The IRS and Tax Professionls; What Happens Next?

There is an undercurrent happen in respect to the IRS and tax professionals who are not Enrolled Agents, Tax Attorneys and CPAs.  Not sure what is happening; but I guess we'll all know soon enough.

IRS Criminal Investigations in 2012

Quick note on IRS's criminal investigations last year (2012)  There was no shortage of convictions.

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Criminal investigation initiations totaled 5,125 cases in fiscal 2012 while investigations completed were 4,937 – up 5 percent from fiscal 2011. Convictions totaled 2,634 in fiscal 2012 while the conviction rate edged up slightly to 93 percent.

Beginning 2013 - Simplified Option for Home Office Deduction

The IRS,beginning in 2013 will offer a siplified option to figure your business use of your home.  View the summary of the IRS's Announcement.  If you rent the new method has its pros, however using the new method, you won't be able to do certain things such as carry over the excess deduction.

Simplified Option for Home Office Deduction

Beginning in tax year 2013 (returns filed in 2014), taxpayers may use a simplified option when figuring the deduction for business use of their home.
Note: This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.
Highlights of the simplified option:

• Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).
• Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
• No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.

Full details on the new option can be found in Revenue Procedure 2013-13.
Comparison of methods

Simplified Option	Regular Method
Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes	Same
Allowable square footage of home use for business (not to exceed 300 square feet)	Percentage of home used for business
Standard $5 per square foot used to determine home business deduction	Actual expenses determined and records maintained
Home-related itemized deductions claimed in full on Schedule A	Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F)
No depreciation deduction	Depreciation deduction for portion of home used for business
No recapture of depreciation upon sale of home	Recapture of depreciation on gain upon sale of home
Deduction cannot exceed gross income from business use of home less business expenses	Same
Amount in excess of gross income limitation may not be carried over	Amount in excess of gross income limitation may be carried over
Loss carryover from use of regular method in prior year may not be claimed	Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year

How to get back copies of previously-filed tax returns and protect your files during hurricane season

WASHINGTON — With the start of this year’s hurricane season, the Internal Revenue Service encourages individuals and businesses to safeguard themselves against natural disasters by taking a few simple steps.

Create a Backup Set of Records Electronically
Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set.

Keeping a backup set of records –– including, for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.

Document Valuables
Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings.
A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans
Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds
Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

IRS Ready to Help
If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered on-line, by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.

Interest Rates Remain the Same for the Third Quarter of 2013

The worst part about requesting an Installment Agreement with the IRS is the Interest rate you end up paying.  This is one of the reasons the Interest Rates Announcements are important.

 

 

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2013, as in the prior quarter. The rates will be:

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• three (3) percent for underpayments;
• five (5) percent for large corporate underpayments; and
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during April 2013 to take effect May 1, 2013, based on daily compounding.

Tax Reform Hearings

The Senate Finance and House Ways and Means Committees have held more than 50 hearings combined, examining every aspect of tax reform. These hearings have drilled down to consider issues like how the tax code affects families, how it distorts businesses’ decisions and hampers growth, and how it influences the nation’s financial system.

Chairmen Baucus and Camp have talked with taxpayers from Montana and Michigan and heard from hundreds of experts about how tax reform can simplify the system for families, help businesses innovate, and make the U.S. more competitive.

Click here to learn more about Tax Reform @ Taxreform dot gov

The IRS Reminds Taxpayers to Report Foreign Assets

The IRS has been extremely gracious with warning U.S. taxpayers to own up to and tell all about their foreign assets and offshore accounts.  It is our belief that this "nice guy" approach will end with Americans going to federal prison over offshore accounts. 

 

When individuals read about American Corporation's Tax Loopholes, they often times, feel like they shouldn't have to report their offshore activities.  This may or may not be a valid argument.  My job is to help individual tax payers understand that you may not have the resources to fight the IRS should they target you.  Plus, not reporting foreign assets and offshore bank accounts, when you are required to, is a crime.

 

It's clear beyond a shadow of a doubt that the IRS is and has been targeting offshore account holders.  Make no mistake about it, individual tax payers caught in this offshore battle won't have the benefits of the Tea Party scandal.  In other words, there will be no protest and no Senate hearing, just the sound of the prison door closing.  IRS is serious about reporting foreign assets and offshore accounts.  I don't know how else to say it!

 

 

IRS Reminds Those with Foreign Assets of U.S. Tax Obligations

WASHINGTON – The Internal Revenue Service reminds U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, that they may have a U.S. tax liability and a filing requirement in 2013.

The filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for additional information additional information on extensions of time to file.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. For details, see Publication 4261: Do You Have a Foreign Financial Account? Though this form can be filed on paper, Treasury encourages taxpayers to file it electronically.

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $57,000 or less can use brand-name software to prepare their returns and then e-file them for free.
Taxpayers with an AGI greater than $57,000 who don’t qualify for Free File can still choose the accuracy, speed and convenience of electronic filing. Check out the e-file link on IRS.gov for details on using the Free File Fillable Forms or e-file by purchasing commercial software.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, get help choosing a software provider. Both e-file and Free File are available until Oct. 15, 2013, for anyone filing a 2012 return.

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map to get answers. An International Tax Topic Index page was added recently. The IRS Tax Map assembles or groups IRS forms, publications and web pages by subject and provides users with a single entry point to find tax information.

IRS Gives Tax Relief To Oklahoma Tornado Victims; Return Filing and Tax Payment Deadlines Extended to Sept. 30

WASHINGTON –– After Monday’s devastating tornado in Moore and Oklahoma City, the Internal Revenue Service today provided tax relief to individuals and businesses affected by this and other severe storms occurring in parts of Oklahoma.

Following Monday’s disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Cleveland, Lincoln, McClain, Oklahoma and Pottawatomie counties will receive special tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.

The tax relief postpones various tax filing and payment deadlines that occurred starting on May 18, 2013. As a result, affected individuals and businesses will have until Sept. 30, 2013 to file these returns and pay any taxes due. This includes the June 17 and Sept. 16 deadlines for making estimated tax payments. A variety of business tax deadlines are also affected including the July 31 deadline for second quarter payroll and excise tax returns and the Sept. 3 deadline for truckers filing highway use tax returns.

The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The agency automatically provides this relief to any taxpayer located in the disaster area. Taxpayers need not contact the IRS to get this relief.

Beyond the relief provided to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who lives outside the disaster area but whose books, records or tax professional are located in the areas affected by these storms. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.

Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.

Individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either last year’s or this year’s return. Claiming these casualty loss deductions on either an original or amended 2012 return will get the taxpayer an earlier refund but waiting to claim them on a 2013 return could result in greater tax savings depending upon other income factors.

In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after May 18 and before June 3 if the deposits are made by June 3, 2013. Details on available relief can be found on the disaster relief page on IRS.gov.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

The IRS is actively monitoring the situation and will provide additional relief if needed.

Child Care Tax Credit for Children Under 13, Including Summer Care

 

Parents should note that they won't be able to deduct child care cost, unless they can provide a Tax ID for the Child Care Provider.  Also parents should be aware that if a child care provider comes to your home, you may be considered as a household employer.  

 

Also this tax credit applies to children who are under the age of 13, and includes day camps, but not overnight camps.  Parents cannot include the cost of child care cost that is provided by a spouse, or a person who is your dependent.  This usually includes older sisters and brothers who live in the household.

 

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Keep the Child Care Credit in Mind for Summer

If you are a working parent or look for work this summer, you may need to pay for the care of your child or children. These expenses may qualify for a tax credit that can reduce your federal income taxes. The Child and Dependent Care Tax Credit is available not only while school’s out for summer, but also throughout the year. Here are eight key points the IRS wants you to know about this credit.

 

1. You must pay for care so you – and your spouse if filing jointly – can work or actively look for work. Your spouse meets this test during any month they are full-time student, or physically or mentally incapable of self-care.

 

2. You must have earned income. Earned income includes earnings such as wages and self-employment. If you are married filing jointly, your spouse must also have earned income. There is an exception to this rule for a spouse who is full-time student or who is physically or mentally incapable of self-care.

 

3. You must pay for the care of one or more qualifying persons. Qualifying children under age 13 who you claim as a dependent meet this test. Your spouse or dependent who lived with you for more than half the year may meet this test if they are physically or mentally incapable of self-care.

 

4. You may qualify for the credit whether you pay for care at home, at a daycare facility outside the home or at a day camp. If you pay for care in your home, you may be a household employer. For more information, see Publication 926, Household Employer's Tax Guide.

 

5. The credit is a percentage of the qualified expenses you pay for the care of a qualifying person. It can be up to 35 percent of your expenses, depending on your income.

