from www.money.cnn.com
AMT fix means tax-refund delays for millions
IRS says Congress' late fix to alternative minimum tax could hold back about 3 million refund checks until February.
WASHINGTON (AP) -- More than 3 million people will have to wait until February to get their tax refunds because of Congress' late fix to the alternative minimum tax, the IRS said Thursday.
Congress put a one-year freeze on growth of the alternative minimum tax last week, shielding many middle- and upper-middle income taxpayers from first exposure to the tax. But Congress' late action means the Internal Revenue Service won't be able to start processing five AMT-related forms until February, delaying potential refunds for those people until that month.
Between 3 million and 4 million people filed in January of last year using those forms, with many of those people expecting a refund, the IRS said.
The average refund in 2007 was $2,324, the agency said.
"We regret the inconvenience the delay will mean for millions of early tax filers, especially those expecting a refund," acting IRS Commissioner Linda Stiff said.
As many as 13.5 million people will have to wait until February 11 to start filing with the five AMT-related forms, but the IRS said filing patterns show only between 3 million to 4 million of those people file during the early tax season anyhow.
The IRS was able to reprogram its computers to begin accepting the seven other AMT-related forms when the tax season opens in early January.
But the tax packages that will start arriving in the mail beginning after New Year's Day were printed in November, before the AMT fixes were approved by Congress. The IRS has created a special section on its Web site, irs.gov, with updated copies of AMT forms.
The alternative minimum tax was passed in 1969 and was aimed at about 155 very wealthy families, who used deductions to avoid paying any federal income tax. The AMT disallows certain deductions and credits. It was not adjusted for inflation; as a result, over the years it has hit a growing number of middle-income taxpayers.
More than 4 million were subject to it in the 2006 tax year. Without the congressional fix, more than 20 million families would have been faced with an extra $2,000 tax hit on average.
The five forms affected by the delay are:
Form 8863, Education Credits.
Form 5695, Residential Energy Credits.
Form 1040A's Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
Form 8396, Mortgage Interest Credit and
Form 8859, District of Columbia First-Time Homebuyer Credit.
Any taxpayer using those forms will have to wait until February to file their taxes, the agency said. The IRS will begin processing those forms on Feb. 11, and the first refunds for those people will start going out 10 to 14 days later.
More than 100 million people got refunds during the last tax season.
An executive at Kansas City, Mo.-based H&R Block (HRB, Fortune 500), the nation's largest tax preparer, suggested there might be ways for people to increase the speed of their refunds.
"We can help taxpayers claiming the child and dependent-care credit avoid the delay by using alternative forms to file their return," said Tim Gokey, group president of H&R Block Tax Services. "Taxpayers can also file their return earlier by not claiming the credits being blocked until Feb. 11, and then filing an amended return later to claim the additional credits."
The Associated Press reported on Dec. 1 that the IRS Oversight Board was warning that taxpayers could expect refund delays because Congress hadn't acted on an AMT fix.
Congress passes legislation every year to keep the tax from expanding. The fix this year was delayed by an argument between Republicans and Democrats over whether some taxes should rise to offset the cost of correcting the AMT.
The House's Democratic majority demanded that the $50 billion cost of the tax relief be paid for, mainly by closing a loophole on offshore tax havens. But Republicans' argument that the AMT shouldn't be fixed with increased taxes prevailed, with the backing of a White House veto threat.
The Dec. 19 passage of the AMT fix threw the IRS's schedule off because it takes seven weeks to reprogram the agency's computers to adjust for congressional action, the agency said.
IRS officials suggest that people file electronically to get faster refunds. People who file electronically and get direct deposits into their accounts can expect refunds in 10-14 days, while those who file with paper forms can expect a wait of as long as six weeks.
The IRS is also working with tax professionals and the makers of tax preparation software to make sure their information is as up-to-date as possible.
"The IRS is going to continue to do everything it can to make this a fully successful filing season for the nation's taxpayers," Stiff said.
Sunday, December 30, 2007
Saturday, December 22, 2007
$ 65,100.00
from www.boston.com
I have a number in mind and it should figure prominently in your tax decisions
My plans for substantial tax savings next year, including tax-free stock dividends and long-term capital gains, revolve around one figure: $65,100.
more stories like this
While not official yet, $65,100 is projected to be the top of the 15 percent tax bracket for spouses filing jointly in 2008, based on how brackets are adjusted annually for inflation. For single filers, it would be $32,550. For every extra dollar, Uncle Sam would take a progressively bigger cut (first 25 percent, then 28, 33, and 35).
That's reason enough for my wife, Georgina, and me - and all taxpayers - to try to stay within the 15 percent bracket (by contributing to deductible retirement plans, for example, and claiming deductions and adjustments to income).
But there is another incentive: From 2008 through 2010, current tax law calls for a "0 percent" rate - that's right, nada - on qualifying stock dividends and long-term capital gains on the sale of securities for people in the two lowest tax brackets.
"Now, that's a free lunch," said Mike Swenson, certified public accountant with Thomson Tax and Accounting. (Through Dec. 31, the tax rate for qualifying dividends and long-term gains in these two brackets is 5 percent.)
Unless the law is renewed, stock dividends will be taxed as ordinary income in 2011 and the rate on long-term gains will revert to a maximum 20 percent.
The uncertainty about what Congress may do next - including repealing the lower rates before 2011 - is prompting many advisers to suggest investors sitting on gains don't wait too long to sell.
Given the government deficit, "low rates for investors may disappear sooner rather than later," said Grace Allison, vice president and tax strategist for Northern Trust. Investors with large unrealized gains in concentrated portfolios (a lot of money in a few stocks) should consider selling and diversifying now, she said.
Even investors with diversified portfolios can benefit from selling, particularly if they can do it tax-free.
"While the low capital-gains rates appear safe for now, tax laws can be unpredictable," Swenson said. "The rule of thumb is to take advantage of the low rates while you can."
Tax reasons alone normally should not drive sell decisions. But in this case, you can buy the same securities right back - or if you have enough money, sell and buy simultaneously - without adverse tax consequences. (There is no "wash-sale" rule when selling at a gain, only when selling at a loss). Your only concerns may be transaction costs, possible fluctuations in share price from sale to repurchase, and whether your fund imposes a waiting period to buy again after you sell.
To qualify for long-term rates, securities must be held more than a year. Gains and dividends count as taxable income to determine your bracket. Next year, we plan to sell selected no-load fund shares for solid gains but not enough to push us beyond the 15 percent bracket (and nowhere near enough that the alternative minimum tax becomes an issue). We'll buy the same number of shares the same day, keeping our portfolio intact and establishing a new and higher tax basis. We'll also refrain from selling investments at a loss in taxable accounts because losses must first be used to offset gains, and the gains will be tax-free anyway.
Humberto Cruz is a columnist for the South Florida Sun-Sentinel. He can be reached at AskHumberto@aol.com
© Copyright 2007 Globe Newspaper Company.
I have a number in mind and it should figure prominently in your tax decisions
My plans for substantial tax savings next year, including tax-free stock dividends and long-term capital gains, revolve around one figure: $65,100.
more stories like this
While not official yet, $65,100 is projected to be the top of the 15 percent tax bracket for spouses filing jointly in 2008, based on how brackets are adjusted annually for inflation. For single filers, it would be $32,550. For every extra dollar, Uncle Sam would take a progressively bigger cut (first 25 percent, then 28, 33, and 35).
That's reason enough for my wife, Georgina, and me - and all taxpayers - to try to stay within the 15 percent bracket (by contributing to deductible retirement plans, for example, and claiming deductions and adjustments to income).
But there is another incentive: From 2008 through 2010, current tax law calls for a "0 percent" rate - that's right, nada - on qualifying stock dividends and long-term capital gains on the sale of securities for people in the two lowest tax brackets.
"Now, that's a free lunch," said Mike Swenson, certified public accountant with Thomson Tax and Accounting. (Through Dec. 31, the tax rate for qualifying dividends and long-term gains in these two brackets is 5 percent.)
Unless the law is renewed, stock dividends will be taxed as ordinary income in 2011 and the rate on long-term gains will revert to a maximum 20 percent.
The uncertainty about what Congress may do next - including repealing the lower rates before 2011 - is prompting many advisers to suggest investors sitting on gains don't wait too long to sell.
Given the government deficit, "low rates for investors may disappear sooner rather than later," said Grace Allison, vice president and tax strategist for Northern Trust. Investors with large unrealized gains in concentrated portfolios (a lot of money in a few stocks) should consider selling and diversifying now, she said.
Even investors with diversified portfolios can benefit from selling, particularly if they can do it tax-free.
"While the low capital-gains rates appear safe for now, tax laws can be unpredictable," Swenson said. "The rule of thumb is to take advantage of the low rates while you can."
Tax reasons alone normally should not drive sell decisions. But in this case, you can buy the same securities right back - or if you have enough money, sell and buy simultaneously - without adverse tax consequences. (There is no "wash-sale" rule when selling at a gain, only when selling at a loss). Your only concerns may be transaction costs, possible fluctuations in share price from sale to repurchase, and whether your fund imposes a waiting period to buy again after you sell.
To qualify for long-term rates, securities must be held more than a year. Gains and dividends count as taxable income to determine your bracket. Next year, we plan to sell selected no-load fund shares for solid gains but not enough to push us beyond the 15 percent bracket (and nowhere near enough that the alternative minimum tax becomes an issue). We'll buy the same number of shares the same day, keeping our portfolio intact and establishing a new and higher tax basis. We'll also refrain from selling investments at a loss in taxable accounts because losses must first be used to offset gains, and the gains will be tax-free anyway.
Humberto Cruz is a columnist for the South Florida Sun-Sentinel. He can be reached at AskHumberto@aol.com
© Copyright 2007 Globe Newspaper Company.
Thursday, December 20, 2007
Tax Advisors for Personal and Business Use
from www.banks.com
By Chris Bibey December 18th, 2007
No matter who you are, being able to lean on a tax advisor may be a huge benefit in your life. This holds true no matter if you simply file individual income taxes, or you are in the midst of starting a business. The tax process in the United States can be very difficult to get along with. And if you are not sure of what you are doing, you could end up being hit with big penalties or worse from the IRS. For this reason, more and more people are hiring tax advisors to work with them.
What can a tax advisor do for you? The better question may be: what can’t a tax advisor do. The fact of the matter is that when you hire an advisor they are meant to help with anything and everything. Not only can they overlook your entire tax situation, but they can also answer your questions. Simply put, you are hiring an advisor to work for you so nothing tax related is off limits.
Do you need pay your tax advisor year round? This is a tricky question, and should be answered only after considering your situation. For instance, if you own a business you may need to have a tax advisor available to you at all times. Remember, you will probably have tax related questions that need answered on a daily basis. On the other side of things, as an individual you may not need to speak with your advisor more than once a year. Of course, if you have a large portfolio of investments this may not be the case.
Hiring a tax advisor to oversee your situation may be the best financial decision that you ever make.
By Chris Bibey December 18th, 2007
No matter who you are, being able to lean on a tax advisor may be a huge benefit in your life. This holds true no matter if you simply file individual income taxes, or you are in the midst of starting a business. The tax process in the United States can be very difficult to get along with. And if you are not sure of what you are doing, you could end up being hit with big penalties or worse from the IRS. For this reason, more and more people are hiring tax advisors to work with them.
What can a tax advisor do for you? The better question may be: what can’t a tax advisor do. The fact of the matter is that when you hire an advisor they are meant to help with anything and everything. Not only can they overlook your entire tax situation, but they can also answer your questions. Simply put, you are hiring an advisor to work for you so nothing tax related is off limits.
Do you need pay your tax advisor year round? This is a tricky question, and should be answered only after considering your situation. For instance, if you own a business you may need to have a tax advisor available to you at all times. Remember, you will probably have tax related questions that need answered on a daily basis. On the other side of things, as an individual you may not need to speak with your advisor more than once a year. Of course, if you have a large portfolio of investments this may not be the case.
Hiring a tax advisor to oversee your situation may be the best financial decision that you ever make.
Saturday, December 8, 2007
IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit
from www.irs.gov
IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit
IR-2007-196, Dec. 5, 2007
WASHINGTON — Purchasers of certain large trucks, buses or other heavy vehicles running on alternative fuel can claim a credit of up $32,000, and purchasers of certain large hybrid trucks and other heavy hybrid vehicles can claim a credit of up to $12,000 if they qualify for the Alternative Motor Vehicle Credit.
Qualified Alternative Fuel Motor Vehicles (QAFMV) are powered solely by alternative fuels, such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol. Vehicles powered by a combination of an alternative fuel and a petroleum-based fuel may qualify for a reduced credit. Purchases of new vehicles with special equipment, as well as ones converted for alternative power, may qualify.
A credit also is available for certain new qualified heavy hybrid vehicles with a gross vehicle weight rating in excess of 8,500 pounds. A qualifying heavy hybrid motor vehicle draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system. This credit should be not confused with the alternative motor vehicle credit for qualified hybrid passenger automobiles and light trucks.
The list of vehicles is updated periodically
Subscribe to IRS Newswire
IRS Issues List of Vehicles that Qualify for the Alternative Motor Vehicle Credit
IR-2007-196, Dec. 5, 2007
WASHINGTON — Purchasers of certain large trucks, buses or other heavy vehicles running on alternative fuel can claim a credit of up $32,000, and purchasers of certain large hybrid trucks and other heavy hybrid vehicles can claim a credit of up to $12,000 if they qualify for the Alternative Motor Vehicle Credit.
Qualified Alternative Fuel Motor Vehicles (QAFMV) are powered solely by alternative fuels, such as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen and any liquid at least 85 percent of the volume of which consists of methanol. Vehicles powered by a combination of an alternative fuel and a petroleum-based fuel may qualify for a reduced credit. Purchases of new vehicles with special equipment, as well as ones converted for alternative power, may qualify.
