Work Opportunity Tax Credit

 

The information below is directly from the IRS and explains how to qualify and take the Work Opportunity Tax Credit for Employers.  The latest transition relief rules information is included.

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The legislative changes under the American Taxpayer Relief Act of 2012 (H.R. 8), retroactively allow taxable employers to claim the Work Opportunity Tax Credit (WOTC) for all of the targeted group employee categories listed on Form 5884, if they were hired on or after Jan. 1, 2011, and before Dec. 31, 2013.

That same act also extends the expanded Work Opportunity Tax Credit available for hiring qualified veterans through Dec. 31, 2013, for both taxable and tax-exempt employers

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, by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit. 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.

However, the IRS has issued transition relief rules for employers who hire employees from one of the targeted group categories, other than qualified veterans, during 2012. For targeted group members other than qualified veterans hired on or after Jan.1, 2012, and on or before March 31, 2013, an employer will be considered to have timely filed Form 8850 if it submits the completed Form 8850 no later than April, 29, 2013. For qualified veterans hired on or after Jan.1, 2013, and on or before March 31, 2013, an employer will be considered to have timely filed Form 8850 if it submits Form 8850 no later than April 29, 2013. See Notice 2013-14 for further information.

Employers should contact their individual state workforce agency with any specific processing questions for Forms 8850.

Claiming the Credit

Taxable Employers

After the required certification is secured, taxable employers claim the tax credit as a general business credit against their income tax by filing the following:

• Form 5884 (with instructions) (PDF),
• Form 3800 (PDF),
• Instructions for Form 3800 (PDF), and
• Your business’s related income tax return and instructions (i.e., Forms 1040, 1041, 1120, etc.)

Tax-exempt Employers

Qualified tax-exempt organizations described in IRC Section 501(c) and exempt from taxation under IRC Section 501(a), may claim the credit for qualified veterans who begin work on or after Nov. 22, 2011, and before Jan. 1, 2014.

After the required certification (Form 8850) is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans (PDF).

File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. It is recommended that qualified tax-exempt employers not reduce their required deposits in anticipation of any credit as the forms are processed separately.

In addition to Form 5884-C and its instructions, tax-exempt employers should see IRS Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit

Similarities and Differences Between, the IRS and Google

1.  One can put you in financial heaven, or hell, while the other can put you in federal prison

 

2.      To close loopholes, one usually needs an act of Congress, while the other, may or may not hold a meeting and within 48 hours (if not less) the loophole is closed. (Major changes made by Google take longer)

 

3.      They both are equal opportunity organizations (generally speaking)  When you follow the rules, the rewards can be legal financial gain and increased income

 

4.      They both operate on “formulas” which are devised by some of the most brilliant minds in the work force.

 

5.      They both have companies and professionals who charge people large sums of money to accomplish task within the IRS and Search Engines results 

 

6.      They both can change your financial picture!

 

7.      They often times are abused by individuals and/or companies who are trying to get ahead by cheating.

 

8.      One collects $2.5 trillion a year while the other pulled in around $40 billion in revenue in 2011. 

 

9.      They both provide (to the public) detailed information on how to play by the rules, regardless if you are a large corporation or an individual.

 

10.   They both encourage the public to work with certified (tested) and qualified individuals to provide tax services and search engine optimization.  (Except one is have a legal problem enforcing the certification process)

Note:  Search Engine Optimization can be greatly influenced by man hours.  Large corporations who have 30 people all working on SEO are bound to have different results then a company of one.  We recommend that small business owners learn which automation tools are acceptable to the major search engines and use them accordingly.

By C. Ingraham, RTRP

Certified SEO Specialist

Living Offshore? You May Qualify for Income Exclusion, Up to $95,100 (2012)

One of my most favorite tax topics, Foreign Earn Income Exclusion.  You may qualify to exclude up to $95,100 of foreign income income from being taxed.  If you live and work offshore you may want to learn more about this exclusion. 

And if you are planning to move offshore, this information can help you to save thousands of dollars in taxes each year.

 Tips for Taxpayers with Foreign Income

 

The IRS reminds U.S. citizens and residents who lived or worked abroad in 2012 that they may need to file a federal income tax return. If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.

Here are seven tips taxpayers with foreign income should know:

1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

 

2. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, with the Treasury Department. See Publication 4261, Do You Have a Foreign Financial Account?, for more information.

 

3. Consider the Automatic Extension. U.S. citizens and resident aliens living abroad on April 15, 2013, may qualify for an automatic two-month extension to file their 2012 federal income tax returns. The extension of time to file until June 17, 2013, also applies to those serving in the military outside the U.S. Taxpayers must attach a statement to their returns explaining why they qualify for the extension.

 

4. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $95,100 of their wages and other foreign earned income they received in 2012. See Forms 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion, for more information.

 

5. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.

 

6. Use IRS Free File. Taxpayers who live abroad can prepare and e-file their federal tax return for free by using IRS Free File. People who make $57,000 or less can use Free File’s brand-name software. People who earn more can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available exclusively through the IRS.gov website.