 

6. You may use up to $3,000 of the unreimbursed expenses you pay in a year for one qualifying person or $6,000 for two or more qualifying person.

 

7. Expenses for overnight camps or summer school tutoring do not qualify. You cannot include the cost of care provided by your spouse or a person you can claim as your dependent. If you get dependent care benefits from your employer, special rules apply.

 

8. Keep your receipts and records to use when you file your 2013 tax return next year. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your return

Tax Loopholes Used by Corporate America

Below are the names and details of some of the largest tax loopholes in American history.  These tax loopholes are used by American corporations to legally avoid taxes.  The information is more than interesting, its almost unbelievable, yet we have every reason to believe that the Huffington Post got it right.


Excess Stock Options


About 280 Fortune 500 companies have taken home a total of $27.3 billion over the past three years thanks to a tax break that allows corporations to treat executive stock awards like cash compensation -- meaning the money can be written off like a business expense -- according to a recent report from the Citizens for Tax Justice. Critics argue that this defies "common sense," given stock options aren't a cost to the company like cash compensation is.

Facebook used this single loophole to wipe out its entire tax liability last year.

 

Accelerated Depreciation

Accelerated depreciation accounted for $76 billion in revenue loss in 2011, the most of any corporate tax break, according to the Government Accountability Office.

The tax break allows businesses to write off the costs of ostensibly deteriorating machinery before the equipment even wears out. A Citizens for Tax Justice study found that Duke Energy managed to reduce its tax liability largely by using this tax break. Duke called the study misleading.

 

 

Deferral On Overseas Profits

Fortune 500 companies, including Apple, have more than $1.6 trillion in profits parked offshore, according to multiple recent studies. By keeping that money overseas, companies are able to avoid paying U.S. taxes on the profits.

 

 

Exclusion Of Interest On State And Municipal Bonds

When companies invest in state and municipal bonds, they are exempt from taxes on the interest they earn from those bonds. This is one corporate tax break that individuals can take advantage of as well, though it largely benefits the wealthy. As a result of the loophole, the government has lost $58 billion over the past five years, according to the Fiscal Times. Companies including Goldman Sachs have benefitted from the exemption by using the tax exempt bonds to build new offices, according to The New York Times

 

  

Domestic Manufacturing Activities

Starbucks is among the companies that have successfully lobbied to qualify for a tax break that rewards U.S. manufacturing. As a result, activities like roasting coffee beans count as domestic manufacturing and are eligible for tax breaks

 

 

Fossil Fuel Subsidies

Oil and gas companies currently benefit from tax breaks that they say encourage innovation by subsidizing hunts for oil and gas that may not turn out to be fruitful. The result: Continental Resources paid an effective tax rate of 2.2 percent over the past 5 years. Chevron and Exxon Mobil paid tax rates at 4 percent and 2 percent, respectively.

 

Corporate Jet Owners Tax Break

This tax break, which allows companies to deduct the cost of a corporate jet from their tax bill like they would any other business expense, got its moment in the spotlight when President Barack Obama highlighted it as an unfair perk for the rich. The president's 2011 budget pushed for an increase in the per-flight fee for private jets from $60 to $100, yet the break remains in effect today.

Companies that make jets, like Cessna, Beechcraft and Learjet, benefit from the subsidy as it supports the aviation industry, according to proponents of the subsidy.

 

 

The credit for the above information goes to: The Huffington Post.

 

 

 

Ups, Now Congress Knows: Apple Paid Little Or No Taxes To Any Government On Billions In Profits

WASHINGTON (Reuters) - Using an unusual global tax structure, Apple Inc has held billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government, a Senate report on the company's offshore tax structure concluded on Monday.

In a 40-page memorandum released a day before Apple CEO Tim Cook is scheduled to testify before Congress, the Senate's Permanent Subcommittee on Investigations identified three subsidiaries that have no "tax residency" in Ireland, where they are incorporated, or in the United States, where company executives manage those companies.

The main subsidiary, a holding company that includes Apple's retail stores throughout Europe, has not paid any corporate income tax in the last five years.

The subsidiary, which has a Cork, Ireland, mailing address, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30 percent of Apple's total worldwide net profits, the report said.

"Apple has exploited a difference between Irish and U.S. tax residency rules," the report said.
Ahead of Tuesday's hearing, Apple said on Monday it does not use "tax gimmicks" and that the company will pay more than $7 billion in U.S. taxes in fiscal 2013.

