Tax Return Preparers (RTRP).

Enrolled Agents, supervised preparers or non-1040 preparers must pass a competency exam and maintain continuing education requirements. Once a paid tax preparer passes the one-time competency exam, tax compliance and suitability check, they will become a Registered Tax Return Preparer (RTRP). It is important to know that any paid tax preparer may not call themselves an RTRP until receiving a certificate from the IRS.

As you go through your search for a qualified, Registered Tax Return Preparer, ask to see this certificate. You will never have to worry about this problem with INTAXACT. Your INTAXACT tax preparer is always a licensed CPA, so there is no question about the qualifications or ability to legally prepare your tax return.

Contact an INTAXACT CPA today and ensure that your return will be done fast, accurately, and at the best price by the right RTRP!

Attention Expats — Offshore Voluntary Disclosure Program Opens Again!

david — Mon, 09 Jan 2012 23:47:03 +0000

The IRS had so much success with the two previous programs; they reopened the offshore voluntary disclosure program for people hiding offshore accounts to get current with their tax obligations on January 9, 2012.

This time, the IRS will keep the program open for an indefinite period. They will announce a closing date when they feel that it has run its course.
The program is designed to allow taxpayers to get into compliance with their US tax obligations. The program is primarily designed to allow taxpayers to report assets being hidden abroad without criminal prosecution.

Unfortunately, the penalties can be very severe. You may face a 27.5 percent penalty, but you may qualify for a 5 percent penalty in some cases. Some smaller offshore accounts could be subject to a reduced 12.5 percent penalty if the offshore accounts or assets did not exceed $75,000 in any calendar year.

There are a large number of taxpayers opting for the “quiet disclosure” approach to getting their tax returns caught up. This group will be opting for examination. If you feel that you do not owe any tax and you do not have assets in excess of $75,000, this could be a good option for you.

As stated by IRS Commissioner Doug Shulman…“As we’ve said all along, people need to come in and get right with us before we find you,” “We are following more leads and the risk for people who do not come in continues to increase.”

The IRS does not regularly impose a penalty if you do not owe any US tax. In any event, no matter which option you choose, you will want to get your tax returns prepared and filed with the IRS. Contact an INTAXACT CPA today to learn just how easy it is to get caught up with your US tax filing. We are here to help!

Second Special Voluntary Disclosure Initiative Opens — Aug. 31 deadline

david — Wed, 04 Jan 2012 22:54:03 +0000

WASHINGTON — The Internal Revenue Service announced today a special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be available through Aug. 31, 2011.

“As we continue to amass more information and pursue more people internationally, the risk to individuals hiding assets offshore is increasing,” said IRS Commissioner Doug Shulman. “This new effort gives those hiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it gives people a chance to come in before we find them.”

The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on Oct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative.

“As I’ve said all along, the goal is to get people back into the U.S. tax system,” Shulman said. “Combating international tax evasion is a top priority for the IRS. We have additional cases and banks under review. The situation will just get worse in the months ahead for those hiding assets and income offshore. This new disclosure initiative is the last, best chance for people to get back into the system.”

The new initiative announced today – called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) — includes several changes from the 2009 Offshore Voluntary Disclosure Program (OVDP). The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. However, the 2011 initiative does add new features.

For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties by the Aug. 31 deadline.

The IRS is also making other modifications to the 2011 disclosure initiative.

Participants face a 25 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty.

The IRS also created a new penalty category of 12.5 percent for treating smaller offshore accounts. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the 2011 initiative will qualify for this lower rate.

The 2011 initiative offers clear benefits to encourage taxpayers to come in now rather than risk IRS detection. Taxpayers hiding assets offshore who do not come forward will face far higher penalty scenarios as well as the possibility of criminal prosecution.

“This is a fair offer for people with offshore accounts who want to get right with the nation’s taxpayers,” Shulman said. “This initiative offers them the chance to get certainty about how their case will be handled. Just as importantly, those who truly come in voluntarily can avoid criminal prosecution as well.”