 

7. Get Tax Help Outside the U.S. Taxpayers living abroad can get IRS help in four U.S. embassies and consulates. IRS staff at these offices can help with tax filing issues and answer questions about IRS notices and tax bills. The offices also have tax forms and publications. To find the nearest foreign IRS office, visit the IRS.gov website. At the bottom of the home page click on the link labeled ‘Contact Your Local IRS Office.’ Then click on ‘International.’

How to file return; Health Insurance Deduction if You Are Self-Employed

Below are rules and tips on Health Insurance deductions IF, you are self-employed.  You will notice right off that you have to have a "net profit from self-employment"  Check out the rules and see if you can qualify to take the health insurance deduction.

Health Insurance Deduction if You’re Self-Employed

If you are self-employed, the IRS wants you to know about a tax deduction generally available to people who are self-employed.

The deduction is for medical, dental or long-term care insurance premiums that self-employed people often pay for themselves, their spouse and their dependents. The insurance can also cover your child who was under age 27 at the end of 2012, even if the child was not your dependent.

You may be able to take this deduction if one of the following applies to you:

• You had a net profit from self-employment. You would report this on a Schedule C, Profit or Loss From Business, Schedule C-EZ, Net Profit From Business, or Schedule F, Profit or Loss From Farming.

• You had self-employment earnings as a partner reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc.

• You used an optional method to figure your net earnings from self-employment on Schedule SE, Self-Employment Tax.

• You were paid wages reported on  Form W-2, Wage and Tax Statement, as a shareholder who owns more than two percent of the outstanding stock of an S corporation.

• There are also some rules that apply to howthe insurance plan is established. Follow these guidelines to make sure the plan qualifies:

• If you’re self-employed and file Schedule C, C-EZ, or F, the policy can be in your name or in your business’ name.

• If you’re a partner, the policy can be in your name or the partnership’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the partnership must reimburse you and include the premiums as income on your Schedule K-1.

• If you’re an S corporation shareholder, the policy can be in your name or the S corporation’s name and either of you can pay the premiums. If the policy is in your name and you pay the premiums, the S corporation must reimburse you and include the premiums as wage income on your Form W-2.

SEO for Beginners, Easy Way to See the Big Picture

All this talk  about SEO (Search Engine Optimization) can be a turn off when you are trying to run a business.  This is just one more task which takes time away from time spent helping customers or clients.  Yet, this is one of the most important task a small business can perform.

By viewing the "big picture"at SEO Work in Progress, you can get a real understanding of what SEO actually includes and how it can effect your business.

There is on-page SEO and off-page SEO, however at the end of the day, most small business owners just want to know what they need to do to bring in new clients?

SEO Specialist, C. Ingraham has created a half a web page scenario which shows exactly what SEO can do for a small business and which basic steps are necessary to accomplish these task.  What she doesn't say on the web page is that the key to SEO success is when web site owners use automation processes which are deemed acceptable by the major search engines. 

The actual task of SEO for a web site can be extremely time consuming.  When reviewing the "big picture" on SEO Work in Progress, a small business owner can delicate small tasks to different individuals and at the end of the day enjoy the fact that they have a larger presence on the Internet and will reach far more potential customers. 

If your business is a one person effort, then the "SEO big picture" will help you understand how to complete small task each day, which untimely will have a positive effect on your business over time.  If you are working alone, your keywords would be: patients and continued efforts.

OK, Here it is, the Official Notice from the IRS; Relief Available to Taxpayers; IRS

Relief Available To Many Extension Requesters Claiming Tax Benefits

IR-2013-31, March 20, 2013

WASHINGTON —The Internal Revenue Service today provided late-payment penalty relief to individuals and businesses requesting a tax-filing extension because they are attaching to their returns any of the forms that couldn’t be filed until after January.

The relief applies to the late-payment penalty, normally 0.5 percent per month, charged on tax payments made after the regular filing deadline. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act.
Taxpayers using forms claiming such tax benefits as depreciation deductions and a variety of business credits qualify for this relief. A complete list of eligible forms can be found in Notice 2013-24, posted today on IRS.gov.

Individuals and businesses qualify for this relief if they properly request an extension to file their 2012 returns. Eligible taxpayers need not make any special notation on their extension request, but as usual, they must properly estimate their expected tax liability and pay the estimated amount by the original due date of the return.

The return must be filed and payment for any additional amount due must be made by the extended due date. Interest still applies to any tax payment made after the original deadline.

Further details on this relief, including instructions for responding to penalty notices, is available in Notice 2013-24.

Delay Filing Your Taxes; But Not Paying Your Taxes; Relief from Late Payment Tax Penalties

Below are two very important notices, one from the IRS themselves and the other from a Tax Professional Organization, with links back to the IRS.  Either way it's good news if you having trouble meeting the April 15th deadline.

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File an extension. If your return is not ready by April 15, you can get an automatic extension for an extra six months. E-file your extension using the Free File program. You can also get an extension using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. Visit IRS.gov to download and print the form, or call 800-TAX-FORM (800-829-3676) to have the form mailed to you. Allow at least 10 days for mailing. You should e-file or mail your extension, and pay any tax due, by April 15. An extension gives you extra time to work on your return, not more time to pay.