A credit also is available for certain new qualified heavy hybrid vehicles with a gross vehicle weight rating in excess of 8,500 pounds. A qualifying heavy hybrid motor vehicle draws propulsion energy from onboard sources of stored energy which are both an internal combustion or heat engine using consumable fuel, and a rechargeable energy storage system. This credit should be not confused with the alternative motor vehicle credit for qualified hybrid passenger automobiles and light trucks.
The list of vehicles is updated periodically
Subscribe to IRS Newswire
Tuesday, November 27, 2007
IRS Announces 2008 Standard Mileage Rates
from www.irs.gov
IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile
IR-2007-192, Nov. 27, 2007
WASHINGTON — The Internal Revenue Service today issued the 2008 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.
The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS.
The mileage rate for charitable miles is set by law.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.
Revenue Procedure 2007-70 contains additional information on these standard mileage rates.
Subscribe to IRS Newswire
IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile
IR-2007-192, Nov. 27, 2007
WASHINGTON — The Internal Revenue Service today issued the 2008 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning Jan. 1, 2008, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
50.5 cents per mile for business miles driven;
19 cents per mile driven for medical or moving purposes; and
14 cents per mile driven in service of charitable organizations.
The new rate for business miles compares to a rate of 48.5 cents per mile for 2007. The new rate for medical and moving purposes compares to 20 cents in 2007. The rate for miles driven in service of charitable organizations has remained the same.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile; the standard rate for medical and moving purposes is based on the variable costs as determined by the same study. Runzheimer International, an independent contractor, conducted the study for the IRS.
The mileage rate for charitable miles is set by law.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.
Revenue Procedure 2007-70 contains additional information on these standard mileage rates.
Subscribe to IRS Newswire
Saturday, November 24, 2007
Why your IRS tax refund will be late
from www.suntimes.com
Why your IRS tax refund will be late
November 22, 2007
ROBERT NOVAK novakevans@aol.com
Habitual congressional gridlock usually has no impact on the lives of ordinary Americans. But what happened on the Senate floor last Friday just before lawmakers recessed for their Thanksgiving break will delay tax refunds next year for 50 million taxpayers who count on them.
The underlying reason is a 38-year-old congressional tax blunder that never has been corrected. In 1969, Congress passed the alternative minimum tax to collect from 155 tax-avoiding millionaires. But because the scheme was not indexed for inflation, this year alone it would hit 23 million extra people with taxes higher than intended. AMT will be ''patched'' to provide relief as it is in every Congress, but not in time this year. Refunds totaling more than $75 billion will arrive many weeks late not only for taxpayers in the $100,000-to-$200,000 bracket who are unintentionally affected by AMT, but also lower-income persons because the IRS refund procedure will be disrupted by the delay.
Senate Majority Leader Harry Reid's 11th-hour effort Friday collapsed when he refused to open the proceedings to votes on Republican tax-cutting proposals. At the heart of this deadlock is a debate between Democrats and Republicans over whether the level of federal taxation should be controlled. For once, the debate comes home to ordinary taxpayers in delayed refund checks.
The AMT problem did not take Congress by surprise. The administration for months had been calling for another AMT ''patch'' to keep the monster that Congress built from devouring more taxpayers. But Democratic Rep. Charles Rangel, chairman of the tax-writing House Ways and Means Committee, said he instead would attempt ''the mother of all tax reforms'': total repeal of AMT, with lost revenue paid for by massive taxing of the rich -- a trillion-dollar redistribution of wealth over the next decade.
Rangel's ''mother'' was going nowhere, so Congress last month belatedly turned to passing a patch. The Blue Dogs, self-styled Democratic fiscal conservatives, insisted on offsets -- $26 billion in tax increases -- to cover lost AMT revenue. Rangel's new bill (called ''little mother'' by Republicans) hit unpopular targets: private equity accounts, hedge funds and investment partnerships. It passed the House Nov. 9 on a party-line vote.
Everybody knew ''little mother'' was pure posturing. There was no chance for the necessary 60-vote super Senate majority. Indeed, Senate Democratic leaders did not want a tax increase offset for the patch. The bill's final version that would reach President Bush's desk would contain no tax increase. Majority Leader Reid said he would not pass a bill until December, when Congress returned from its Thanksgiving break.
But the Internal Revenue Service announced it would take 10 weeks to readjust its computers to account for the patched AMT, affecting its entire refund system. One $90,000-a-year Senate staffer complained he would not be getting his tax refunds, and the word spread among his colleagues (an unregistered, potent lobbyist bloc). Republican lawmakers pounded on the Democrats for inflicting pain on ordinary taxpayers. Prominent Democratic senators urged Reid to get something done. Consequently, Reid made a surprise announcement that the Senate would take up the AMT patch last Friday instead of waiting for December. All signs indicated that Reid was serious about taking action.
Grave philosophical differences between Republicans and Democrats prevented passage. Senate Minority Leader Mitch McConnell proposed permitting Republicans to offer four floor amendments to the bill. Reid did not want to subject his Democrats to voting against tax cuts, including repeal of the estate tax. So the two party leaders mutually refused to grant the unanimous consent needed for the Senate to take up the bill, and the senators left Washington with another piece of work undone.
AMT surely will be patched in December, too late for timely tax refunds.
Why your IRS tax refund will be late
November 22, 2007
ROBERT NOVAK novakevans@aol.com
Habitual congressional gridlock usually has no impact on the lives of ordinary Americans. But what happened on the Senate floor last Friday just before lawmakers recessed for their Thanksgiving break will delay tax refunds next year for 50 million taxpayers who count on them.
The underlying reason is a 38-year-old congressional tax blunder that never has been corrected. In 1969, Congress passed the alternative minimum tax to collect from 155 tax-avoiding millionaires. But because the scheme was not indexed for inflation, this year alone it would hit 23 million extra people with taxes higher than intended. AMT will be ''patched'' to provide relief as it is in every Congress, but not in time this year. Refunds totaling more than $75 billion will arrive many weeks late not only for taxpayers in the $100,000-to-$200,000 bracket who are unintentionally affected by AMT, but also lower-income persons because the IRS refund procedure will be disrupted by the delay.
Senate Majority Leader Harry Reid's 11th-hour effort Friday collapsed when he refused to open the proceedings to votes on Republican tax-cutting proposals. At the heart of this deadlock is a debate between Democrats and Republicans over whether the level of federal taxation should be controlled. For once, the debate comes home to ordinary taxpayers in delayed refund checks.
The AMT problem did not take Congress by surprise. The administration for months had been calling for another AMT ''patch'' to keep the monster that Congress built from devouring more taxpayers. But Democratic Rep. Charles Rangel, chairman of the tax-writing House Ways and Means Committee, said he instead would attempt ''the mother of all tax reforms'': total repeal of AMT, with lost revenue paid for by massive taxing of the rich -- a trillion-dollar redistribution of wealth over the next decade.
Rangel's ''mother'' was going nowhere, so Congress last month belatedly turned to passing a patch. The Blue Dogs, self-styled Democratic fiscal conservatives, insisted on offsets -- $26 billion in tax increases -- to cover lost AMT revenue. Rangel's new bill (called ''little mother'' by Republicans) hit unpopular targets: private equity accounts, hedge funds and investment partnerships. It passed the House Nov. 9 on a party-line vote.
Everybody knew ''little mother'' was pure posturing. There was no chance for the necessary 60-vote super Senate majority. Indeed, Senate Democratic leaders did not want a tax increase offset for the patch. The bill's final version that would reach President Bush's desk would contain no tax increase. Majority Leader Reid said he would not pass a bill until December, when Congress returned from its Thanksgiving break.
But the Internal Revenue Service announced it would take 10 weeks to readjust its computers to account for the patched AMT, affecting its entire refund system. One $90,000-a-year Senate staffer complained he would not be getting his tax refunds, and the word spread among his colleagues (an unregistered, potent lobbyist bloc). Republican lawmakers pounded on the Democrats for inflicting pain on ordinary taxpayers. Prominent Democratic senators urged Reid to get something done. Consequently, Reid made a surprise announcement that the Senate would take up the AMT patch last Friday instead of waiting for December. All signs indicated that Reid was serious about taking action.
Grave philosophical differences between Republicans and Democrats prevented passage. Senate Minority Leader Mitch McConnell proposed permitting Republicans to offer four floor amendments to the bill. Reid did not want to subject his Democrats to voting against tax cuts, including repeal of the estate tax. So the two party leaders mutually refused to grant the unanimous consent needed for the Senate to take up the bill, and the senators left Washington with another piece of work undone.
AMT surely will be patched in December, too late for timely tax refunds.
Chances of Being Audited By the IRS
from www.banks.com
Chances of Being Audited By the IRS
By Chris Bibey November 20th, 2007
Every year, tax filers worry that the IRS is going to single them out for an audit. Are you stressing out over nothing? The fact of the matter is that only a very small percentage of individual tax returns are audited. Generally speaking, the selection process for audits is generated by a computer based model that looks at a set of norms or standards.
When the figures on your tax return differ greatly from the standards that the computer is using, your chances of being audited increase greatly. This is why it is very important to ensure that your numbers are correct no matter what.
Tax returns are grouped together by the IRS, and from there, those that will be audited are chosen. Of course, the IRS does not release information on the specifications and details that they use to break down these groupings. If they did, there would surely be a lot of people trying to “game” the system.
If you report a large amount of deductions or an abnormally low income, there is a good chance that you are going to set off a red flag. In turn, the IRS may contact you looking for an explanation.
Being audited is never fun. But with that being said, just because you are audited does not mean that you are going to get in trouble. Once again, if you are honest and do everything right the first time around, there is nothing to worry about even if the IRS does get in touch.
The IRS estimates that hundreds of billions of dollars have been lost by those who cheat on their taxes. For this reason, Congress has given the IRS a bigger budget for conducting audits.
Posted in Tax Audits, IRS No Comments »
Chances of Being Audited By the IRS
By Chris Bibey November 20th, 2007
Every year, tax filers worry that the IRS is going to single them out for an audit. Are you stressing out over nothing? The fact of the matter is that only a very small percentage of individual tax returns are audited. Generally speaking, the selection process for audits is generated by a computer based model that looks at a set of norms or standards.
When the figures on your tax return differ greatly from the standards that the computer is using, your chances of being audited increase greatly. This is why it is very important to ensure that your numbers are correct no matter what.
Tax returns are grouped together by the IRS, and from there, those that will be audited are chosen. Of course, the IRS does not release information on the specifications and details that they use to break down these groupings. If they did, there would surely be a lot of people trying to “game” the system.
If you report a large amount of deductions or an abnormally low income, there is a good chance that you are going to set off a red flag. In turn, the IRS may contact you looking for an explanation.
Being audited is never fun. But with that being said, just because you are audited does not mean that you are going to get in trouble. Once again, if you are honest and do everything right the first time around, there is nothing to worry about even if the IRS does get in touch.
The IRS estimates that hundreds of billions of dollars have been lost by those who cheat on their taxes. For this reason, Congress has given the IRS a bigger budget for conducting audits.
Posted in Tax Audits, IRS No Comments »
IRS Has $110 Million in Refund Checks Looking for a Home
from www.irs.gov
IR-2007-189, Nov. 14, 2007
WASHINGTON — The Internal Revenue Service is looking for 115,478 taxpayers who are due refund checks worth about $110 million after the checks were returned as undeliverable.
The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting.
“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”
The “ Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
Most Refunds
The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.
In fact, undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.
A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS.
Telephone Tax Refund
The list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The sharp increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.
Updating Your Address
Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service.Taxpayers can update their addresses with the IRS on the “ Where’s My Refund?” feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses.
A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form or request it by calling 1-800-TAX-FORM (1-800-829-3676).
Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.
Direct Deposit Can Stop Lost Refunds
Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form.
Links:
IR-2007-189, Nov. 14, 2007
WASHINGTON — The Internal Revenue Service is looking for 115,478 taxpayers who are due refund checks worth about $110 million after the checks were returned as undeliverable.
The refund checks, averaging about $953, can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting.
“Taxpayers should not miss out on getting their money back,” said Richard Morgante, commissioner of the IRS Wage and Investment Division. ”The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.”
The “ Where’s My Refund?” tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
Most Refunds
The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit.
In fact, undeliverable refunds account for less than one-tenth of one percent of all refunds, or about one in a thousand.
A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS.
Telephone Tax Refund
The list of taxpayers due undeliverable refunds this year rose about 21 percent from 95,746 last year. The sharp increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it.
Updating Your Address
Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service.Taxpayers can update their addresses with the IRS on the “ Where’s My Refund?” feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses.
A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form or request it by calling 1-800-TAX-FORM (1-800-829-3676).
Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address.
Direct Deposit Can Stop Lost Refunds
Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form.
Links:
Tuesday, November 13, 2007
Saver's Credit: Tax Break Helps Low and Moderate Income Workers
from www.irs.gov
Plan Now to Get Full Benefit of Saver’s Credit; Tax Break Helps Low- and Moderate-Income Workers Save for Retirement
IR-2007-187, Nov. 9, 2007
WASHINGTON — Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2007 and the years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Formally known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
“We want low- and moderate-income workers to know about this valuable credit so they can effectively plan ahead and take full advantage of it,” said Richard J. Morgante, commissioner of the Wage and Investment Division of the IRS. “Now that a growing number of employers are automatically enrolling their employees in 401(k) plans, the saver’s credit offers many workers who save for retirement an added bonus.”
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2007 tax return. People have until April 15, 2008, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2007. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2008 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
Married couples filing jointly with incomes up to $52,000 in 2007 or $53,000 in 2008;
Heads of Household with incomes up to $39,000 in 2007 or $39,750 in 2008; and
Married individuals filing separately and singles with incomes up to $26,000 in 2007 or $26,500 in 2008.
