IRS Announced, Todays That Interest Rates Beginning in Jan 1, 2010 Will Remain the Same As Last Quarter of 2009

The Internal Revenue Service today announced that interest rates for the calendar quarter beginning January 1, 2010, will remain the same as they were in the prior quarter. The rates will be:

four (4) percent for overpayments [three (3) percent in the case of a corporation];
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

For more information, visit irs.gov

Qualifing for an Offer in Compromise and Getting the Right Help

I refer people who have decided to file an Offer in Compromise, to our Enrolled Agent when thay live in the San Francisco Bay Area. However, when web visitors need help with OIC information, I refer them to http://www.oicadvice.com/index.html

Below is information from the above site, which provides quality information on the IRS's Offer in Compromise program.

OICs
Most OICs are based on a taxpayer's inability to pay the full amount owed to the IRS, or, alternatively, that paying the full amount will leave the taxpayer in dire financial hardship. The IRS uses extensive guidelines and standards for determining ability to pay and identifying potential hardship cases. A thorough knowledge of these guidelines and standards is absolutely essential for submitting a potentially acceptable OIC.

Different Types of Income Information Needed to File Past Due Returns

Need to file your past due returns?

You will need the following information:

Income
(Self/spouse: married filing joint return)

To request past due tax return income information for yourself and/or your spouse call the IRS at (866) 681-4271

You may also request income information by contacting your employer, financial institute, or any other source of income.

Common Types of Income:

Wages, Salaries, Tips, etc. - Form W-2
Certain Gambling Winnings - Form W-2G
Proceeds from Broker & Barter Exchange Transactions - Form 1099-B
Dividends & Distributions - Form 1099-DIV
Interest Income - Form 1099-INT
Miscellaneous Income, Self-employment - Form 1099-MISC
Capital Gains & Losses, Unemployment Compensation - Form 1099-G
Distributions from Pensions and Annuities - Form 1099-R
Proceeds from Real Estate Transactions - Form 1099-S
Alimony Received
Your Self-employment Income Records



If you are pushed for time, you can click on the title of this blog posting and receive online help.

IRS Reports the Nine Top Mistakes Tax Payers Make When Filing Past Due Returns

The IRS reported that the following errors, are the biggest mistakes that tax payers make when preparing their past due returns.

1. Incorrectly Reporting 1099-MISC Income on Your Past Due Returns

A Form 1099-MISC is used to report payments made in the course of a trade or business to another person or business who is not an employee, also referred to as self-employed. The form is required, among other things, when payments of $600 or more in non-employee compensation, medical and health care payments, or rents are paid. This form is filed by the payer with the IRS and a copy is sent to the person or business receiving the payment. Unlike a W-2, there is no federal income tax, Social Security tax or Medicare tax withheld. The person or business receiving the payment is responsible for paying all taxes.

Self-employed individuals report their income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or you may qualify to use Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). You should also be aware of Form 1040, Schedule SE (PDF), Self-Employment Tax, which must be filed if net earnings from self-employment are $400 or more. This form is used to figure your Social Security and Medicare tax, which is based on your net self-employment income.

2. Not Reporting Capital Gains/Losses on Past Due Tax Returns

In general, if you had a capital gain or loss, including any capital gain distributions from sales of stock or bonds, you must complete Form 1040 and attach a Schedule D to your tax return. Refer to Publication 550, Investment Income and Expenses for more information.

3. Failing to File a Past Due Return for a Deceased Taxpayer

A personal representative (fiduciary) is responsible for filing certain tax returns for a person who has died, and for the decedent's estate. The personal representative may be required to file the final income tax return of the decedent and any returns not filed for preceding years, the income tax return for the estate, and the estate tax return.

The final return should have the word: "Deceased,” the decedent's name, and the date of death written across the top of the return. Generally, the person who is filing a return for a decedent and claiming a refund must file Form 1310 (PDF), Statement of Person Claiming Refund Due a Deceased Taxpayer, with the return. However, if you are a surviving spouse filing a joint return, or a court appointed or certified personal representative filing an original return for the decedent, you do not have to file Form 1310. Personal representatives must attach to the return a copy of the court certificate showing the appointment.

4. Not Providing Correct Social Security Numbers for All Dependents

Be sure that all dependents’ Social Security numbers (SSNs) and names match their Social Security identification cards. If the SSNs do not match, we will disallow the dependents and any related credits, but you will need to call the Social Security Administration at (800) 772-1213 to correct the mistake.

5. Failing to Sign Your Past Due Tax Return

All returns must be signed. If filing jointly, both taxpayers must sign.

6. Mailing Your Past Due Tax Return to Incorrect Address

Be sure to mail your past due tax return to the IRS address on your notice. Sending your return to another address will delay the processing of your return.

7. Omitting Spouse’s Income on a Jointly Filed Past Due Return

Income from both taxpayers must be included on the return. If you need income information, please call the IRS' toll-free number at (866) 681-4271.

8. Omitting the 10 Percent Early Distribution Tax on Qualified Retirement Plans

In general, any distribution from your IRA, other qualified retirement plan, or modified endowment contract before you reach age 59½ is an early distribution. In general, if you receive an early distribution (including an involuntary cash out) from an IRA, other qualified retirement plan, or modified endowment contract, the part of the distribution included in income generally is subject to an additional 10 percent tax.

9. Incorrectly Reporting Rollover Distributions

A rollover is a tax-free distribution of assets from one qualified retirement plan that is reinvested in another plan or the same plan. Generally, you must complete the rollover within 60 days of receiving the distribution. Any taxable amount not rolled over must be included in income and may be subject to the additional tax on early withdrawals.