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Washington, D.C. (March 20, 2013)

By Michael Cohn


The Internal Revenue Service is giving relief from late-payment tax penalties to individuals and businesses that request a tax-filing extension because they are attaching to their returns any of the forms that couldn’t be filed until after January.

The relief applies to the late-payment penalty, normally 0.5 percent per month, charged on tax payments made after the regular filing deadline. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act.

Taxpayers using forms claiming such tax benefits as depreciation deductions and a variety of business credits qualify for this relief. A complete list of eligible forms can be found in Notice 2013-24, posted today on IRS.gov.

Individuals and businesses qualify for this relief if they properly request an extension to file their 2012 returns. Eligible taxpayers need not make any special notation on their extension request, but as usual, they must properly estimate their expected tax liability and pay the estimated amount by the original due date of the return.

The return must be filed and payment for any additional amount due must be made by the extended due date. Interest still applies to any tax payment made after the original deadline.

Further details on the tax relief, including instructions for responding to penalty notices, is available in Notice 2013-24.

The affected forms include:
• Form 3800, General Business Credit
• Form 4136, Credit for Federal Tax Paid on Fuels
• Form 4562, Depreciation and Amortization (Including Information on Listed
• Property)
• Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth
• of the Northern Mariana Islands
• Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign
• Corporations
• Form 5695, Residential Energy Credits
• Form 5735, American Samoa Economic Development Credit
• Form 5884, Work Opportunity Credit
• Form 6478, Alcohol and Cellulosic Biofuels Credit
• Form 6765, Credit for Increasing Research Activities
• Form 8396, Mortgage Interest Credit
• Form 8582, Passive Activity Loss Limitations
• Form 8820, Orphan Drug Credit
• Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit
• Form 8839, Qualified Adoption Expenses
• Form 8844, Empowerment Zone and Renewal Community Employment Credit
• Form 8845, Indian Employment Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit
• Form 8863, Education Credits (American Opportunity and Lifetime Learning
• Credits)
• Form 8864, Biodiesel and Renewable Diesel Fuels Credit
• Form 8874, New Markets Credits
• Form 8900, Qualified Railroad Track Maintenance Credit
• Form 8903, Domestic Production Activities Deduction
• Form 8908, Energy Efficient Home Credit
• Form 8909, Energy Efficient Appliance Credit
• Form 8910, Alternative Motor Vehicle Credit
• Form 8911, Alternative Fuel Vehicle Refueling Property Credit
• Form 8912, Credit to Holders of Tax Credit Bonds
• Form 8923, Mine Rescue Team Training Credit
• Form 8932, Credit for Employer Differential Wage Payments


• Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit

How to file tax return; Tax Rules for Children With Investment Income

Tax Rules for Children Who Have Investment Income

 

Some children receive investment income and are required to file a federal tax return. If a child cannot file his or her own tax return for any reason, such as age, the child's parent or guardian is responsible for filing a return on the child’s behalf.

There are special tax rules that affect how parents report a child’s investment income. Some parents can include their child’s investment income on their tax return. Other children may have to file their own tax return.

Here are four facts from the IRS about the taxability of your child’s investment income.

1. Investment income normally includes interest, dividends, capital gains and other unearned income, such as from a trust.

 

2. Special rules apply if your child's total investment income is more than $1,900. The parent’s tax rate may apply to part of that income instead of the child's tax rate.

 

3. If your child's total interest and dividend income is less than $9,500, you may be able to include the income on your tax return. See Form 8814, Parents' Election to Report Child's Interest and Dividends. If you make this choice, the child does not file a return.

 

4. Your child must file their own tax return if they received investment income of $9,500 or more. File Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, with the child’s federal tax return.

How to file tax return; Itemizing vs. Standard Deduction

The tax software will help you determine if you should itemize or use the standard deduction.  The announcement from the IRS below will help to ensure that you and your tax software make the right decision.

 

Single people who earn high salaries, often times pay more than $5,950 in State taxes, and ultimately end up with the option to Itemize.  If you fall into this category, there are two things you have to be aware of.  1) you could easily end up with an AMT tax and 2) you may have a lot more legal deductions which you can add to your Schedule A. 

 

If you find yourself in this situation, you may want to consult with a tax professional.  (AMT is imposed at a nearly flat rate on an adjusted amount of taxable income above a certain threshold)

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Itemizing vs. Standard Deduction: Six Facts to Help You Choose

 

When you file a tax return, you usually have a choice to make: whether to itemize deductions or take the standard deduction. You should compare both methods and use the one that gives you the greater tax benefit.

The IRS offers these six facts to help you choose.

1. Figure your itemized deductions. Add up the cost of items you paid for during the year that you might be able to deduct. Expenses could include home mortgage interest, state income taxes or sales taxes (but not both), real estate and personal property taxes, and gifts to charities. They may also include large casualty or theft losses or large medical and dental expenses that insurance did not cover. Unreimbursed employee business expenses may also be deductible.