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In 2005, the most recent year for which complete figures are available, saver’s credits totaling more than $900 million were claimed on nearly 5.3 million individual income tax returns. Saver’s credits claimed on these returns averaged $216 for joint filers, $149 for heads of household and $140 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
Eligible taxpayers must be at least 18 years of age.
Anyone claimed as a dependent on someone else’s return cannot take the credit.
A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2007, this rule applies to distributions received after 2004 and before the due date (including extensions) of the 2007 return. Form 8880 and its instructions have details on making this computation.
Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted last year. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on this Web site.
Plan Now to Get Full Benefit of Saver’s Credit; Tax Break Helps Low- and Moderate-Income Workers Save for Retirement
IR-2007-187, Nov. 9, 2007
WASHINGTON — Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2007 and the years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Formally known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
“We want low- and moderate-income workers to know about this valuable credit so they can effectively plan ahead and take full advantage of it,” said Richard J. Morgante, commissioner of the Wage and Investment Division of the IRS. “Now that a growing number of employers are automatically enrolling their employees in 401(k) plans, the saver’s credit offers many workers who save for retirement an added bonus.”
Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2007 tax return. People have until April 15, 2008, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2007. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2008 contributions soon so their employer can begin withholding them in January.
The saver’s credit can be claimed by:
Married couples filing jointly with incomes up to $52,000 in 2007 or $53,000 in 2008;
Heads of Household with incomes up to $39,000 in 2007 or $39,750 in 2008; and
Married individuals filing separately and singles with incomes up to $26,000 in 2007 or $26,500 in 2008.
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.
In 2005, the most recent year for which complete figures are available, saver’s credits totaling more than $900 million were claimed on nearly 5.3 million individual income tax returns. Saver’s credits claimed on these returns averaged $216 for joint filers, $149 for heads of household and $140 for single filers.
The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.
Other special rules that apply to the saver’s credit include the following:
Eligible taxpayers must be at least 18 years of age.
Anyone claimed as a dependent on someone else’s return cannot take the credit.
A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2007, this rule applies to distributions received after 2004 and before the due date (including extensions) of the 2007 return. Form 8880 and its instructions have details on making this computation.
Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted last year. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation. More information about the credit is on this Web site.
Tax Mistakes to Avoid
from www.banks.com
Tax Mistakes to Avoid
By Chris Bibey November 9th, 2007
Making mistakes when filing your taxes is serious business. In other words, this is not something that you should take lightly. If you think that a mistake here and there is no big deal, you have another thing coming. Sure, you may be able to get away with errors from time to time, but you do not want to push your luck. Instead, you should make sure that everything you do is 100 percent accurate. Not only will this ensure that the IRS never comes after you, but it will make you feel better about yourself as well.
One of the biggest tax mistakes made is getting confused on what is deductible and what is not. This holds true both for individual tax filers, as well as those who are keeping business records. If you have any doubt in this area, make sure that you ask before finalizing anything. This is something that the IRS watches for, and if you are exaggerating in several areas you could get in a lot of trouble.
It may sound obvious, but not accurately reporting income is a huge problem among many tax payers. Should this be an issue? Absolutely not! But some tax payers know that they can fib about their income, and in turn pay less taxes at the end of the year; this is especially common among those who are self employed.
Finally, hoping that you can complete your tax return within a matter of minutes is just about as dumb as it gets. It is a shame to think that so many people wait until the day before they need to mail their forms to get started. If you do this, you could run into a bind that will push you behind. Of course, this can lead to issues with the IRS.
You should do whatever it takes to avoid tax related mistakes. No, dealing with tax forms and returns is not fun, but it is an important part of life.
Tax Mistakes to Avoid
By Chris Bibey November 9th, 2007
Making mistakes when filing your taxes is serious business. In other words, this is not something that you should take lightly. If you think that a mistake here and there is no big deal, you have another thing coming. Sure, you may be able to get away with errors from time to time, but you do not want to push your luck. Instead, you should make sure that everything you do is 100 percent accurate. Not only will this ensure that the IRS never comes after you, but it will make you feel better about yourself as well.
One of the biggest tax mistakes made is getting confused on what is deductible and what is not. This holds true both for individual tax filers, as well as those who are keeping business records. If you have any doubt in this area, make sure that you ask before finalizing anything. This is something that the IRS watches for, and if you are exaggerating in several areas you could get in a lot of trouble.
It may sound obvious, but not accurately reporting income is a huge problem among many tax payers. Should this be an issue? Absolutely not! But some tax payers know that they can fib about their income, and in turn pay less taxes at the end of the year; this is especially common among those who are self employed.
Finally, hoping that you can complete your tax return within a matter of minutes is just about as dumb as it gets. It is a shame to think that so many people wait until the day before they need to mail their forms to get started. If you do this, you could run into a bind that will push you behind. Of course, this can lead to issues with the IRS.
You should do whatever it takes to avoid tax related mistakes. No, dealing with tax forms and returns is not fun, but it is an important part of life.
Saturday, November 3, 2007
IRS Announces New Chinese, Russian and Vietnamese Tax Glossaries to Assist Taxpayers
from www.is.gov
IR-2007-182, Nov. 2, 2007WASHINGTON — The Internal Revenue Service today announced the availability of five new publications to help foreign-language communities understand federal tax forms and publications that are written in English. These new glossaries of tax terminology will help meet increased demand for tax-related resources in languages other than English.
The five new publications are new versions of Publication 850 for Chinese (simplified), Chinese (traditional), Korean, Russian and Vietnamese. A Spanish version was previously available.
The Virtual Translation Office of the IRS helped create these glossaries of tax terminology to help taxpayers and the professionals who assist them. The publications were developed in cooperation with professional translators and editors to establish uniformity in language usage in IRS tax products and to function as reference materials for these products.
Although the publications are not legal documents, the IRS hopes that these glossaries will be useful to members of the U.S. Chinese, Korean, Russian and Vietnamese communities in understanding IRS documents and clarifying tax-related issues.
The new publications are:
Publication 850 (EN/CN-S), English-Chinese (Simplified) Glossary of Words and Phrases
Publication 850 (EN/CN-T), English-Chinese (Traditional) Glossary of Words and Phrases
Publication 850 (EN/KR), English-Korean Glossary of Words and Phrases
Publication 850 (EN/RU), English-Russian Glossary of Words and Phrases
Publication 850 (EN/VN), English-Vietnamese Glossary of Words and Phrases
Subscribe to IRS Newswire
IR-2007-182, Nov. 2, 2007WASHINGTON — The Internal Revenue Service today announced the availability of five new publications to help foreign-language communities understand federal tax forms and publications that are written in English. These new glossaries of tax terminology will help meet increased demand for tax-related resources in languages other than English.
The five new publications are new versions of Publication 850 for Chinese (simplified), Chinese (traditional), Korean, Russian and Vietnamese. A Spanish version was previously available.
The Virtual Translation Office of the IRS helped create these glossaries of tax terminology to help taxpayers and the professionals who assist them. The publications were developed in cooperation with professional translators and editors to establish uniformity in language usage in IRS tax products and to function as reference materials for these products.
Although the publications are not legal documents, the IRS hopes that these glossaries will be useful to members of the U.S. Chinese, Korean, Russian and Vietnamese communities in understanding IRS documents and clarifying tax-related issues.
The new publications are:
Publication 850 (EN/CN-S), English-Chinese (Simplified) Glossary of Words and Phrases
Publication 850 (EN/CN-T), English-Chinese (Traditional) Glossary of Words and Phrases
Publication 850 (EN/KR), English-Korean Glossary of Words and Phrases
Publication 850 (EN/RU), English-Russian Glossary of Words and Phrases
Publication 850 (EN/VN), English-Vietnamese Glossary of Words and Phrases
Subscribe to IRS Newswire
IRS Warns of E-mail Scam Soliciting Donations to California Wildfire Victims
from www.irs.gov
IR-2007-183, Nov. 2, 2007
WASHINGTON — The Internal Revenue Service today warned taxpayers to be on the lookout for a new e-mail scam that appears to be a solicitation from the IRS and the U.S. government for charitable contributions to victims of the recent Southern California wildfires.
In an effort to appear legitimate, the bogus e-mails include text from an actual speech about the wildfires by a member of the California Assembly.
The scam e-mail urges recipients to click on a link, which then opens what appears to be the IRS Web site but which is, in fact, a fake. An item on the phony Web site urges donations and includes a link that opens a donation form which requests the recipient’s personal and financial information.
“People should exercise caution when they receive unsolicited e-mail or e-mail from senders they don’t know,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “They should avoid opening any attachments or clicking on any links until they can verify the e-mail’s legitimacy.”
The bogus e-mails appear to be a “phishing” scheme, in which recipients are tricked into providing personal and financial information that can be used to gain access to and steal the e-mail recipient’s assets.
The IRS also believes that clicking on the link downloads malware, or malicious software, onto the recipient’s computer. The malware will steal passwords and other account information it finds on the victim's computer system and send them to the scamster.
Generally, scamsters use the data they fraudulently obtain to empty the recipient’s bank accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name or even file fraudulent tax returns to obtain refunds rightfully belonging to the victim.The IRS does not send e-mails soliciting charitable donations. As a rule, the IRS does not send unsolicited e-mails or ask for personal and financial information via e-mail. The IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.Recipients of the scam e-mail who clicked on any of the links should have their computers checked for malicious software and should monitor their financial accounts for suspicious activity, taking measures to prevent unauthorized access as necessary. Any unauthorized activity should be reported to law enforcement authorities and to the three major credit companies. More information on how to handle actual or potential identity theft may be found in IRS Publication 4535, Identity Theft Protection and Victim Assistance, available on this Web site. Information is also available on the Federal Trade Commission’s identity theft Web site.
Recipients of the scam e-mail can help the IRS shut down this scheme by forwarding the e-mail to an electronic mail box, phishing@irs.gov, using instructions found in “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes” on this site. This mail box was established to receive copies of possibly fraudulent e-mails involving misuse of the IRS name, logo or Web site for investigation.
The IRS and the Treasury Inspector General for Tax Administration (TIGTA) work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.
Since the establishment of the mail box last year, the IRS has received more than 30,000 e-mails from taxpayers reporting almost 600 separate phishing incidents. To date, investigations by TIGTA have identified almost 900 host sites in at least 55 different countries, as well as in the United States.
Recipients of questionable e-mails claiming to come from the IRS may also call TIGTA’s toll-free hotline at 1-800-366-4484.
The IRS has come across numerous schemes in which e-mails claim to come from the IRS. More information on these schemes may be found on this Web site by entering the term phishing in the search box.
IR-2007-183, Nov. 2, 2007
WASHINGTON — The Internal Revenue Service today warned taxpayers to be on the lookout for a new e-mail scam that appears to be a solicitation from the IRS and the U.S. government for charitable contributions to victims of the recent Southern California wildfires.
In an effort to appear legitimate, the bogus e-mails include text from an actual speech about the wildfires by a member of the California Assembly.
The scam e-mail urges recipients to click on a link, which then opens what appears to be the IRS Web site but which is, in fact, a fake. An item on the phony Web site urges donations and includes a link that opens a donation form which requests the recipient’s personal and financial information.
“People should exercise caution when they receive unsolicited e-mail or e-mail from senders they don’t know,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “They should avoid opening any attachments or clicking on any links until they can verify the e-mail’s legitimacy.”
The bogus e-mails appear to be a “phishing” scheme, in which recipients are tricked into providing personal and financial information that can be used to gain access to and steal the e-mail recipient’s assets.
The IRS also believes that clicking on the link downloads malware, or malicious software, onto the recipient’s computer. The malware will steal passwords and other account information it finds on the victim's computer system and send them to the scamster.
Generally, scamsters use the data they fraudulently obtain to empty the recipient’s bank accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name or even file fraudulent tax returns to obtain refunds rightfully belonging to the victim.The IRS does not send e-mails soliciting charitable donations. As a rule, the IRS does not send unsolicited e-mails or ask for personal and financial information via e-mail. The IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts.Recipients of the scam e-mail who clicked on any of the links should have their computers checked for malicious software and should monitor their financial accounts for suspicious activity, taking measures to prevent unauthorized access as necessary. Any unauthorized activity should be reported to law enforcement authorities and to the three major credit companies. More information on how to handle actual or potential identity theft may be found in IRS Publication 4535, Identity Theft Protection and Victim Assistance, available on this Web site. Information is also available on the Federal Trade Commission’s identity theft Web site.
Recipients of the scam e-mail can help the IRS shut down this scheme by forwarding the e-mail to an electronic mail box, phishing@irs.gov, using instructions found in “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes” on this site. This mail box was established to receive copies of possibly fraudulent e-mails involving misuse of the IRS name, logo or Web site for investigation.
The IRS and the Treasury Inspector General for Tax Administration (TIGTA) work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported.
Since the establishment of the mail box last year, the IRS has received more than 30,000 e-mails from taxpayers reporting almost 600 separate phishing incidents. To date, investigations by TIGTA have identified almost 900 host sites in at least 55 different countries, as well as in the United States.
Recipients of questionable e-mails claiming to come from the IRS may also call TIGTA’s toll-free hotline at 1-800-366-4484.
The IRS has come across numerous schemes in which e-mails claim to come from the IRS. More information on these schemes may be found on this Web site by entering the term phishing in the search box.
Saturday, October 27, 2007
AMT tax mess may not be fixed soon.
from www.mercurynews.com
By Mark SchwanhausserMercury News
Article Launched: 10/27/2007 01:39:24 AM PDT
Few regions have more people who would benefit from a new Democratic proposal to eliminate the alternative minimum tax than Silicon Valley, one of the dreaded tax system's prime hunting grounds. But don't hold your breath.
The revamping of the tax code unveiled Thursday has virtually no chance of passing in its current form this year, before the 2008 elections - and may never be approved.