The IRS Reminding Tax Payers of New ARRA Tax Deductions, on State, Local & Excise Taxes for New Cars, Motor Homes or Motorcycles

WASHINGTON — With 2010 models arriving in dealer showrooms, the Internal Revenue Service reminds taxpayers that purchasing a new car, light truck, motor home or motorcycle could qualify them for a special deduction for the state and local sales and excise taxes on their 2009 tax returns.

Purchases made before Jan. 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).

The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

Taxpayers who make qualifying new vehicle purchases this year can estimate the deduction with the help of Worksheet 10 in IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k of the worksheet show how to take into account purchases above the $49,500 limit, as well as the reduced deductions for taxpayers at higher income levels.

The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.

For more information, you can visit http://irs.gov and put in your keywords in the top right search box.

What if I Don't Have the Money to Pay My Taxes?

You should still file your past due returns, regardless if you have the money to pay the taxes or not.

The reason to file as soon as possible, is to avoid additional penalities, for failure to file -- the IRS or your tax professional can help you with payment options.

There is help for tax payers who have been ill, and missed filing past due returns

If you have not filed past due tax returns, and have been ill, (taking prescribed drugs) there is help for you. It is a known fact, that some prescribed drugs can put an individual into a "fog" -- at which time, he/she may not always, remember financial details.

The first step to getting back on track and filing your past due returns, is to contact an online service that specializes in past due tax returns.

The next step is to get in writing from your doctor's office, proof of your illness. What type of illness and when did it start and how long did it last? This short statement could help to save you hundreds of dollars.

The online tax service (that's us) can help you to file your past due tax returns and request that certain penalties be lowered, without you, ever having to leave your home or your office.

As the song goes, "Your Are Not Alone" -- there are millions of Americans who miss the April 15th filing date each year, due to personal illness, serious illness in the immediate family, death in the family, lost of employment or divorce.

Taxpayers, sometimes, believe that because they don't hear from the IRS during the first year of non filed returns, that the problem, may go away on it's own. These same taxpayer, may not file for 2 or 3 more years.

Please know, that if you have reported income from a W2 or 1099-MISC, or interest reported from a savings account or even mortgage interest, sold real estate, stocks or even cashed a high dollar amount check, the IRS is aware of the transactions.

As soon as the "IRS computer" tells the "IRS human" that it couldn't find a tax return for you, the collection process begins and includes penalties and interest from the date that the return was due.

Realize, that eventually, you will hear from the IRS.

It is better if the IRS hears from you first. Even if your own family has given up on you, the IRS still considers you to be a part of the IRS tax paying family.

Tax Loopholes for Middle Income Tax Payers for Sale?

The best chance Americans have to legally keep what they earn by paying less taxes is to do what the rich do. Take advantage of legal tax loopholes that will help to not only lower your taxes, but, create opportunity as well.


Tax Loopholes for Middle Income Tax Payers for Sale?

Yes.

One such opportunity involves my “after tax season” hobby. My hobby is creating, developing, growing and selling, online web sites, for the purpose of generating a profit AND creating legal tax deductions for my clients and web visitors.

If you are looking for tax write-offs, you probably are wondering how generating a profit and tax write offs fit into the same sentence? Easy, usually, but not always, a new business will generate a loss, which is used to help lower one’s taxes, before it generates a profit.

The IRS gives you 3 years to turn a profit. And most worthy web sites, generate a profit after the first year, if not sooner.. If your small business does not turn a profit within 3 out of 5 years, the IRS may consider your project to be a hobby, rather than a “for profit business.” Form 1040, Schedule C.

I enjoy completing past due returns and even current tax returns. However, My passion is developing a tax loophole (web site) from scratch and than watching the client benefit, from the small investment.

When I sit down to create a double edge entity that not only will provide, tax write-offs, but the opportunity and potential for increased income, it just feels like magic.

Now, it’s not all happy days around here. In fact, before I could truly agree to sit down and create a product for sale to the general public, I had to domplete my research on what “really” sells online.

I remember, that day well. The search engines pointed me to sites, which told me that the top selling products online were, books, computer hardware, computer software, Videos, etc.

Well “they” lied.

And for over 5 years I believed what they said. Even after I got my certification in Internet Marketing, I still believed the lie. (My classes, nor my certification test ever mentioned the details of the truth)

Then I found out the truth, and I felt stupid.

The truth is: the top selling products online was, and still is, “adult entertainment.”

And you know what? IRS knew the truth because of the 1099 statements some of these webmasters where reporting on their tax returns. But did they tell it? No.

Now, don’t you church folks get all upset. The adult entertainment industry includes, music, videos, information on other famous adults, e-books, adult games, and many other niches, other than, the hard stuff and the massage ladies on craigslist.

But it just goes to show you, until you really do your research, you can lose a lot of money and time following the crowd. I guess that old saying is true, "If you aren't the lead dog, the view is always the same"

There are two major reasons to file your past due returns as soon as possible

If a taxpayer is due a refund because of withholding or estimated taxes paid, even if they were not legally required to file -- you must file within 3 years of the return due date to receive the refund. (If you owe back taxes - the amount of your refund will be applied)

The same rule applies if you have a legal rights to claim tax credits, such as EIC (Earned Income Credit)

Note: Taxpayers who are self-employed won't get credit towards Social Security retirement or disability benefits.

Why do I have to file all my past due returns before the IRS will consider my Installment Agreement Request?

There are two major reasons that a taxpayer must file all of his/her past due returns before the IRS will consider an Installment Agreement.

1. The IRS may owe you a refund for some of the years you did not file. And the refund can be used to offset the years that you may owe.

2. The IRS charges taxpayers a fee (around $105) to set up an Installment Agreement - so I would think you would want "all" past due taxes included in the Installment Agreement.