 

2. Know your standard deduction. If you do not itemize, your basic standard deduction amount depends on your filing status. For 2012, the basic amounts are:

 

• Single = $5,950
• Married Filing Jointly = $11,900
• Head of Household = $8,700
• Married Filing Separately = $5,950
• Qualifying Widow(er) = $11,900

 

3. Apply other rules in some cases. Your standard deduction is higher if you are 65 or older or blind. Other rules apply if someone else can claim you as a dependent on his or her tax return. To figure your standard deduction in these cases, use the worksheet in the instructions for Form 1040, U.S. Individual Income Tax Return.

 

4. Check for the exceptions. Some people do not qualify for the standard deduction and should itemize. This includes married people who file a separate return and their spouse itemizes deductions. See the Form 1040 instructions for the rules about who may not claim a standard deduction.

 

5. Choose the best method. Compare your itemized and standard deduction amounts. You should file using the method with the larger amount.

 

6. File the right forms. To itemize your deductions, use Form 1040, and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

Last Minute Tax Tip; Lower your tax liability

Take advantage of last-minute tax savings. Taxpayers can reduce their taxable income by as much as $5,000 or $6,000 if a taxpayer is 50 or older, and meets income requirements. Taxpayers can contribute to their 2012 IRA accounts up until April 15, 2013.  Lower your tax liability.

How to file taxes, Home Office Tax Break

Because Home Office deductions can be used to lower your tax liability, considerably, the IRS often times reviews these types of returns for audits.  The best way to ensure that you will be OK, if the IRS decides to ask questions, is to keep accurate and GOOD records.  If you do this one task, you can help protect yourself, not from an audit, but from the IRS being right in an audit.

 

Read what the IRS has said and know that you CAN deduct a Home Office, even if you have an Employer. 

 

Our advise is that you employ a tax professional who has experience in Schedule C tax returns.  Its not enough for a Tax Preparer, CPA, Enrolled Agent or Tax Attorney to have experience in Corporate or Individual tax returns, they need extensive experience in Schedule C tax returns.

 

 

Home Office Deduction: a Tax Break for Those Who Work from Home

 

If you use part of your home for your business, you may qualify to deduct expenses for the business use of your home. Here are six facts from the IRS to help you determine if you qualify for the home office deduction.

1. Generally, in order to claim a deduction for a home office, you must use a part of your home exclusively and regularly for business purposes. In addition, the part of your home that you use for business purposes must also be:

 

• your principal place of business, or

• a place where you meet with patients, clients or customers in the normal course of your business, or

• a separate structure not attached to your home. Examples might include a studio, workshop, garage or barn. In this case, the structure does not have to be your principal place of business or a place where you meet patients, clients or customers.

 

2. You do not have to meet the exclusive use test if you use part of your home to store inventory or product samples. The exclusive use test also does not apply if you use part of your home as a daycare facility.

 

3. The home office deduction may include part of certain costs that you paid for having a home. For example, a part of the rent or allowable mortgage interest, real estate taxes and utilities could qualify. The amount you can deduct usually depends on the percentage of the home used for business.

 

4. The deduction for some expenses is limited if your gross income from the business use of your home is less than your total business expenses.

 

5. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. Report your deduction on Schedule C, Profit or Loss From Business.

 

6. If you are an employee, you must meet additional rules to claim the deduction. For example, in addition to the above tests, your business use must also be for your employer’s convenience.

How to file tax return; Rules on Early Withdrawals from Retirement Plans

Droves of people have been paying penalties on early withdrawals from Retirement Plans due to the down turn of the economy.  In most cases Unemployment hasn't been enough to sustain the household, and pulling money from the Retirement Account was the only option.

 

Unfortunately this procedure has left many taxpayer's Retirement accounts low.  Individuals who are close to retirement are wondering about the quality of their retirement.  Others are considering working until 70, and still others are taking what's left in their Retirement accounts and moving offshore, where they can retire and live well, on a lower monthly income.

 

Regardless of how you plan to handle the situation, we all still have to pay Uncle Sam when you take money from your Retirement account before you are a certain age. Below are the tax laws pertaining to early withdrawals from your Retirement Plans:

 

Tax Rules on Early Withdrawals from Retirement Plans

 

Taking money out early from your retirement plan can cost you an extra 10 percent in taxes. Here are five things you should know about early withdrawals from retirement plans.

1. An early withdrawal normally means taking money from your plan, such as a 401(k), before you reach age 59½.

 

2. You must report the amount you withdrew from your retirement plan to the IRS. You may have to pay an additional 10 percent tax on your withdrawal.

 

3. The additional 10 percent tax normally does not apply to nontaxable withdrawals. Nontaxable withdrawals include withdrawals of your cost in participating in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

 

4. If you transfer a withdrawal from one qualified retirement plan to another within 60 days, the transfer is a rollover. Rollovers are not subject to income tax. The added 10 percent tax also does not apply to a rollover.

 

5. There are several other exceptions to the additional 10 percent tax. These include withdrawals if you have certain medical expenses or if you are disabled. Some of the exceptions for retirement plans are different from the rules for IRAs.