It's not even clear whether Congress could approve a temporary fix to save millions of Americans from getting caught by the AMT when they file their 2007 returns. There's pressure to move quickly because the Internal Revenue Service starts sending its tax forms to be printed Nov. 7.
But the proposal from Rep. Charles Rangel, the Democratic chairman of the powerful House Ways and Means Committee, does accomplish one important thing. It has framed the election year debate over tax policy:
• Should Congress eliminate the AMT, which was designed to snare 155 wealthy taxpayers in 1969 but could whack an estimated 21 million Americans in 2007?
• If so, should lawmakers raise other taxes to offset the $800 billion in revenue that would be lost by eliminating the AMT? If Congress sticks to its pay-as-you-go policy vs. adding to the budget deficit, should rich Americans, corporations like Hewlett-Packard or venture capitalists along Sand Hill Road pay more?
• And can the nation afford to eliminate the AMT and keep President
Bush's tax cuts in effect, rather than letting them phase out as originally planned?
"Rangel is making a statement," said Clint Stretch, director of tax policy for accounting powerhouse Deloitte & Touche in Washington. "Implicitly, everyone wants to talk about eliminating the AMT, and everyone is talking about extending the Bush tax cuts. And he is putting squarely on the table the question, 'How would we do that?' "
Many taxpayers don't realize they're supposed to calculate their income tax under both the regular rules and the AMT rules - and pay whichever bill is larger. The tax's reach is spreading to the middle class because every cut under the regular tax system forces more taxpayers into the AMT, which never has been indexed to inflation.
Democrats have led the push to repeal the AMT because its bite is deepest in "blue states" such as California, New Jersey, New York and Virginia. But Republicans have resisted, with House GOP leader John Boehner of Ohio calling Rangel's bill "the mother of all tax hikes."
Even if the bill goes nowhere, Democrats will paint Republicans as the bad guys, said Thomas Ochsenschlager, vice president of the American Institute of Certified Public Accountants. "Rangel and the Democrats can say, 'Hey, we were going to eliminate the AMT - the big bogyman - and the Republicans wouldn't let us do it.' "
Many residents in affluent Silicon Valley have a lot at stake in this debate. If Congress fails to pass the one-year fix, the AMT will strike 71 percent of taxpayers with incomes between $75,000 and $200,000 - and more than one-third of the taxpayers with incomes between $75,000 and $100,000, Ochsenschlager said.
Rangel, of New York, plans to break out the patch from the giant bill into a separate bill that he will announce next week. To pay part of the bill for the patch, which is estimated to cost the government $50 billion in revenue over 10 years, Rangel has targeted venture capitalists and hedge fund investors. He aims to tax them at ordinary income-tax rates rather than the sharply lower capital-gains rates they currently pay.
Monday, the National Venture Capital Association is primed to deliver letters to lawmakers from 500 entrepreneurs who oppose such a tax change.
Finding a way to kill the AMT is politically sensitive. In 2005, President Bush's tax reform panel ignited a firestorm by suggesting the lost revenue could be offset by slashing coveted deductions such as mortgage interest, state and local tax payments and health insurance premiums.
Rangel's plan would pay for the lost AMT revenue primarily by taxing the wealthiest Americans more. He proposes a 4 percent surcharge on taxpayers earning at least $200,000, and a 4.6 percent surcharge on incomes above $500,000. High-income taxpayers also would face limits on itemized deductions and personal exemptions.
Rangel's bill also would extend a raft of tax breaks that are scheduled to expire, including the research-and-development credit and deductions for private mortgage insurance and state and local sales taxes.
In addition, the bill would cut corporate tax rates, with the top rate dropping from 35 percent to 30.5 percent. To offset those cuts, though, Rangel would tighten rules that favor relatively small numbers of corporations.
For example, the plan would force U.S. companies to defer deductions from overseas divisions if they keep those profits overseas. In 2005, U.S. companies were given a one-year break that slashed taxes on so-called repatriated profits, and billions of dollars flowed back home.
Silicon Valley's 20 largest public companies brought back $28.7 billion in foreign profits, with Hewlett-Packard accounting for $14.5 billion.
By Mark SchwanhausserMercury News
Article Launched: 10/27/2007 01:39:24 AM PDT
Few regions have more people who would benefit from a new Democratic proposal to eliminate the alternative minimum tax than Silicon Valley, one of the dreaded tax system's prime hunting grounds. But don't hold your breath.
The revamping of the tax code unveiled Thursday has virtually no chance of passing in its current form this year, before the 2008 elections - and may never be approved.
It's not even clear whether Congress could approve a temporary fix to save millions of Americans from getting caught by the AMT when they file their 2007 returns. There's pressure to move quickly because the Internal Revenue Service starts sending its tax forms to be printed Nov. 7.
But the proposal from Rep. Charles Rangel, the Democratic chairman of the powerful House Ways and Means Committee, does accomplish one important thing. It has framed the election year debate over tax policy:
• Should Congress eliminate the AMT, which was designed to snare 155 wealthy taxpayers in 1969 but could whack an estimated 21 million Americans in 2007?
• If so, should lawmakers raise other taxes to offset the $800 billion in revenue that would be lost by eliminating the AMT? If Congress sticks to its pay-as-you-go policy vs. adding to the budget deficit, should rich Americans, corporations like Hewlett-Packard or venture capitalists along Sand Hill Road pay more?
• And can the nation afford to eliminate the AMT and keep President
Bush's tax cuts in effect, rather than letting them phase out as originally planned?
"Rangel is making a statement," said Clint Stretch, director of tax policy for accounting powerhouse Deloitte & Touche in Washington. "Implicitly, everyone wants to talk about eliminating the AMT, and everyone is talking about extending the Bush tax cuts. And he is putting squarely on the table the question, 'How would we do that?' "
Many taxpayers don't realize they're supposed to calculate their income tax under both the regular rules and the AMT rules - and pay whichever bill is larger. The tax's reach is spreading to the middle class because every cut under the regular tax system forces more taxpayers into the AMT, which never has been indexed to inflation.
Democrats have led the push to repeal the AMT because its bite is deepest in "blue states" such as California, New Jersey, New York and Virginia. But Republicans have resisted, with House GOP leader John Boehner of Ohio calling Rangel's bill "the mother of all tax hikes."
Even if the bill goes nowhere, Democrats will paint Republicans as the bad guys, said Thomas Ochsenschlager, vice president of the American Institute of Certified Public Accountants. "Rangel and the Democrats can say, 'Hey, we were going to eliminate the AMT - the big bogyman - and the Republicans wouldn't let us do it.' "
Many residents in affluent Silicon Valley have a lot at stake in this debate. If Congress fails to pass the one-year fix, the AMT will strike 71 percent of taxpayers with incomes between $75,000 and $200,000 - and more than one-third of the taxpayers with incomes between $75,000 and $100,000, Ochsenschlager said.
Rangel, of New York, plans to break out the patch from the giant bill into a separate bill that he will announce next week. To pay part of the bill for the patch, which is estimated to cost the government $50 billion in revenue over 10 years, Rangel has targeted venture capitalists and hedge fund investors. He aims to tax them at ordinary income-tax rates rather than the sharply lower capital-gains rates they currently pay.
Monday, the National Venture Capital Association is primed to deliver letters to lawmakers from 500 entrepreneurs who oppose such a tax change.
Finding a way to kill the AMT is politically sensitive. In 2005, President Bush's tax reform panel ignited a firestorm by suggesting the lost revenue could be offset by slashing coveted deductions such as mortgage interest, state and local tax payments and health insurance premiums.
Rangel's plan would pay for the lost AMT revenue primarily by taxing the wealthiest Americans more. He proposes a 4 percent surcharge on taxpayers earning at least $200,000, and a 4.6 percent surcharge on incomes above $500,000. High-income taxpayers also would face limits on itemized deductions and personal exemptions.
Rangel's bill also would extend a raft of tax breaks that are scheduled to expire, including the research-and-development credit and deductions for private mortgage insurance and state and local sales taxes.
In addition, the bill would cut corporate tax rates, with the top rate dropping from 35 percent to 30.5 percent. To offset those cuts, though, Rangel would tighten rules that favor relatively small numbers of corporations.
For example, the plan would force U.S. companies to defer deductions from overseas divisions if they keep those profits overseas. In 2005, U.S. companies were given a one-year break that slashed taxes on so-called repatriated profits, and billions of dollars flowed back home.
Silicon Valley's 20 largest public companies brought back $28.7 billion in foreign profits, with Hewlett-Packard accounting for $14.5 billion.
Tuesday, October 23, 2007
2008 Inflation Adjustments Widen Tax Brackets
from www.irs.gov
IR-2007-172, Oct. 18, 2007WASHINGTON — For 2008, personal exemptions and standard deductions will rise, tax brackets will widen and workers will be able to save more for retirement, thanks to inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2008. Key changes affecting 2008 returns, filed by most taxpayers in early 2009, include the following:
The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007.
The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.
The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $4,824, up from $4,716. The income limit for the credit for joint return filers with two or more children is $41,646, up from $39,783.
The maximum Hope credit, available for the first two years of post-secondary education, is $1,800, up from $1,650 in 2007.
The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k), may qualify for the credit, which is available in addition to any other tax savings that apply.
The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.
For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000).
Participants in most employer-sponsored 401(k) plans and 403(b) plans for employees of public schools and certain tax-exempt organizations can contribute up to $15,500, unchanged from 2007. Individuals, age 50 or over, can make an additional contribution of up to $5,000, also unchanged from 2007.
Individuals participating in SIMPLE retirement plans can contribute $10,500, unchanged from 2007. Those, age 50 or over, can make an additional contribution of up to $2,500, also unchanged from 2007.
The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007.
IR-2007-172, Oct. 18, 2007WASHINGTON — For 2008, personal exemptions and standard deductions will rise, tax brackets will widen and workers will be able to save more for retirement, thanks to inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2008. Key changes affecting 2008 returns, filed by most taxpayers in early 2009, include the following:
The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007.
The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.
The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $4,824, up from $4,716. The income limit for the credit for joint return filers with two or more children is $41,646, up from $39,783.
The maximum Hope credit, available for the first two years of post-secondary education, is $1,800, up from $1,650 in 2007.
The income limit for the savers credit is $53,000 for joint filers (up $1,000), $39,750 for heads of household (up $750) and $26,500 for singles and married persons filing separately (up$500). Low-and moderate income workers who contribute to a retirement plan, such as an IRA or 401(k), may qualify for the credit, which is available in addition to any other tax savings that apply.
The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000) and $101,000 (up from $99,000) for singles and heads of household.
For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000).
Participants in most employer-sponsored 401(k) plans and 403(b) plans for employees of public schools and certain tax-exempt organizations can contribute up to $15,500, unchanged from 2007. Individuals, age 50 or over, can make an additional contribution of up to $5,000, also unchanged from 2007.
Individuals participating in SIMPLE retirement plans can contribute $10,500, unchanged from 2007. Those, age 50 or over, can make an additional contribution of up to $2,500, also unchanged from 2007.
The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007.
Monday, October 22, 2007
Poker Tournament Winnings MUST be Reported to the IRS
from www.irs.gov
Poker Tournament Winnings Must be Reported to the IRS
IR-2007-173, Oct. 19, 2007
WASHINGTON — Starting next year, casinos and other sponsors of poker tournaments will be required to report most winnings to winners and the Internal Revenue Service, according to the IRS.
The new requirement, which goes into effect on March 4, 2008, was contained in guidance released Sept. 4 by the Treasury Department and the IRS. The guidance is designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.
For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on an IRS Form W-2G.
Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.
So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.
The IRS reminds tournament winners that, by law, they must report all their winnings on their federal income tax returns. This rule applies regardless of the amount and regardless of whether the winner receives a Form W-2G or any other reporting form. This is true for 2007 and earlier years, and will continue to be the case after the new reporting requirement goes into effect.
Related Item: Revenue Procedure 2007-57 in Internal
Poker Tournament Winnings Must be Reported to the IRS
IR-2007-173, Oct. 19, 2007
WASHINGTON — Starting next year, casinos and other sponsors of poker tournaments will be required to report most winnings to winners and the Internal Revenue Service, according to the IRS.
The new requirement, which goes into effect on March 4, 2008, was contained in guidance released Sept. 4 by the Treasury Department and the IRS. The guidance is designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.
For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on an IRS Form W-2G.
Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.
So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.
The IRS reminds tournament winners that, by law, they must report all their winnings on their federal income tax returns. This rule applies regardless of the amount and regardless of whether the winner receives a Form W-2G or any other reporting form. This is true for 2007 and earlier years, and will continue to be the case after the new reporting requirement goes into effect.
Related Item: Revenue Procedure 2007-57 in Internal
Wednesday, October 17, 2007
Celebrity Tax Scofflaws in California Announced
from www.latimes.com
California Local News
April L. Brown / Associated Press
The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state.
California tax scofflaws include O.J., Sinbad
April L. Brown / Associated Press
The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state.
The state releases a list of 224 people who owe money. The goal is to shame people into paying up.
By Patrick McGreevy, Los Angeles Times Staff Writer 12:36 PM PDT, October 17, 2007
SACRAMENTO -- Tapping into the fear of public humiliation to get Californians to pay up on delinquent state income taxes, the state has released a list of California's 224 worst scofflaws, including celebrities Dionne Warwick, O.J. Simpson and comedian Sinbad.The list was originally 250 people. But just the threat of their names going on a public website convinced 26 of the biggest tax scofflaws to agree to settle their bills, bringing in about $300,000 in payments so far, according to State Controller John Chiang.