Apple defended the main subsidiary highlighted by the subcommittee's report, saying it does not reduce Apple's U.S. tax liability, the company said in a comment posted online as part of Tuesday's prepared remarks.

Subcommittee staffers said on Monday that Apple was not breaking any laws and had cooperated fully with the investigation.

Tuesday's hearing is the second to be held by Senator Carl Levin, a Michigan Democrat and chairman of the subcommittee, to shed light on the weaknesses of the U.S. corporate tax code. Levin has sought to overhaul the code in Congress.

In September, the subcommittee scrutinized the offshore tax structures of Microsoft Corp and Hewlett-Packard . Committee staffers said they did not find similar subsidiaries set up for stateless tax bills at those two companies.

Apple also uses two conventional offshore tax practices typical of multinational companies' tax-avoidance strategies, the report said.

Multinational corporations value goods and services moving across international borders from one corporate unit to another. Known as "transfer pricing," these moves are frequently managed to reduce corporations' global tax costs.

Corporations must pay the top U.S. 35-percent corporate tax on foreign profits, but not until those profits are brought into the United States from abroad. This exception is known as corporate offshore income deferral.

Apple's tax structure highlights flaws in the U.S. corporate tax code so that Congress "can effectively close the loopholes used by many U.S. multinational companies," Arizona Senator John McCain, the subcommittee's top Republican, said in a statement on Monday.

Levin, who announced he will retire at the end of 2014, introduced legislation in February to close tax loopholes. So far, the bill does not have any Republican co-sponsors. Similar legislation has been introduced in the House of Representatives.

Government tax officials from the Internal Revenue Service and Treasury Department also are scheduled to testify before the subcommittee on Tuesday.

(Reporting by Patrick Temple-West; Editing by Howard Goller, Bernard Orr)

Number of Tax Returns Filed With the IRS in 2013

The IRS stats are in for the filing season for 2012; prepared and filed in 2013.  The IRS received over 134 million tax returns. You will notice that more and more people are preparing their own taxes and e-filing from home. While this is great news for some taxpayers, its not so great for taxpayers who have a Schedule C, Schedule D, or Schedule E included in their tax return. 

 

The Schedule C, D and E can cause a drastic increase or decrease in a taxpayer's tax return, and should only be completed by a taxpayer IF they know exactly what they are doing. 

 

Because more and more Americans are filing their own tax returns, I published a new e-Book, The Hidden Tax Benefits in Schedule A, taxpayers can learn more about how to manage a Schedule A to your advantage.  See IRS stats below for the exact numbers on tax filings in 2013

 

More taxpayers e-file from home in 2013

 

WASHINGTON — The Internal Revenue Service today provided updated statistics showing continued growth in electronic filing of tax returns. So far in 2013, more than 43 million people have self-prepared and e-filed their tax returns from home, an increase of more than 4 percent compared to the prior year.

Through May 10, the IRS received more than 43.6 million self-prepared e-file returns, up from 41.7 million a year earlier. E-filed returns from tax professionals increased slightly, reaching almost 70.4 million. In all, almost 114 million tax returns came in through e-file this year, up from 112.1 million at this point last year.

Other highlights from the new filing season statistics show:

• During 2013, the IRS issued more than 101 million refunds worth almost $268 billion.
• Almost 80 percent of refunds used direct deposit.
• More people are using IRS.gov to get answers, file their returns and resolve issues. So far in 2013, the IRS web site has been accessed more than 300 million times, up almost 25 percent compared to the same time last year.

 

 

2013 FILING SEASON STATISTICS
Cumulative statistics comparing 5/11/12 and 5/10/13
Individual Income Tax Returns:	2012		2013		% Change
Total Receipts	135,473,000		134,349,000		-0.8
Total Processed	130,261,000		129,674,000		-0.5
E-filing Receipts:
TOTAL	112,089,000		113,954,000		1.7
Tax Professionals	70,344,000		70,380,000		0.1
Self-prepared	41,745,000		43,574,000		4.4
Web Usage:
Visits to IRS.gov	255,269,615		318,408,842		24.7
Total Refunds:
Number	102,522,000		101,082,000		-1.4
Amount	$277.180	Billion	$267.946	Billion	-3.3
Average refund	$2,704		$2,651		-2.0
Direct Deposit Refunds:
Number	79,308,000		79,880,000		0.7
Amount	$231.656	Billion	$228.467	Billion	-1.4
Average refund	$2,921		$2,860		-2.1