Tax Tax, Debt Crisis, World Currency Status, Social Security Surplus

Tax talk in Washington; Summary of Article: tax hikes not likely? not sure! debt crisis! world currency status, better off then Greece; social security 2.7 trillion surplus, social security bankrupt 2033, entitlements;  how American debt problem is measured? health care cost in America

Of course we won't really know if there will be tax hikes until after Congress votes and the dust settles.  Talk of closing tax loopholes is on the table, as is arranging the tax system to increase economic growth.  The words "tax reform" are being thrown around in Washington, this time they be more serious then previously.

You may be wondering, what is "entitlement?"  Entitlement is a program that establishes certain eligibility criteria and anyone fitting that criteria may receive its benefits. Medicare and Social Security are the two largest entitlement programs. 

The fact that Social Security an entitlement program which is expected to go bankrupt in 2033, causes major concerns.

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WASHINGTON -- Sharp differences emerged on Sunday between House and Senate Republicans over the prospect for a budget deal with President Barack Obama, with House Speaker John Boehner (R-Ohio) insisting that "the talk about raising revenue is over" even as Sen. Bob Corker (R-Tenn.) said that the GOP is open to increasing tax receipts by closing loopholes.

"I think there, by the way, is a chance on a deal," Corker told Fox News' Chris Wallace. "I think the president is saying the right things. We have an opportunity over the next 4 to 5 months."

"I think Republicans, if they saw true entitlement reform, would be glad to look at tax reform that generates additional revenue. And it doesn't mean creeping rates, it means closing loopholes. It also means arranging our tax system so we have economic growth. And I think we have been saying that from day one."

Other Republicans, however, would not even echo Corker's comments on the same day. Speaking to ABC News' Martha Raddatz, Boehner rejected any deal that includes higher tax revenue.

"The president believes that we have to have more taxes from the American people. We're not going to get very far," Boehner said. "The president got his tax hikes on January 1. The talk about raising revenue is over. It's time to deal with the spending problem."

Both Corker and Boehner, however, acknowledged that the prospect of a "crisis" over the debt is a long-term issue, not an immediate pressing threat. Other Republicans, including House Budget Committee Chairman Paul Ryan (R-Wis.) have characterized the federal budget deficit and debt as a much more imminent danger to the health of the American economy.

“We do not have an immediate debt crisis -- but we all know that we have one looming,” Boehner told ABC. “And we have one looming because we have entitlement programs that are not sustainable in their current form. They’re going to go bankrupt.”

Shortly after the ABC interview aired Sunday, Boehner's press office released a excerpts of the interview that omitted Boehner's acknowledgment that there is no "immediate" debt crisis.

On CBS, Bob Schieffer highlighted Boehner's comments and asked Ryan whether the government faces an immediate debt crisis. Ryan acknowledged that it does not, but warned about an economic calamity if one happens.

"America is still a step ahead of the European nations who are confronting a debt crisis, of Japan. it's partly because of our resilient economy, our world currency status," Ryan said. "So we do not have a debt crisis right now, but we see it coming. We know it's irrefutably happening."

The type of crisis that is happening in Greece, however, is extremely unlikely to occur in the United States. Unlike Greece, the U.S. borrows money in its own currency, giving it far greater power over its creditors. The long-term threat posed by the government's debt is inflation or increasing interest rates -- problems that could eventually create a drag on economic growth, but which would not result in abrupt shocks to the economic system.

"Republicans want to see a 75-year solution to entitlements," Corker said.

A host of conservative figures criticized Obama this week for telling ABC's George Stephanopoulos that there is no immediate budget crisis.

Social Security currently enjoys a $2.7 trillion surplus, enough to fund the program through 2033 without any changes. Medicare's finances are less robust as a result of the uniquely expensive American health care system. Health care costs in the U.S. are roughly double the rate per person in Canada and the U.K.

But the system has years to be reformed before benefits or taxes would need to be increased, and there is no evidence that long-term health care costs are spooking investors in the present day. The severity of the American federal debt problem is measured by the interest rate on U.S. Treasury bonds. The bigger the debt problem, the higher the interest rate that investors demand to be paid for taking on the risk of buying Treasury bonds. Interest rates on Treasury bonds have been near record lows for year.

Original article can be found at Huffington Post

Doing Your Own Taxes? Child and Dependent Care Tax Credit, How to;

Tax credits can play an important part in you getting a larger refund.  Knowing which tax credit to approach and which ones you qualify for is an important part of doing your own taxes.

 

The IRS has provided the information below to help you discern the Child and Dependent Care Tax Credit

 

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Claiming the Child and Dependent Care Tax Credit

 

The Child and Dependent Care Credit can help offset some of the costs you pay for the care of your child, a dependent or a spouse. Here are 10 facts the IRS wants you to know about the tax credit for child and dependent care expenses.

1. If you paid someone to care for your child, dependent or spouse last year, you may qualify for the child and dependent care credit. You claim the credit when you file your federal income tax return.

 

2. You can claim the Child and Dependent Care Credit for “qualifying individuals.” A qualifying individual includes your child under age 13. It also includes your spouse or dependent who lived with you for more than half the year who was physically or mentally incapable of self-care.

 

3. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

 

4. You, and your spouse if you file jointly, must have earned income, such as income from a job. A special rule applies for a spouse who is a student or not able to care for himself or herself.