Related
-
California's official list of the top 250 delinquent taxpayers
"Unfortunately these 250 people have put themselves above the 14 million people who have done the right thing and paid their taxes," Chiang said today.Although a bill approved by the state Legislature compelled the list to be released publicly on the website of the state Franchise Tax Board, Chiang said he supports the action and believes it will be effective in cases in which tax liens and warning letters have failed."Certainly people don't want the public embarrassment of being on the list," the controller said. "I wouldn't want to be on a list with O.J. Simpson."The list says Orenthal Simpson of Miami, Fla., owes $1,435,484 in personal income taxes with a tax lien dating back to 1999.Simpson, the former professional football player and actor, left California for Florida after he was acquitted of murdering his ex-wife and her acquaintance.The list says that the state is owed $2,665,305 in personal income taxes by singer Dionne Warwick of South Orange, N.J., with the tax lien dating back to 1997.The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state, with the tax lien dated from 1999.patrick.mcgreevy@latimes.com
California Local News
April L. Brown / Associated Press
The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state.
California tax scofflaws include O.J., Sinbad
April L. Brown / Associated Press
The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state.
The state releases a list of 224 people who owe money. The goal is to shame people into paying up.
By Patrick McGreevy, Los Angeles Times Staff Writer 12:36 PM PDT, October 17, 2007
SACRAMENTO -- Tapping into the fear of public humiliation to get Californians to pay up on delinquent state income taxes, the state has released a list of California's 224 worst scofflaws, including celebrities Dionne Warwick, O.J. Simpson and comedian Sinbad.The list was originally 250 people. But just the threat of their names going on a public website convinced 26 of the biggest tax scofflaws to agree to settle their bills, bringing in about $300,000 in payments so far, according to State Controller John Chiang.
Related
-
California's official list of the top 250 delinquent taxpayers
"Unfortunately these 250 people have put themselves above the 14 million people who have done the right thing and paid their taxes," Chiang said today.Although a bill approved by the state Legislature compelled the list to be released publicly on the website of the state Franchise Tax Board, Chiang said he supports the action and believes it will be effective in cases in which tax liens and warning letters have failed."Certainly people don't want the public embarrassment of being on the list," the controller said. "I wouldn't want to be on a list with O.J. Simpson."The list says Orenthal Simpson of Miami, Fla., owes $1,435,484 in personal income taxes with a tax lien dating back to 1999.Simpson, the former professional football player and actor, left California for Florida after he was acquitted of murdering his ex-wife and her acquaintance.The list says that the state is owed $2,665,305 in personal income taxes by singer Dionne Warwick of South Orange, N.J., with the tax lien dating back to 1997.The comedian and actor Sinbad, whose last name is Adkins, resides in Oak Park, Ill., and is listed as owing $2,138,592 in personal income taxes to the state, with the tax lien dated from 1999.patrick.mcgreevy@latimes.com
Sunday, October 14, 2007
U.S. Income Gap Widens. The Richest Share Hits Record.
from www.yahoo.com
U.S. income gap widens, richest share hits record
By Karey Wutkowski Fri Oct 12, 2:22 PM ET
WASHINGTON (Reuters) - The gap between America's richest and poorest is at its widest in at least 25 years, with the wealthiest taking home a record share of the nation's income that exceeds even the previous high in 2000.
According to recent data from the Internal Revenue Service, the richest 1 percent of Americans earned 21.2 percent of all U.S. income earned in 2005. That is a significant increase from 2004 when the top 1 percent earned 19 percent of the nation's income.
The previous high over the past 25 years, when such data were compiled, was in 2000 when a bull market brought the figure up to 20.81 percent.
The Tax Foundation, a nonpartisan tax research group based in Washington, said the wealthy benefited in 2005 from a healthy, growing economy and higher-than-average price inflation.
The IRS data included all of the 132.6 million tax returns filed in 2005 with a positive adjusted gross income, or AGI, also including people who did not earn enough to owe taxes.
AGI is a figure used to calculate an individual's income tax liability and includes all gross income adjusted by certain allowed deductions, such as moving expenses, health savings account deductions, alimony paid and retirement contributions.
In 2005, 90.6 million people who filed tax returns paid taxes into the Treasury, and 42 million with a positive AGI used exemptions, deductions and tax credits to reduce their federal income tax liability to zero.
Democratic U.S. presidential candidates have raised the widening income gap as a campaign issue, proposing to raise taxes on wealthier Americans to pay for programs that would benefit lower-income families.
To make the top 1 percent of wealthiest Americans in 2005, a taxpayer had to earn at least $364,657. That figure is an increase from 2004, when the cut-off point stood at $328,049.
In 2005, the top 50 percent of American earners brought in 87.17 percent of the nation's income, also an all-time high for the data available.
The previous high for that figure was also in 2000, when the richest 50 percent of Americans earned 87.01 percent of the income.
U.S. income gap widens, richest share hits record
By Karey Wutkowski Fri Oct 12, 2:22 PM ET
WASHINGTON (Reuters) - The gap between America's richest and poorest is at its widest in at least 25 years, with the wealthiest taking home a record share of the nation's income that exceeds even the previous high in 2000.
According to recent data from the Internal Revenue Service, the richest 1 percent of Americans earned 21.2 percent of all U.S. income earned in 2005. That is a significant increase from 2004 when the top 1 percent earned 19 percent of the nation's income.
The previous high over the past 25 years, when such data were compiled, was in 2000 when a bull market brought the figure up to 20.81 percent.
The Tax Foundation, a nonpartisan tax research group based in Washington, said the wealthy benefited in 2005 from a healthy, growing economy and higher-than-average price inflation.
The IRS data included all of the 132.6 million tax returns filed in 2005 with a positive adjusted gross income, or AGI, also including people who did not earn enough to owe taxes.
AGI is a figure used to calculate an individual's income tax liability and includes all gross income adjusted by certain allowed deductions, such as moving expenses, health savings account deductions, alimony paid and retirement contributions.
In 2005, 90.6 million people who filed tax returns paid taxes into the Treasury, and 42 million with a positive AGI used exemptions, deductions and tax credits to reduce their federal income tax liability to zero.
Democratic U.S. presidential candidates have raised the widening income gap as a campaign issue, proposing to raise taxes on wealthier Americans to pay for programs that would benefit lower-income families.
To make the top 1 percent of wealthiest Americans in 2005, a taxpayer had to earn at least $364,657. That figure is an increase from 2004, when the cut-off point stood at $328,049.
In 2005, the top 50 percent of American earners brought in 87.17 percent of the nation's income, also an all-time high for the data available.
The previous high for that figure was also in 2000, when the richest 50 percent of Americans earned 87.01 percent of the income.
Friday, October 12, 2007
Honda Vehicle Certified As Qualified Hybrid Vehicle
from www.irs.gov
Honda Vehicle Certified As Qualified Hybrid Vehicle
IR-2007-168, Oct. 12, 2007WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc. that its Model Year 2008 Honda Civic Hybrid CVT meets the requirements of the Alternative Motor Vehicle Credit as a qualified hybrid motor vehicle.The credit amount for the 2008 Honda Civic Hybrid CVT is $2,100.Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.As of June 30, 2007, Honda sold a total of 58,872 qualifying hybrid vehicles.
Related Items:
Honda Vehicle Certified As Qualified Hybrid Vehicle
IR-2007-168, Oct. 12, 2007WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc. that its Model Year 2008 Honda Civic Hybrid CVT meets the requirements of the Alternative Motor Vehicle Credit as a qualified hybrid motor vehicle.The credit amount for the 2008 Honda Civic Hybrid CVT is $2,100.Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.As of June 30, 2007, Honda sold a total of 58,872 qualifying hybrid vehicles.
Related Items:
Thursday, October 11, 2007
IRS Offers Relief for Late S Corporation Elections
from www.irs.gov
IRS Offers Relief for Late S Corporation Elections
IR-2007-166, Oct. 9, 2007
WASHINGTON — Businesses that are eligible to elect S corporation tax treatment now have a simpler process for requesting relief for late elections under a change announced by the Internal Revenue Service today.
Revenue Procedure 2007-62 allows small businesses that missed filing Form 2553, Election by a Small Business Corporation, before filing their first Form 1120S, U.S. Income Tax Return for an S Corporation, to file both forms simultaneously. The change is effective for taxable years that end on or after Dec. 31, 2007. Internal Revenue Bulletin 2007-41, published on Oct. 9, 2007, includes this new guidance.
The IRS cautioned that the requirement for filing Form 2553 to establish the election in advance of filing the initial Form 1120S remains in effect. However, the new process will save time and effort for those taxpayers who can establish reasonable cause for making a late election.
Form 2553 will be updated to reflect the new rules, so taxpayers filing paper Forms 2553 should download the most recent revision from IRS.gov. Form 2553 can also be submitted electronically as an attachment to an e-filed Form 1120S.
There is relief under earlier guidance for late elections for taxpayers who meet certain conditions. Previously, taxpayers had to submit Form 2553 along with a statement explaining the reasons for the late election. The new guidance provides a simplified method to request relief by permitting taxpayers to file their first Form 1120S along with Form 2553 and include the statement on the form.
Small business corporations that are eligible for tax treatment under Subchapter S of the Internal Revenue Code enjoy the advantages of the corporate structure while being taxed similarly to a partnership or sole proprietorship.
The new procedure will reduce taxpayer burden by allowing the agency to process a properly completed tax return and its corresponding election without delays or additional contacts with taxpayers to resolve the issue of a missing election.
The change, based on suggestions from tax professionals and small business owners, resulted from the work of an IRS process improvement team led by the Office of Taxpayer Burden Reduction.
IRS Offers Relief for Late S Corporation Elections
IR-2007-166, Oct. 9, 2007
WASHINGTON — Businesses that are eligible to elect S corporation tax treatment now have a simpler process for requesting relief for late elections under a change announced by the Internal Revenue Service today.
Revenue Procedure 2007-62 allows small businesses that missed filing Form 2553, Election by a Small Business Corporation, before filing their first Form 1120S, U.S. Income Tax Return for an S Corporation, to file both forms simultaneously. The change is effective for taxable years that end on or after Dec. 31, 2007. Internal Revenue Bulletin 2007-41, published on Oct. 9, 2007, includes this new guidance.
The IRS cautioned that the requirement for filing Form 2553 to establish the election in advance of filing the initial Form 1120S remains in effect. However, the new process will save time and effort for those taxpayers who can establish reasonable cause for making a late election.
Form 2553 will be updated to reflect the new rules, so taxpayers filing paper Forms 2553 should download the most recent revision from IRS.gov. Form 2553 can also be submitted electronically as an attachment to an e-filed Form 1120S.
There is relief under earlier guidance for late elections for taxpayers who meet certain conditions. Previously, taxpayers had to submit Form 2553 along with a statement explaining the reasons for the late election. The new guidance provides a simplified method to request relief by permitting taxpayers to file their first Form 1120S along with Form 2553 and include the statement on the form.
Small business corporations that are eligible for tax treatment under Subchapter S of the Internal Revenue Code enjoy the advantages of the corporate structure while being taxed similarly to a partnership or sole proprietorship.
The new procedure will reduce taxpayer burden by allowing the agency to process a properly completed tax return and its corresponding election without delays or additional contacts with taxpayers to resolve the issue of a missing election.
The change, based on suggestions from tax professionals and small business owners, resulted from the work of an IRS process improvement team led by the Office of Taxpayer Burden Reduction.
Tuesday, October 9, 2007
Randomly Selected Taxpayers to have their 2006 returns Audited
from www.irs.gov
The IRS is now sending letters advising 13,000 randomly selected taxpayers that their 2006 return has been selected for audit as part of the latest National Research Program study. Tax research on individuals needs updating because as time passes, patterns of noncompliance change. The data obtained will enable the IRS to audit fewer taxpayers with accurate tax returns, which lessens the burden on compliant taxpayers. For more information, see news release IR-2007-113.
The IRS is now sending letters advising 13,000 randomly selected taxpayers that their 2006 return has been selected for audit as part of the latest National Research Program study. Tax research on individuals needs updating because as time passes, patterns of noncompliance change. The data obtained will enable the IRS to audit fewer taxpayers with accurate tax returns, which lessens the burden on compliant taxpayers. For more information, see news release IR-2007-113.
Sunday, October 7, 2007
KMPG Tax Shelter Case set to go to Trial
from www.yahoo.com
By Paritosh Bansal Sun Oct 7, 11:24 AM ET
NEW YORK (Reuters) - A tax-shelter case involving former partners at KPMG (KPMG.UL) is set to go to trial after two years of legal wrangling and a high-profile debate about the rights of white-collar criminal defendants.
Jury selection begins on Tuesday in U.S. District Court in Manhattan for four defendants who were charged in 2005 with helping to cheat the government of $2.5 billion by creating questionable tax shelters for wealthy clients.
When originally filed, the case was touted as the largest ever criminal tax prosecution. But it is much smaller now.
In July, U.S. District Judge Lewis Kaplan dismissed charges against 13 former KPMG partners, ruling that the government interfered with their right to counsel.
Still, legal experts are watching the case as its outcome could have an impact on the U.S. government's ongoing investigations into tax shelters.
"In a sense the government is partly on trial," said Carl Tobias, law professor at the University of Richmond. "It will be important for the government to show that it has assembled a strong case in light of what's happened."
The remaining defendants include three former KPMG employees -- David Greenberg, Robert Pfaff and John Larson -- and Raymond Ruble, a former partner at law firm Sidley Austin.
The 2005 indictment alleged that between 1996 and 2005 the defendants put together tax shelters known as FLIP, OPIS, BLIPS and SOS that were designed to generate phony tax losses. It also said the defendants prepared false documents to deceive the government.
KPMG avoided indictment by settling the federal probe in 2005 for $456 million.
However, the 13 defendants who were dismissed from the case are still not completely in the clear. The government has said it was reviewing a possible appeal.
LONG TRIAL SEEN
The trial of the four remaining defendants is expected to last between three and five months. Tax shelter structures are complicated and could be difficult to explain to a jury.
The case involves some 24 million pages of documents, according to court papers.
Some legal experts say the government could face an uphill task in proving its case.