The IRS is handling processing of the voluntary disclosures in centralized units to more efficiently process the applications.

The IRS will also launch a new section on www.IRS.gov that includes the full terms and conditions on the 2011 Offshore Voluntary Disclosure Initiative, including an extensive set of questions and answers to help taxpayers and tax professionals. The web site also includes details on how people can make a voluntary disclosure.

In the first voluntary disclosure program in 2009, taxpayers faced up to a 20 percent penalty covering up to a six-year period. Taxpayers came forward with about 15,000 voluntary disclosures in that effort covering banks in more than 60 countries.

Shulman said IRS efforts in the international arena will only increase as time goes on.

“Tax secrecy continues to erode,” Shulman said. “We are not letting up on international tax issues, and more is in the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.”

OVDI Deadline Moved To September 9, 2011

david — Mon, 29 Aug 2011 01:02:48 +0000

US expats have a little more time to file for the Offshore Voluntary Disclosure Initiative (OVDI) thanks to Hurricane Irene. The IRS announced on Friday, August 26, 2001 that the deadline has been moved to September 9, 2011 for those seeking entry into the amnesty program.

The speed of information dissemination has done an incredible job getting the word out about the OVDI program and scaring a lot of expats half to death. We have received numerous calls about this program and two questions have been at the top of the list. How much will I owe for penalties?

Odds are for most expats, you will not be penalized. The OVDI program FAQ’s No. 17 and No. 18 provide relief if you meet certain criteria. The information in the following paragraph summarizes these FAQ’s.

US expatriate citizens that reported all of their taxable income, but recently learned of their filing requirements for the Form TD F 90–22.1, Report of Foreign Bank and Financial Accounts (FBAR), or other U.S. foreign information returns like Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) or Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) can obtain penalty relief by filing these delinquent returns.

If you need help with getting into compliance with your US tax filing, please contact an InTaxAct CPA today. We have fair pricing and offer multi-year tax preparation packages.

The Expanded Adoption Tax Credit

david — Wed, 27 Jul 2011 16:26:55 +0000

If you are adopting a child in 2011, the Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

The adoption tax credit, which can be as much as $13,170, offsets qualified adoption expenses making adoption possible for families who could not otherwise afford it. Taxpayers who adopt a child in 2010 or 2011 may qualify if you adopted or attempted to adopt a child and paid qualified expenses relating to the adoption.

Taxpayers with modified adjusted gross income of more than $182,520 in 2010 may not qualify for the full amount and it phases out completely at $222,520. The IRS may make inflation adjustments the phase-out amount as well as to the maximum credit amount.

You may be able to claim the credit even if the adoption does not become final. If you adopt a special needs child, you may qualify for the full amount of the adoption credit even if you paid little or no adoption-related expenses.

Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of the child who is under 18 years old, or having physical or mental limitation making them incapable of caring for themselves. These expenses may include adoption fees, court costs, attorney fees and travel expenses.

To claim the credit, you must file a paper tax return including Form 8839, Qualified Adoption Expenses. You must attach documents supporting the adoption. Documents may include a final adoption decree, placement agreement from an authorized agency, court documents and the state’s determination for special needs children. Failure to include required documents will delay your refund.

The IRS is committed to processing adoption credit claims quickly, but it also must safeguard against improper claims by ensuring the standards for this important credit are met. If your return is selected for review, please keep in mind that it is necessary for the IRS to ensure the legal criteria are met before the credit can be paid. If you are owed a refund beyond the adoption credit, you will still receive that part of your refund while the review is being conducted.

FBAR – Report of Foreign Bank and Financial Accounts – Form TD F 90–22.1

david — Fri, 24 Jun 2011 02:46:26 +0000

It is a normal practice for people to have bank accounts at a bank near their homes for convenience. This is also true for many American expatriates living abroad as well. Most expats set up a foreign bank account in their host country to make it easier to deal with living abroad.

The IRS makes this process a bit more cumbersome for expats by requiring the filing of Form TD F 90–22.1 by June 30 of each year. This is an information report that will not require or incur the payment of any taxes. This form is not eligible for an extension as with many other IRS forms.