 

5. Payments for care cannot go to your spouse, the parent of your qualifying person or to someone you can claim as a dependent on your return. Payments can also not go to your child who is under age 19, even if the child is not your dependent.

 

6. This credit can be worth up to 35 percent of your qualifying costs for care, depending upon your income. When figuring the amount of your credit, you can claim up to $3,000 of your total costs if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs.

 

7. If your employer provides dependent care benefits, special rules apply. See Form 2441, Child and Dependent Care Expenses for how the rules apply to you.

 

8. You must include the Social Security number on your tax return for each qualifying individual.

 

9. You must also include on your tax return the name, address and Social Security number (individuals) or Employer Identification Number (businesses) of your care provider.

 

10. To claim the credit, attach Form 2441 to your tax return. If you use IRS e-file to prepare and file your return, the software will do this for you.

Millions in Refunds for the Million Who Didn’t File in 2009

The IRS claims that refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009. The IRS estimates that half the potential refunds for 2009 exceed $500.

 

To collect a refund from that year, a return for 2009 must be filed no later than April 15. The law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes the property of the U.S. Treasury. There is no penalty for filing a late return qualifying for a refund.

The IRS also reminded taxpayers seeking a 2009 refund that checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans.  This information provided by: Accounting Today

IRS Has $917 Million in Refunds for Taxpayers Who Did Not File in 2009

OK, the announcement has been made by the IRS; there is $917 Million in tax refunds due to people who Have NOT filed their 2009 tax return.  These returns MUST be filed by April 15 of 2013 in order for you to get your refund.

 

This is a lot of money.  This means there are hundreds of thousands, if not more, taxpayers who didn't file, but if they had they would have received a refund.

 

The IRS is not in the habit of making a big deal over these massive amounts of refunds each year, however they do make a legal announcement, and each year, hundreds of thousand of taxpayers don't file and the IRS keeps the money.

 

If you didn't file in 2009 and you believe that you may be due a refund, regardless of how much money you paid in with holding taxes, you may want to get the ball rolling and file 2009 back taxes.

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IRS Has $917 Million for People Who Have Not Filed a 2009 Income Tax Return

WASHINGTON — Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the Internal Revenue Service announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.

The IRS estimates that half the potential refunds for 2009 are more than $500.
Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2009 refund that their checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refund of taxes withheld or paid during 2009. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2009, the credit is worth as much as $5,657.

The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2009 were:

$43,279 ($48,279 if married filing jointly) for those with three or more qualifying children,
$40,295 ($45,295 if married filing jointly) for people with two qualifying children,
$35,463 ($40,463 if married filing jointly) for those with one qualifying child, and
$13,440 ($18,440 if married filing jointly) for people without qualifying children.

Doing Your Own Taxes; Five Ways to Lower Your 2012 Taxes

 

A tax credit is a good thing and helps to reduce your tax liability.  When preparing your own taxes, the single largest mistake is over looking tax credits which you may qualify for.

 

Below are five tax credits the IRS wants to remind you of. 

 

 

Five Tax Credits that Can Reduce Your Taxes

 

A tax credit reduces the amount of tax you must pay. A refundable tax credit not only reduces the federal tax you owe, but also could result in a refund.

Here are five credits the IRS wants you to consider before filing your 2012 federal income tax return:

1. The Earned Income Tax Credit is a refundable credit for people who work and don’t earn a lot of money. The maximum credit for 2012 returns is $5,891 for workers with three or more children. Eligibility is determined based on earnings, filing status and eligible children. Workers without children may be eligible for a smaller credit. If you worked and earned less than $50,270, use the EITC Assistant tool on IRS.gov to see if you qualify. For more information, see Publication 596, Earned Income Credit.

 

2. The Child and Dependent Care Credit is for expenses you paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent. The care must enable you to work or look for work. For more information, see Publication 503, Child and Dependent Care Expenses.

 

3. The Child Tax Credit may apply to you if you have a qualifying child under age 17. The credit may help reduce your federal income tax by up to $1,000 for each qualifying child you claim on your return. You may be required to file the new Schedule 8812, Child Tax Credit, with your tax return to claim the credit. See Publication 972, Child Tax Credit, for more information.

 

4. The Retirement Savings Contributions Credit (Saver’s Credit) helps low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or a retirement plan at work. The credit is in addition to any other tax savings that apply to retirement plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs).

 

5. The American Opportunity Tax Credit helps offset some of the costs that you pay for higher education. The AOTC applies to the first four years of post-secondary education. The maximum credit is $2,500 per eligible student. Forty percent of the credit, up to $1,000, is refundable. You must file Form 8863, Education Credits, to claim it if you qualify. For more information, see Publication 970, Tax Benefits for Education.

For web site owners: Ecommerce has become a direct target for sales tax collection

Lost tax revenue associated with ecommerce was estimated at $11.4
billion in 2012.* In 2013 states are expected to face crushing budget
deficits. As a result, ecommerce businesses will be under the
microscope by state auditors. Sales tax is more complex than ever and
what you don't know about your liability can, and will, hurt you.