"These are very complex structures that no court has ever found illegitimate," said Michael Levy, a lawyer at McKee Nelson LLP. "The thrust of the prosecution's evidence and the defense's efforts to counter that evidence is going to be what each of these individuals understood about the economic realities of the transactions."
Jonathan Rosen, of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, said "the government's hurdle here is quite high ... They are looking at conduct in 1998 through the prism of 2007."
Last month, one defendant, David Makov, an investment adviser who did not work at KPMG, pleaded guilty to conspiracy and agreed to cooperate with prosecutors.
Makov was the second indicted defendant to plead guilty. An ex-KPMG partner, David Rivkin, entered a guilty plea last year.
"Makov's plea is very likely good news for the government," Rosen said. "(It is) very helpful for the government to have a witness come forward and say, 'This is what we were intending to do at the time."'
Another legal expert, Burton Wiand, of Fowler White Boggs Banker, said the plea could indicate the government has a good case. "It is not unlikely that you might see more pleas before the trial starts," Wiand said.
Ruble's lawyer, Jack Hoffinger, said his client was going ahead with the case. "We are proceeding to trial."
Greenberg's lawyer declined to comment, while lawyers for Larson and Pfaff could not be reached. A spokeswoman for the U.S. attorney's office declined to comment.
A successful case is likely to boost the government's efforts to pursue other tax shelter cases.
Prosecutors have said they plan to file a new indictment in a case that has already led to charges against current and former Ernst & Young (ERNY.UL) partners.
Ernst & Young was not named in that case. In July 2003, the auditing firm agreed to pay $15 million to the IRS to end an investigation of tax shelter marketing.
By Paritosh Bansal Sun Oct 7, 11:24 AM ET
NEW YORK (Reuters) - A tax-shelter case involving former partners at KPMG (KPMG.UL) is set to go to trial after two years of legal wrangling and a high-profile debate about the rights of white-collar criminal defendants.
Jury selection begins on Tuesday in U.S. District Court in Manhattan for four defendants who were charged in 2005 with helping to cheat the government of $2.5 billion by creating questionable tax shelters for wealthy clients.
When originally filed, the case was touted as the largest ever criminal tax prosecution. But it is much smaller now.
In July, U.S. District Judge Lewis Kaplan dismissed charges against 13 former KPMG partners, ruling that the government interfered with their right to counsel.
Still, legal experts are watching the case as its outcome could have an impact on the U.S. government's ongoing investigations into tax shelters.
"In a sense the government is partly on trial," said Carl Tobias, law professor at the University of Richmond. "It will be important for the government to show that it has assembled a strong case in light of what's happened."
The remaining defendants include three former KPMG employees -- David Greenberg, Robert Pfaff and John Larson -- and Raymond Ruble, a former partner at law firm Sidley Austin.
The 2005 indictment alleged that between 1996 and 2005 the defendants put together tax shelters known as FLIP, OPIS, BLIPS and SOS that were designed to generate phony tax losses. It also said the defendants prepared false documents to deceive the government.
KPMG avoided indictment by settling the federal probe in 2005 for $456 million.
However, the 13 defendants who were dismissed from the case are still not completely in the clear. The government has said it was reviewing a possible appeal.
LONG TRIAL SEEN
The trial of the four remaining defendants is expected to last between three and five months. Tax shelter structures are complicated and could be difficult to explain to a jury.
The case involves some 24 million pages of documents, according to court papers.
Some legal experts say the government could face an uphill task in proving its case.
"These are very complex structures that no court has ever found illegitimate," said Michael Levy, a lawyer at McKee Nelson LLP. "The thrust of the prosecution's evidence and the defense's efforts to counter that evidence is going to be what each of these individuals understood about the economic realities of the transactions."
Jonathan Rosen, of Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, said "the government's hurdle here is quite high ... They are looking at conduct in 1998 through the prism of 2007."
Last month, one defendant, David Makov, an investment adviser who did not work at KPMG, pleaded guilty to conspiracy and agreed to cooperate with prosecutors.
Makov was the second indicted defendant to plead guilty. An ex-KPMG partner, David Rivkin, entered a guilty plea last year.
"Makov's plea is very likely good news for the government," Rosen said. "(It is) very helpful for the government to have a witness come forward and say, 'This is what we were intending to do at the time."'
Another legal expert, Burton Wiand, of Fowler White Boggs Banker, said the plea could indicate the government has a good case. "It is not unlikely that you might see more pleas before the trial starts," Wiand said.
Ruble's lawyer, Jack Hoffinger, said his client was going ahead with the case. "We are proceeding to trial."
Greenberg's lawyer declined to comment, while lawyers for Larson and Pfaff could not be reached. A spokeswoman for the U.S. attorney's office declined to comment.
A successful case is likely to boost the government's efforts to pursue other tax shelter cases.
Prosecutors have said they plan to file a new indictment in a case that has already led to charges against current and former Ernst & Young (ERNY.UL) partners.
Ernst & Young was not named in that case. In July 2003, the auditing firm agreed to pay $15 million to the IRS to end an investigation of tax shelter marketing.
Friday, October 5, 2007
Tax Filing Extention Expires on October 15th.
from www.irs.gov
Tax-filing Extension Expires Oct. 15; Don’t Overlook Tax Breaks, Choose e-file or Free File, IRS Urges
IR-2007-165, Oct. 5, 2007
WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax breaks and then file their returns electronically using IRS e-file or the Free File system.
Many of the more than 10.2 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. A record 58 percent of the 135.3 million returns received so far this year have been filed electronically.
In addition, the IRS urges all taxpayers with incomes at or below $52,000 to file their returns for free using the Free File link on IRS.gov. Seven in 10 taxpayers qualify to use the software and electronic-filing services made available through the Free File Alliance, a public-private partnership between the IRS and a consortium of tax-preparation software manufacturers. Telephone customers can also use Free File to request this year’s one-time telephone excise tax refund.
Taxpayers who have purchased their own software or use a paid tax preparer are also urged to file their returns electronically. Almost 78.8 million individual taxpayers have already used IRS e-file, a 9 percent increase over last year at this time.
Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers.Paper filers, as well as electronic filers, who cannot pay what they owe, may be able to set up a payment agreement with the IRS. Check out the Online Payment Agreement section on IRS.gov for more information.
Anyone expecting a refund can get it sooner by choosing direct deposit. Nearly three in five refunds have been direct-deposited this year, a new record. This year for the first time, taxpayers can choose to have their refunds deposited into as many as three accounts.
Before filing, the IRS urges taxpayers to take a moment to check out these often-overlooked tax breaks:
Telephone Excise Tax Refund: This is a one-time refund of long-distance excise taxes available on tax year 2006 income-tax returns. The refund applies to charges billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. Even if a taxpayer does not normally have to file a return, Form 1040EZ-T (also available through Free File) can be used to request this refund.
Earned Income Tax Credit: Earned income of less than $38,348 in 2006 may qualify a taxpayer to claim the earned income tax credit. This credit, worth up to $4,536, is available to low and moderate-income workers and working families. A special interactive “EITC Assistant” is available on IRS.gov to help taxpayers determine whether they are eligible.
Savers credit: Low-and moderate income workers who contributed to a retirement plan, such as an IRA or 401(k), may be able to take the savers credit. This credit is available in addition to any other tax savings that apply. Use Form 8880 to claim the credit.
Extender tax breaks: Several popular tax breaks were renewed too late to be included on 2006 federal income tax forms. Accordingly, many taxpayers need to follow special instructions to claim the deduction for state and local sales taxes, the tuition and fees deduction, as well as the educator expense deduction. In addition, many who qualify for the tuition and fees deduction may reap greater tax savings by, instead, claiming the Hope credit or the lifetime learning credit for a particular student.
Some taxpayers can wait until after Oct.15, to file. This includes those serving in Iraq, Afghanistan or other combat zone localities and people affected by several recent natural disasters.
Tax-filing Extension Expires Oct. 15; Don’t Overlook Tax Breaks, Choose e-file or Free File, IRS Urges
IR-2007-165, Oct. 5, 2007
WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax breaks and then file their returns electronically using IRS e-file or the Free File system.
Many of the more than 10.2 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. A record 58 percent of the 135.3 million returns received so far this year have been filed electronically.
In addition, the IRS urges all taxpayers with incomes at or below $52,000 to file their returns for free using the Free File link on IRS.gov. Seven in 10 taxpayers qualify to use the software and electronic-filing services made available through the Free File Alliance, a public-private partnership between the IRS and a consortium of tax-preparation software manufacturers. Telephone customers can also use Free File to request this year’s one-time telephone excise tax refund.
Taxpayers who have purchased their own software or use a paid tax preparer are also urged to file their returns electronically. Almost 78.8 million individual taxpayers have already used IRS e-file, a 9 percent increase over last year at this time.
Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers.Paper filers, as well as electronic filers, who cannot pay what they owe, may be able to set up a payment agreement with the IRS. Check out the Online Payment Agreement section on IRS.gov for more information.
Anyone expecting a refund can get it sooner by choosing direct deposit. Nearly three in five refunds have been direct-deposited this year, a new record. This year for the first time, taxpayers can choose to have their refunds deposited into as many as three accounts.
Before filing, the IRS urges taxpayers to take a moment to check out these often-overlooked tax breaks:
Telephone Excise Tax Refund: This is a one-time refund of long-distance excise taxes available on tax year 2006 income-tax returns. The refund applies to charges billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. Even if a taxpayer does not normally have to file a return, Form 1040EZ-T (also available through Free File) can be used to request this refund.
Earned Income Tax Credit: Earned income of less than $38,348 in 2006 may qualify a taxpayer to claim the earned income tax credit. This credit, worth up to $4,536, is available to low and moderate-income workers and working families. A special interactive “EITC Assistant” is available on IRS.gov to help taxpayers determine whether they are eligible.
Savers credit: Low-and moderate income workers who contributed to a retirement plan, such as an IRA or 401(k), may be able to take the savers credit. This credit is available in addition to any other tax savings that apply. Use Form 8880 to claim the credit.
Extender tax breaks: Several popular tax breaks were renewed too late to be included on 2006 federal income tax forms. Accordingly, many taxpayers need to follow special instructions to claim the deduction for state and local sales taxes, the tuition and fees deduction, as well as the educator expense deduction. In addition, many who qualify for the tuition and fees deduction may reap greater tax savings by, instead, claiming the Hope credit or the lifetime learning credit for a particular student.
Some taxpayers can wait until after Oct.15, to file. This includes those serving in Iraq, Afghanistan or other combat zone localities and people affected by several recent natural disasters.
U.S. Marshals arrest New Hampshire Tax Evaders
from http://www.bostonglobe.com/
By Marc Robins, Globe Correspondent October 5, 2007
A tense five-month standoff ended peacefully last night when US marshals took custody of convicted tax evaders Ed and Elaine Brown at their Plainfield, N.H., home, authorities announced.
"We had no indication that the Browns intended to voluntary surrender," US Marshal Stephen Monier said in a statement, "so we had to move forward with an operation that promised the safest possible outcome. That day was today."
The arrests occurred without incident about 7:45 p.m., he said. "High-profile situations like this are always difficult, but they don't have to be tragic.
"I'm glad no one was injured, and that the community remained safe throughout the operation," Monier said.
The Browns were turned over to the US Bureau of Prisons last night and will begin serving their 63-month federal prison term, Monier said. In June, he said the Browns would eventually be charged with obstruction of justice for resisting arrest.
The Browns had stopped paying taxes in 1996, mostly on income generated by Elaine Brown's dental practice.
Ed Brown, 65, and Elaine Brown, 67, were convicted of federal tax charges on January 18th and sentenced, in absentia, during an April 24 court hearing.
Since about the time of their conviction, the Browns had been holed up on their property and had refused to surrender.
"I'm in my house," Ed Brown told the Associated Press by phone the day before his conviction. "I won't leave it."
During the stay at their home, the Browns kept weapons, got power from a wind turbine generator and solar panels, and communicated with the outside through satellite dishes.
Followers and friends who had heard about the case brought food, water, and supplies.
The Browns garnered much of their support via the internet.
Ed Brown kept a blog that at one point received a million hits in a month, and Brown supporters kept a MySpace page for the couple.
Randy Weaver, who infamously resisted arrest at Ruby Ridge in Idaho in 1992, joined Brown at his compound in June to offer his support.
However, visits to the Brown household declined after four men were arrested Sept. 12 for providing guns or other supplies to the couple.
That, along with other factors, were used in determining the time of the arrest, Monier said.
© Copyright 2007 Globe Newspaper Company
Wednesday, October 3, 2007
Charities, Churches and Politics
Charities, Churches and Politics
The ban on political campaign activity by charities and churches was created by Congress more than a half century ago. The Internal Revenue Service administers the tax laws written by Congress and has enforcement authority over tax-exempt organizations. Here is some background information on the political campaign activity ban and the latest IRS enforcement statistics regarding its adminstration of this congressional ban.In 1954, Congress approved an amendment by Sen. Lyndon Johnson to prohibit 501(c)(3) organizations, which includes charities and churches, from engaging in any political campaign activity. To the extent Congress has revisited the ban over the years, it has in fact strengthened the ban. The most recent change came in 1987 when Congress amended the language to clarify that the prohibition also applies to statements opposing candidates.Currently, the law prohibits political campaign activity by charities and churches by defining a 501(c)(3) organization as one "which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office."The IRS has published Revenue Ruling 2007-41, which outlines how churches, and all 501(c)(3) organizations, can stay within the law regarding the ban on political activity. Also, the ban by Congress is on political campaign activity regarding a candidate; churches and other 501(c)(3) organizations can engage in a limited amount of lobbying (including ballot measures) and advocate for or against issues that are in the political arena. The IRS also has provided guidance regarding the difference between advocating for a candidate and advocating for legislation. See political and lobbying activities.