The information that must be reported includes foreign bank accounts, brokerage accounts, mutual funds, securities, trusts, or any other financial account that would be considered a cash or cash equivalent account, which contains the U.S. Dollar equivalent of $10,000 or more in aggregate at any time during the tax year.

Example #1: Bob has a checking account with a balance of $7,500 and a savings account with a balance of $3,500. Bob is required to report both accounts because the aggregate amount is $11,000.

Example #2: Sally has two checking accounts with $675 in each of them and a savings account with $8,500. Sally will not be required to file because the aggregate amount for all accounts is only $9,850.

The TD F 90–22.1 is NOT filed with your tax return. The only connection that this form has with your tax return is a check box on line 7a on the Schedule B if you are required to file that with your return. If you do not have interest or dividend earnings or your interest and dividend earnings are less than $1,500, you will still need to file a Schedule B with your return.

You can download a copy of the TD F 90–22.1 form from the IRS website at http://www.irs.gov/pub/irs-pdf/f90221.pdf if you choose to complete the form on your own. If you are an InTaxAct client, we will prepare the form for you as part of our preparation process for no additional charge.

The IRS office that handles the processing of the FBAR forms is located in Detroit, Michigan. You can mail it to them at:

U.S. Department of the Treasury

P.O. Box 32621

Detroit, MI 48232–0621

U.S.A.

If you are a little behind on getting your form prepared and need to get it to the IRS quickly, you can send it via courier delivery to:

IRS Enterprise Computing Center

ATTN: CTR Operations Mailroom, 4th Floor

985 Michigan Avenue

Detroit, MI 48226

U.S.A.

Telephone: (313) 234‑1062

If you have any questions regarding the FBAR and TD F 90–22.1 or any other expatriate tax issues, please contact an InTaxAct CPA today!

IRS Mileage Rate Increases to 55.5 Cents per Mile

david — Thu, 23 Jun 2011 21:56:51 +0000

There is some great news for those of you using your car for business purposes. The IRS just announced that the standard mileage rate will increase to 55.5 cents per mile beginning July 1, 2011 for the remainder of 2011. This represents a 5.5 cent increase per standard mile. That might help take a little sting out of those exorbitant gas prices.

It will be very important to keep a good mileage log with dates for tax time. The mileage will need to be shown for the first six months and then again for the second six months of the year.

If you need more information or help with other deductions for your small business, contact an InTaxAct CPA today for your free consult.

Foreign Earned Income Exclusion – Form 2555 and Form 2555EZ

david — Sat, 18 Jun 2011 22:01:18 +0000

As a U.S. citizen working and living outside of the US and its territories, you are entitled to take advantage of the Foreign Earned Income Exclusion.

United States citizens, resident aliens, and green card holders that work and live outside of the U.S. can exclude all or part of their foreign earned income when filing their U.S. federal tax return. You also qualify to exclude compensation for personal services or certain foreign housing costs.

To qualify for the foreign earned income exclusion, a U.S. citizen, resident alien, or green card holder must have a tax home in a foreign country and receive income for working in that foreign country. (Foreign Earned Income). You must meet either the bona fide residence test or the physical presence test.

The foreign earned income exclusion is adjusted annually for inflation. The maximum exclusion per qualifying person is $91,400 for 2009, $91,500 for 2010, and $92,900 for 2011. This can be increased through use of the housing exemption.

The foreign earned income exclusion and the foreign housing exemption are claimed using Form 2555 — Foreign Earned Income Exclusion and becomes a part of Form 1040. A shorter version is Form 2555-EZ — Foreign Earned Income Exclusion.

The foreign tax credit cannot be claimed on the excluded income.

As a U.S. expatriate, there is no reason to be afraid of filing your U.S. tax return. Most of our clients end up with no U.S. tax when they file. Become an InTaxAct client today and let our U.S. licensed CPA’s help you get through the IRS tax maze. Our service is fast, accurate, and fairly priced at $329 including all the necessary forms.