With Amazon beginning to pay sales tax in more states, ecommerce
companies are getting ready to take on this liability - don't be left
behind. In our new whitepaper, we will show how your business will
be affected by new sales tax legislation and what you can do to be
ready.

Click here and download SmallBuinessNewz FREE Ecommerce and Sales Tax Legislation
Whitepaper. http://aj.600z.com/aj/133904/0/cc?z=1&b=133893&c=133901

Where to Find Free Tax Help for Military Personnel and Their Families

Many members of the military are able to get their tax returns prepared for free on or off most military bases including overseas locations. The U.S. Armed Forces participates in the Volunteer Income Tax Assistance program sponsored by the IRS. VITA provides free tax advice, tax preparation, tax return filing and other tax help to military members and their families.

Here are four things you need to know about free military tax assistance:

1. Armed Forces Tax Council. The Armed Forces Tax Council oversees the military tax programs offered worldwide. AFTC partners with the IRS to conduct outreach to military personnel and their families. This includes the Army, Air Force, Navy, Marine Corps and Coast Guard.

 

2. Volunteer tax sites. Military-based VITA sites staffed with IRS-trained volunteers provide free tax help and tax return preparation. Volunteers receive training on military tax issues, such as combat zone tax benefits, filing extensions and special benefits that apply to the Earned Income Tax Credit.

 

3. What to bring. To receive free tax assistance, bring the following records to your military VITA site:

• Valid photo identification
• Social Security cards for you, your spouse and dependents, or a Social Security number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents
• Wage and earning statement(s), such as Forms W-2, W-2G, and 1099-R
• Interest and dividend statements (Forms 1099)
• A copy of last year’s federal and state tax returns, if available
• Checkbook for routing and account numbers for direct deposit of your tax refund
• Total amount paid for day care and day care provider’s identifying number. This is usually an Employer Identification Number or Social Security number.
• Other relevant information about income and expenses

4. Joint returns. If you are married filing a joint return and wish to file electronically, both you and your spouse should be present to sign the required forms. If both cannot be present, you usually must bring a valid power of attorney form along with you. You may use IRS Form 2848, Power of Attorney and Declaration of Representative for this purpose.

 

There is a special exception to this rule if your spouse is in a combat zone. The exception allows a spouse to prepare and e-file a joint return with a written statement stating the other spouse is in a combat zone and unable to sign.

Doing Your Own Taxes? Mortgage Debt Forgiveness

If you are doing your own taxes and you had a foreclosure in the past year.  You may or may not know what to do with the 1099-C which you received in the mail, or the 1099-A.  When you add this information into your consumer tax software, if you missed any of the instructions, you could end up with a tax bill of anywhere from $20,000 to $70,000 or more.

 

1.  If you have a 1099-C or a 1099-A is may be in your best interest to employ a tax professional to make it go away. 

 

2.  If you believe you can do it on your own, the information from the IRS on the subject is below.

 

 

Important Facts about Mortgage Debt Forgiveness

 

If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.
Here are 10 key facts from the IRS about mortgage debt forgiveness:

1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

 

2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

 

3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

 

4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

 

5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

 

6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.

 

7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.

 

8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.

 

9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

 

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

Schedule C, Tax Preparer vs. Tax Accountant

by C. Ingraham, RTRP
Unfiledtaxesprepared.com/

Too often, the difference between a tax preparer and a tax accountant can mean the difference in you owing the IRS or paying the IRS, when filing a Schedule C.  It's a matter of having the necessary experience to understand each of the Schedule C tax write-offs, and how the IRS may react to each of these write offs based on tax codes.

Giving your information to a tax preparer who has served you well for years on your personal income taxes, isn't the same as employing a tax accountant or a CPA who will dive into your charter accounts or your shoe box expenses and dig out the legal deductions. (When dealing with an tax accountant, they will ask you a lot of questions the first time, and the investment for services is usually less then a CPA)
  
The new business owner has lots of work, and lots of expenses, so he will often times opt to do his own taxes, like he did "before he was self-employed."  In many cases, this is a mistake.  There are certain decisions (elections) which must be made on the first year Schedule C, which will affect the business for years to come.

Example:  You aren't sure if you want to use the actual miles or the actual miles deductions for business use of your auto.  Does it make a difference?  YES.  One of the differences is that one method allows depreciation of your auto, while the other method does not.  Depending on your intent for the future of your business this could be a positive or a negative.

Too often the tax preparer who understands individual taxes, doesn't have the experience necessary to pull a rabbit out of the hat when it comes to lowering tax liabilities on individual tax returns with Schedule Cs (Profit and Loss from Business)   Anyone who understands and knows the tax codes can pull a rabbit out of the hat, but then the question becomes, is the rabbit legal?  Will the rabbit cause the IRS computer to take a double look and report the deduction(s) to an IRS Human, who will then allow the IRS computer to make (written) contact with you via a CP-2000? (Paper audit)

Example:  An experienced tax accountant will answer questions "before" the IRS ask.  How?  By adding detailed information which explains certain line items within your tax return.

Another Example:  An experienced tax professional will compare your national averages and explain, to the IRS, any overages.