Earlier this year, the IRS released the results of its 2006 Political Activity Compliance Initiative which investigated allegations of political campaign activity by 501(c)(3) organizations during the 2006 campaign season. For the 2006 election cycle, the IRS received 237 referals and selected 100 (44 churches, 56 nonchurches) for examination. More than half of these cases are still under investigation. However, the IRS did substantiate improper political activity in 26 cases and issued written advisories. So far, there are no revocation recommendations. (In 2004, the IRS selected 110 cases for examination, issued 69 written advisories, revoked the tax-exempt status of five organizations and proposed revocation for two others.)
Politics plays absolutely no role in audits. A team of career IRS employees review complaints submitted by the public and determine which allegations merit further review. An independent review confirmed that political considerations played no role in IRS decisions to further investigate allegations of political campaign activity. You can read the report here.Each election cycle, the IRS reminds 501(c)(3) exempt organizations to be aware of the ban on political campaign activity. The IRS published its most recent reminder in a public news release which you can read here.The division within the IRS responsible for overseeing churches and charities is the Tax Exempt and Government Entitities Division. TEGE has created a Web page entitled Charities, Churches, and Educational Organizations - Political Campaign Intervention. It is dedicated to the IRS most recent activities related to 501(c)(3) and political activity.A definitive court case on the issue of free speech and political expression is Branch Ministries Inc. versus Rossotti. In that case, the court upheld the constitutionality of the ban on political activity. The court rejected the plaintiff church's allegations that it was being selectively prosecuted because of its conservative views and that its First Amendment right to free speech was being infringed.
The court wrote: "The government has a compelling interest in maintaining the integrity of the tax system and in not subsidizing partisan political activity, and Section 501(c)(3) is the least restrictive means of accomplishing that purpose
Tuesday, September 25, 2007
Senate Bill Would Crack Down on Employee Misclassification
Senate Bill Would Crack Down on Employee Misclassification Senators Barack Obama (D-IL), Dick Durbin (D-IL), Ted Kennedy (D-MA), and Patty Murray (D-WA) have introduced S. 2044, the Independent Contractor Proper Classification Act of 2007, which seeks to close a perceived loophole that allows businesses to classify workers as independent contractors. The senators believe that current law allows companies to avoid paying payroll taxes and benefits for employees. Their bill would restrict the ability of businesses to justify worker misclassifications under Section 530 of the Revenue Act of 1978. The legislation would also require the Department of Labor to enforce the new law. Recent high profile court cases involving FedEx (and other large companies that classify many individuals who appear to be employees as independent contractors) have brought this issue to light.
Monday, September 24, 2007
Pasadena Church wants Apology from IRS
from www.latimes.com
Pasadena church wants apology from IRS
Stephen Osman / LAT
BEWILDERED: The Rev. J. Edwin Bacon Jr., rector of All Saints Episcopal Church, told congregants during morning services today that he and other officials were relieved that the church no longer faced the imminent loss of its tax-exempt status, but were bewildered by the IRS' seemingly contradictory conclusions about the case.
All Saints' rector also demands that the agency clarify its findings after closing its probe into an antiwar sermon in 2004.
By Rebecca Trounson, Los Angeles Times Staff Writer September 24, 2007
The Internal Revenue Service has told a prominent Pasadena church that it has ended its lengthy investigation into a 2004 antiwar sermon, church leaders said Sunday.But the agency wrote in its letter to All Saints Episcopal Church that officials still considered the sermon to have been illegal, prompting the church to seek clarification, a corrected record and an apology from the IRS, the church's rector told standing-room-only crowds of parishioners at Sunday's services.
The church also has asked the Treasury Department, which oversees the IRS, to investigate allegations that officials from the Justice Department had become involved in the matter, raising concerns that the investigation was politically motivated."To be sure, we are pleased that the IRS exam is over," the Rev. J. Edwin Bacon Jr. said in his 9 a.m. sermon, which was interrupted several times by applause. "However, the main issue of protecting the freedom of this church and other religious communities to worship according to the dictates of their conscience and core values is far from accomplished."Bacon predicted that the vague, mixed message from the IRS after its nearly two-year investigation of the All Saints case would have a continued "chilling effect" on the freedom of clerics from all faiths to preach about moral values and significant social issues such as war and poverty.Although the church no longer faces the imminent loss of its tax-exempt status, All Saints has "no more guidance about the IRS rules now than when we started this process," the rector said. He said the church would continue its struggle with the IRS, which he said so far had cost the 3,500-member congregation about $200,000.One of Southern California's largest and most liberal congregations, All Saints came under IRS scrutiny after a sermon two days before the 2004 presidential election by a guest speaker, the Rev. George F. Regas. In his sermon, Regas, the church's former rector, imagined Jesus participating in a political debate with then-presidential candidates George W. Bush and John F. Kerry. Regas did not endorse either candidate, saying that "good people of profound faith" could support either one. But he strongly criticized the war in Iraq and said that Jesus would have told Bush that his preemptive war strategy in Iraq "has led to disaster."A letter from the IRS arrived in June 2005 stating that the church's tax-exempt status was in jeopardy. Federal law prohibits tax-exempt organizations, including churches, from intervening in political campaigns and elections. The letter said the agency's concerns were based on a Nov. 1, 2004, article in the Los Angeles Times, which included three paragraphs about Regas' sermon in a lengthy national roundup of rhetoric from the pulpit on the Sunday before the election. In its latest letter to All Saints, dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status, but said that Regas' sermon did amount to intervention in the 2004 presidential race. The letter offered no details or explanation for either conclusion.An IRS spokesman said Sunday that in keeping with the law, the agency could not comment on specific investigations. However, a top IRS official later issued a statement in response to questions about the All Saints case. "The IRS is committed to ensuring that tax-exempt organizations understand and comply with the law," said Steven T. Miller, commissioner of the agency's Tax Exempt and Government Entities Division. "We will continue to work with charities and churches during the 2008 political season about the federal law's guidelines on political activity. Our goal is to ensure that charities meet their responsibilities under the law and avoid becoming involved in campaign activity."Along with its requests to the IRS, All Saints has asked a top Treasury Department official to investigate what the church called a series of procedural and substantive errors in the case, including allegedly inappropriate conversations between IRS and Justice Department officials about the investigation.Those conversations, documented in e-mails obtained by the church through Freedom of Information Act requests, appear to show that Justice Department officials were involved in the All Saints case before the IRS made any formal referral of it for possible prosecution, an attorney for the church said. The discussions raise concerns that the IRS' investigation was politically motivated, church officials said. One e-mail, for example, appears to show coordination between IRS and Justice Department officials about a request to the church for documents. Others discuss the timing of the request and news coverage about the case. "In view of the fact that recent congressional inquiries have revealed extensive politicization of [the Department of Justice], my client is very concerned that the close coordination undertaken by the IRS allowed partisan political concerns to direct the course of the All Saints examination," attorney Marcus S. Owens wrote in a letter Friday requesting an investigation.Owens, a former director of the IRS division that handles tax-exempt organizations, said that although liberal and conservative congregations and other nonprofits had been investigated by the IRS in recent years, its examination of All Saints was "highly unusual" in a number of ways, not only in its seemingly contradictory conclusions. Among other things, he said the agency had never allowed the church the chance that all taxpayers are typically granted when audited to explain and discuss the issues of concern. "There's always an opportunity to do that, to sort of push back," Owens said. Ellen Aprill, a law professor at Loyola Law School and a tax law specialist, also called the unclear outcome of the case "puzzling" and said it underlined the need for the IRS to explain which activities violate the rules against intervening in a political campaign. Meanwhile, at the church Sunday, parishioners expressed overwhelming support for the decision to pursue an apology and clarification from the IRS, and an explanation from the Justice Department. But some also expressed concerns about possible costs to All Saints, both financial and otherwise."It's so important for this church to be speaking truth to power, and I applaud that," said Sharon Fane of Burbank, who said she had joined All Saints largely because of its IRS battle. "But I have some fear for us too. What will this cost?"The church's top lay leader, senior warden Rich Llewellyn, said the decision to push for answers from the IRS was clear, given the significance of the issues and the church's long history of social activism. "We really need clarity from the IRS," he said. "Otherwise, it's a very scary prospect to think that these agencies are looking over our shoulders at what our pastors can preach in church."Support for the church also came Sunday from leaders of other faiths and Christian denominations, many of whom attended the day's services and a news conference afterward. "The nature of the pulpit is about freedom, freedom to express belief," said Maher Hathout, a leader at the Islamic Center of Southern California and a partner of Bacon's in interfaith efforts. "We need to work together to prevent intimidation."Rep. Adam B. Schiff (D-Burbank) also expressed support. Schiff, who in 2005 unsuccessfully sought a Government Accountability Office investigation into the IRS' scrutiny of churches and other nonprofits, including All Saints, said he still would like to know whether the probes were politically motivated. "The real message from today is that the IRS picked on the wrong church," said Schiff, whose district includes Pasadena. "They thought that All Saints would fold up the tent and admit it was wrong . . . but instead they found a church that would stand up for itself."rebecca.trounson@latimes.comTimes staff writer Tony Barboza contributed to this report
Pasadena church wants apology from IRS
Stephen Osman / LAT
BEWILDERED: The Rev. J. Edwin Bacon Jr., rector of All Saints Episcopal Church, told congregants during morning services today that he and other officials were relieved that the church no longer faced the imminent loss of its tax-exempt status, but were bewildered by the IRS' seemingly contradictory conclusions about the case.
All Saints' rector also demands that the agency clarify its findings after closing its probe into an antiwar sermon in 2004.
By Rebecca Trounson, Los Angeles Times Staff Writer September 24, 2007
The Internal Revenue Service has told a prominent Pasadena church that it has ended its lengthy investigation into a 2004 antiwar sermon, church leaders said Sunday.But the agency wrote in its letter to All Saints Episcopal Church that officials still considered the sermon to have been illegal, prompting the church to seek clarification, a corrected record and an apology from the IRS, the church's rector told standing-room-only crowds of parishioners at Sunday's services.
The church also has asked the Treasury Department, which oversees the IRS, to investigate allegations that officials from the Justice Department had become involved in the matter, raising concerns that the investigation was politically motivated."To be sure, we are pleased that the IRS exam is over," the Rev. J. Edwin Bacon Jr. said in his 9 a.m. sermon, which was interrupted several times by applause. "However, the main issue of protecting the freedom of this church and other religious communities to worship according to the dictates of their conscience and core values is far from accomplished."Bacon predicted that the vague, mixed message from the IRS after its nearly two-year investigation of the All Saints case would have a continued "chilling effect" on the freedom of clerics from all faiths to preach about moral values and significant social issues such as war and poverty.Although the church no longer faces the imminent loss of its tax-exempt status, All Saints has "no more guidance about the IRS rules now than when we started this process," the rector said. He said the church would continue its struggle with the IRS, which he said so far had cost the 3,500-member congregation about $200,000.One of Southern California's largest and most liberal congregations, All Saints came under IRS scrutiny after a sermon two days before the 2004 presidential election by a guest speaker, the Rev. George F. Regas. In his sermon, Regas, the church's former rector, imagined Jesus participating in a political debate with then-presidential candidates George W. Bush and John F. Kerry. Regas did not endorse either candidate, saying that "good people of profound faith" could support either one. But he strongly criticized the war in Iraq and said that Jesus would have told Bush that his preemptive war strategy in Iraq "has led to disaster."A letter from the IRS arrived in June 2005 stating that the church's tax-exempt status was in jeopardy. Federal law prohibits tax-exempt organizations, including churches, from intervening in political campaigns and elections. The letter said the agency's concerns were based on a Nov. 1, 2004, article in the Los Angeles Times, which included three paragraphs about Regas' sermon in a lengthy national roundup of rhetoric from the pulpit on the Sunday before the election. In its latest letter to All Saints, dated Sept. 10, the IRS said the church continues to qualify for tax-exempt status, but said that Regas' sermon did amount to intervention in the 2004 presidential race. The letter offered no details or explanation for either conclusion.An IRS spokesman said Sunday that in keeping with the law, the agency could not comment on specific investigations. However, a top IRS official later issued a statement in response to questions about the All Saints case. "The IRS is committed to ensuring that tax-exempt organizations understand and comply with the law," said Steven T. Miller, commissioner of the agency's Tax Exempt and Government Entities Division. "We will continue to work with charities and churches during the 2008 political season about the federal law's guidelines on political activity. Our goal is to ensure that charities meet their responsibilities under the law and avoid becoming involved in campaign activity."Along with its requests to the IRS, All Saints has asked a top Treasury Department official to investigate what the church called a series of procedural and substantive errors in the case, including allegedly inappropriate conversations between IRS and Justice Department officials about the investigation.Those conversations, documented in e-mails obtained by the church through Freedom of Information Act requests, appear to show that Justice Department officials were involved in the All Saints case before the IRS made any formal referral of it for possible prosecution, an attorney for the church said. The discussions raise concerns that the IRS' investigation was politically motivated, church officials said. One e-mail, for example, appears to show coordination between IRS and Justice Department officials about a request to the church for documents. Others discuss the timing of the request and news coverage about the case. "In view of the fact that recent congressional inquiries have revealed extensive politicization of [the Department of Justice], my client is very concerned that the close coordination undertaken by the IRS allowed partisan political concerns to direct the course of the All Saints examination," attorney Marcus S. Owens wrote in a letter Friday requesting an investigation.Owens, a former director of the IRS division that handles tax-exempt organizations, said that although liberal and conservative congregations and other nonprofits had been investigated by the IRS in recent years, its examination of All Saints was "highly unusual" in a number of ways, not only in its seemingly contradictory conclusions. Among other things, he said the agency had never allowed the church the chance that all taxpayers are typically granted when audited to explain and discuss the issues of concern. "There's always an opportunity to do that, to sort of push back," Owens said. Ellen Aprill, a law professor at Loyola Law School and a tax law specialist, also called the unclear outcome of the case "puzzling" and said it underlined the need for the IRS to explain which activities violate the rules against intervening in a political campaign. Meanwhile, at the church Sunday, parishioners expressed overwhelming support for the decision to pursue an apology and clarification from the IRS, and an explanation from the Justice Department. But some also expressed concerns about possible costs to All Saints, both financial and otherwise."It's so important for this church to be speaking truth to power, and I applaud that," said Sharon Fane of Burbank, who said she had joined All Saints largely because of its IRS battle. "But I have some fear for us too. What will this cost?"The church's top lay leader, senior warden Rich Llewellyn, said the decision to push for answers from the IRS was clear, given the significance of the issues and the church's long history of social activism. "We really need clarity from the IRS," he said. "Otherwise, it's a very scary prospect to think that these agencies are looking over our shoulders at what our pastors can preach in church."Support for the church also came Sunday from leaders of other faiths and Christian denominations, many of whom attended the day's services and a news conference afterward. "The nature of the pulpit is about freedom, freedom to express belief," said Maher Hathout, a leader at the Islamic Center of Southern California and a partner of Bacon's in interfaith efforts. "We need to work together to prevent intimidation."Rep. Adam B. Schiff (D-Burbank) also expressed support. Schiff, who in 2005 unsuccessfully sought a Government Accountability Office investigation into the IRS' scrutiny of churches and other nonprofits, including All Saints, said he still would like to know whether the probes were politically motivated. "The real message from today is that the IRS picked on the wrong church," said Schiff, whose district includes Pasadena. "They thought that All Saints would fold up the tent and admit it was wrong . . . but instead they found a church that would stand up for itself."rebecca.trounson@latimes.comTimes staff writer Tony Barboza contributed to this report
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If you are unhappy or concerned with your current Tax Representitive, or are interested in checking out a particular Tax Representitive company, then we suggest you check out www.Ripoffreport.com. Here you can check out not only Tax Advocacy, LLC, but also most if not all of the National Tax Representitive firms. We cannot guarantee the accuracy of the stories or complaints you will find. We suggest you contact the author of the posts and see for yourself.