There are many 'little numbers' which make up the big picture for an acceptable tax return which includes a Schedule C.  This form, is one of the top forms audited by the IRS because of the fraud involved in using the Schedule C to lower taxes using a home based business.

Yes, a Schedule C is all that and more.  Answering a group of questions on your consumer tax software may not be your best solution for creating a positive relationship between yourself, your new business and the IRS.  You may answer the questions correctly and produce a legal tax return, but you have to ask yourself: "Did I get all of my tax benefits?"

Every year Congress votes in hundreds of new tax laws, and many of these laws must be interpreted correctly in order to maximize the taxpayer's benefits.  (Example:  health insurance laws for small businesses!)

Correct interpretation of new tax laws is crucial.  Interpreting the new tax laws is usually taken care of for tax professionals.  Tax professionals can use IRS attorneys, and the attorneys employed by the professional software company who provides their software.  Either way, experienced tax professionals usually get it right.  Taxes is law, and tax law is no picnic when it comes to business.

I personally enjoy the challenge of a Schedule C.  Its the one form which tells me that a taxpayer has laid the foundation for potential wealth. Taking advantage of the tax benefits for a tax client comes with experience and knowledge of the tax laws. Many Schedule Cs evolve into small corporations, which then have the foundation to become big business and are referred to CPAs who are licensed by the state.

March 2013; E-filed Tax Returns with Incomplete Forms 8863, Education Credits, Experiencing Delays

The IRS revised Form 8863, Education Credits, for Tax Year 2012 to help taxpayers and tax preparers understand the qualifications for the American Opportunity Tax Credit.

Checkboxes for lines 23-26 were added to confirm basic qualifications for taxpayers claiming this credit. If these lines are left blank, there will be a delay in the processing of the taxpayer’s return.
To avoid delays, ensure your clients complete Form 8863 correctly.

Doing Your Own Taxes? Ten Facts about Capital Gains and Losses

Ten Facts about Capital Gains and Losses

 

The term “capital asset” for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.

Here are 10 facts from the IRS on capital gains and losses:

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.

 

2. A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income.

 

4. You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.

 

5. Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.

 

6. If your long-term gains exceed your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a 'net capital gain.’

 

7. The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains.
 

Rates of 25 or 28 percent can also apply to special types of net capital gains.

 

8. If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.
 

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they occurred that year.
 

10. Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you.

IRS Tax forum, dates, location, information for tax professionals

IRS Tax Forum Dates, Locations, Information for Tax Professionals.  Didn't see Las Vegas on the List, but lots of other great places.  These are great forums for new and existing tax preparers.  Many tax preparers tack on an extended vacation. 

Orlando, FL July 9-11 Grapevine, TX (Dallas Area)July 30- August 1 New Orleans, LA August 13-15 Atlanta, GA August 20-22 Nationa Harbor, MD (Washington DC Area)August 27-29 San Diego, CA September 17-19 Quick Links IRS Tax Forums Home Hotel Information FAQ Exhibitor Home CPE and CFP Certifications IRS Tax Forums Online REGISTRATION IS NOW OPEN! The 2013 IRS Nationwide Tax Forums are coming to a city near you. Join your colleagues and IRS representatives for three days of education, training and networking. This is a great opportunity to: Earn valuable CPE/CFP Credits Learn about the latest tax laws and regulations Learn about a wide variety of tax products and services in our exhibit hall Network... Network... Network... Reserve your room now if you want the convenience of staying in the forum hotel. For exhibiting and sponsorship opportunities contact us at expo@irstaxforum.com. For questions contact us at info@irstaxforum.com. IRS Nationwide Tax Forum Registration Team Phone: (202) 495-2919 Fax: (202) 403-3871 info@irstaxforum.com

Doing Your Own Taxes? Tips on Unemployment Income and How to Handle on the Tax Return

Unemployment Income is Taxable and must be included on your tax return.  Check to see if your state includes Unemployment Income, for example.  Below are tips on how to handle Unemployment Incomoe on your tax return.

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Four Tax Tips about Your Unemployment Benefits

 

If you received unemployment benefits this year, you must report the payments on your federal income tax return.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you received in your total income for the year. You should receive a Form 1099-G, Certain Government Payments. It will show the amount you were paid and the amount of any federal income taxes withheld from your payments.

 

2. Types of unemployment benefits include:

• Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability payments from a government program paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act

3. You must include benefits from regular union dues paid to you as an unemployed member of a union in your income. However, other rules apply if you contribute to a special union fund and your contributions are not deductible. If this applies to you, only include in income the amount you received from the fund that is more than your contributions.

 

4. You can choose to have federal income tax withheld from your unemployment benefits. You make this choice using Form W-4V, Voluntary Withholding Request. If you complete the form and give it to the paying office, they will withhold tax at 10 percent of your payments. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

 

For more information on unemployment benefits see IRS Publications 17, Your Federal Income Tax, or IRS Publication 525, Taxable and Nontaxable Income. You can download these free booklets and Form W-4V from the IRS.gov website. You may also order them by calling 800-TAX-FORM (800-829-3676).