Sunday, September 16, 2007
10 Don't Miss Tax Breaks
from www.cnn.com
By Jeanne Sahadi, CNNMoney.com senior writer
As annual rites go, sweating over your 1040 is one of the most taxing, no pun intended.
So to make the venture a little more palatable -- and maybe even profitable -- we asked Thomas Riley, president of the New York State Society of Certified Public Accountants, and Mark Luscombe, principal federal tax analyst for tax information publisher CCH, to help us draw up a tickler list of valuable (and in some cases new) tax breaks worth remembering before signing off on your federal and state tax returns.
Get back your phone tax
Thanks to the recent repeal of a 3 percent long-distance excise telephone tax, you have a refund coming to you on your 2006 tax return whether you itemize or not.
The one-time refund covers the 3 percent tax that you've paid from March 1, 2003 to July 31, 2006. If you don't feel like combing through old bills to tally your total, the IRS will let you claim a standard amount based on your exemptions:
1 exemption: $30 refund
2 exemptions; $40 refund
3 exemptions: $50 refund
4 or more: $60 refund
(If you opt for the standard amount, claim it on line 71 on the 1040. If you want to do the calculations yourself, fill out Form 8913.)
Take credit for being efficient
Tax year 2006 is the first for which you can get a tax break for making your home more energy efficient.
You can take a 30 percent credit up to $2,000 for the cost of solar water heating or photovoltaic equipment in your home. You can get a 10 percent credit up to $500 for insulation and heat-reducing metal roofs, and up to $200 for energy-efficient windows. Labor costs, though, don't count.
(For more information, see IRS Form 5695. The credit is entered on line 52 on the 1040.)
Write off the nanny
If you work full-time and pay for the care of a dependent (e.g., a young child, elderly parent or disabled adult child or spouse), you may be able to get a credit for the amount you spend.
Depending on your income, you're allowed to claim between 20 percent and 35 percent on up to $3,000 in expenses for one dependent or $6,000 for two or more. (Please see correction at end of article.) You may only take the credit on the amount of your expenses that exceeds what you put into a tax-deductible flexible-spending plan at work.
So if you have two small kids, pay $6,000 for their care and defer $5,000 from your paycheck into your plan at work, you may only take the dependent care credit on $1,000 of your expenses, since you're already getting a tax break on the first $5,000.
If you don't put money into a plan at work, you may take a credit on all of your care expenses up to the $3,000 limit for one dependent or $6,000 for two or more, assuming your income qualifies.
(For more information, see IRS Form 2441 or IRS Publication 503. The credit is entered on line 48 on the 1040.)
Get money back for saving
Saving for retirement can result in a lower tax bill in more ways than one. If your AGI is $25,000 or less ($50,000 or less for married couples), you may take up to a 50 percent credit on as much as $2,000 in contributions made to qualified retirement savings plans, such as 401(k)s, 403(b)s and traditional and Roth IRAs. The closer you are to the income ceilings, the lower your credit will be.
That credit is on top of the deduction on your income that you get for making contributions to a 401(k), 403(b) or deductible IRA.
(For more information on the saver's credit, see IRS Form 8880. The credit is entered on line 51 on the 1040.)
A break for self-employed savers
If you're self-employed, you may contribute up to 25 percent of your self-employment income (gross income minus expenses) to a SEP (Simplified Employee Pension) and deduct the full amount.
You're allowed to create and contribute to this IRA-type plan up to the due date of your return -- which, with extensions, can be as late as Oct. 15, 2007.
(For more information, see IRS Form 5305A-SEP. The deduction is entered on line 28 on the 1040.)
Deduct Money Magazine
Among the miscellaneous deductions you may be eligible to take:
Travel costs for job interviews: If you interview for a job in your field, you may deduct the costs of transportation, food and lodging.
Phone use: You may deduct business calls made on a personal cell phone and work-related long-distance calls made on your home phone.
Subscriptions for work-related publications
Dues for professional association memberships
Miscellaneous deductions may be claimed if combined they exceed 2 percent of your adjusted gross income (AGI) and you itemize on your return. But only the amount above 2 percent of your AGI is deductible.
(For more information, see IRS Form 2106. These deductions are entered on Schedule A.)
Pick your state tax
You may either deduct your state and local income taxes on your federal return or the state and local sales taxes you paid, whichever is higher. If you don't have all your receipts, you can use the Optional State Sales Tax Tables in IRS Publication 600.
(The sales tax deduction is claimed by entering "ST" on line 5 of Schedule A.)
Save on tuition
You can take a deduction for qualified higher education expenses whether you itemize or not. It may be taken on up to $4,000 in tuition and fees if your adjusted gross income is $65,000 or less ($130,000 for joint filers). If your AGI is higher ($80,000 or less for single filers; $160,000 or less for married couples), you may deduct up to $2,000.
The tuition deduction may not be taken for expenses for which you are claiming an education credit (e.g., the HOPE or Lifetime Learning credits).
(For more information, see IRS Topic 302. The deduction is entered on line 35 on the 1040.)
Real estate tax deduction
If you bought property and reimbursed the seller for the portion of property taxes he paid for the year, you may deduct that amount on your return, unless you're subject to AMT, which disallows property tax deductions.
(This deduction is entered on Schedule A.)
Save on 529 savings
Some states offer an income tax deduction to residents for contributions they make to a 529 plan. To see if yours does, visit SavingForCollege.com.
This article is an expanded version of the original that appeared in the March issue of Money Magazine.
Correction: Originally this article incorrectly stated that you can take a dependent care credit on up to $3,000 or $6,000 in expenses above what you put into your company's flexible spending account.
-------------------------------------------------
By Jeanne Sahadi, CNNMoney.com senior writer
As annual rites go, sweating over your 1040 is one of the most taxing, no pun intended.
So to make the venture a little more palatable -- and maybe even profitable -- we asked Thomas Riley, president of the New York State Society of Certified Public Accountants, and Mark Luscombe, principal federal tax analyst for tax information publisher CCH, to help us draw up a tickler list of valuable (and in some cases new) tax breaks worth remembering before signing off on your federal and state tax returns.
Get back your phone tax
Thanks to the recent repeal of a 3 percent long-distance excise telephone tax, you have a refund coming to you on your 2006 tax return whether you itemize or not.
The one-time refund covers the 3 percent tax that you've paid from March 1, 2003 to July 31, 2006. If you don't feel like combing through old bills to tally your total, the IRS will let you claim a standard amount based on your exemptions:
1 exemption: $30 refund
2 exemptions; $40 refund
3 exemptions: $50 refund
4 or more: $60 refund
(If you opt for the standard amount, claim it on line 71 on the 1040. If you want to do the calculations yourself, fill out Form 8913.)
Take credit for being efficient
Tax year 2006 is the first for which you can get a tax break for making your home more energy efficient.
You can take a 30 percent credit up to $2,000 for the cost of solar water heating or photovoltaic equipment in your home. You can get a 10 percent credit up to $500 for insulation and heat-reducing metal roofs, and up to $200 for energy-efficient windows. Labor costs, though, don't count.
(For more information, see IRS Form 5695. The credit is entered on line 52 on the 1040.)
Write off the nanny
If you work full-time and pay for the care of a dependent (e.g., a young child, elderly parent or disabled adult child or spouse), you may be able to get a credit for the amount you spend.
Depending on your income, you're allowed to claim between 20 percent and 35 percent on up to $3,000 in expenses for one dependent or $6,000 for two or more. (Please see correction at end of article.) You may only take the credit on the amount of your expenses that exceeds what you put into a tax-deductible flexible-spending plan at work.
So if you have two small kids, pay $6,000 for their care and defer $5,000 from your paycheck into your plan at work, you may only take the dependent care credit on $1,000 of your expenses, since you're already getting a tax break on the first $5,000.
If you don't put money into a plan at work, you may take a credit on all of your care expenses up to the $3,000 limit for one dependent or $6,000 for two or more, assuming your income qualifies.
(For more information, see IRS Form 2441 or IRS Publication 503. The credit is entered on line 48 on the 1040.)
Get money back for saving
Saving for retirement can result in a lower tax bill in more ways than one. If your AGI is $25,000 or less ($50,000 or less for married couples), you may take up to a 50 percent credit on as much as $2,000 in contributions made to qualified retirement savings plans, such as 401(k)s, 403(b)s and traditional and Roth IRAs. The closer you are to the income ceilings, the lower your credit will be.
That credit is on top of the deduction on your income that you get for making contributions to a 401(k), 403(b) or deductible IRA.
(For more information on the saver's credit, see IRS Form 8880. The credit is entered on line 51 on the 1040.)
A break for self-employed savers
If you're self-employed, you may contribute up to 25 percent of your self-employment income (gross income minus expenses) to a SEP (Simplified Employee Pension) and deduct the full amount.
You're allowed to create and contribute to this IRA-type plan up to the due date of your return -- which, with extensions, can be as late as Oct. 15, 2007.
(For more information, see IRS Form 5305A-SEP. The deduction is entered on line 28 on the 1040.)
Deduct Money Magazine
Among the miscellaneous deductions you may be eligible to take:
Travel costs for job interviews: If you interview for a job in your field, you may deduct the costs of transportation, food and lodging.
Phone use: You may deduct business calls made on a personal cell phone and work-related long-distance calls made on your home phone.
Subscriptions for work-related publications
Dues for professional association memberships
Miscellaneous deductions may be claimed if combined they exceed 2 percent of your adjusted gross income (AGI) and you itemize on your return. But only the amount above 2 percent of your AGI is deductible.
(For more information, see IRS Form 2106. These deductions are entered on Schedule A.)
Pick your state tax
You may either deduct your state and local income taxes on your federal return or the state and local sales taxes you paid, whichever is higher. If you don't have all your receipts, you can use the Optional State Sales Tax Tables in IRS Publication 600.
(The sales tax deduction is claimed by entering "ST" on line 5 of Schedule A.)
Save on tuition
You can take a deduction for qualified higher education expenses whether you itemize or not. It may be taken on up to $4,000 in tuition and fees if your adjusted gross income is $65,000 or less ($130,000 for joint filers). If your AGI is higher ($80,000 or less for single filers; $160,000 or less for married couples), you may deduct up to $2,000.
The tuition deduction may not be taken for expenses for which you are claiming an education credit (e.g., the HOPE or Lifetime Learning credits).
(For more information, see IRS Topic 302. The deduction is entered on line 35 on the 1040.)
Real estate tax deduction
If you bought property and reimbursed the seller for the portion of property taxes he paid for the year, you may deduct that amount on your return, unless you're subject to AMT, which disallows property tax deductions.
(This deduction is entered on Schedule A.)
Save on 529 savings
Some states offer an income tax deduction to residents for contributions they make to a 529 plan. To see if yours does, visit SavingForCollege.com.
This article is an expanded version of the original that appeared in the March issue of Money Magazine.
Correction: Originally this article incorrectly stated that you can take a dependent care credit on up to $3,000 or $6,000 in expenses above what you put into your company's flexible spending account.
-------------------------------------------------
Wednesday, September 12, 2007
Back to School Tax breaks Help Teachers Pay Classroom Costs
from www.irs.gov
Back-to-School Tax Breaks Help Teachers Pay Classroom Costs; Aid Parents, Students With College Tuition
IR-2007-158, Sept. 11, 2007
WASHINGTON — With the new school year now under way, the Internal Revenue Service today reminded teachers, parents and students that saving receipts and keeping good records can help them take advantage of various education-related deductions and credits on their 2007 federal income tax return.
“The start of the school year is a good time to remind parents, students and teachers to save all receipts related to tax-advantaged education expenses,” said IRS Acting Commissioner Linda Stiff. “Good recordkeeping makes sense because it can help avoid missing a deduction or credit at tax time.”
Deductions reduce the income on which tax is figured. Credits reduce the overall tax. Though both can lower a person’s year-end tax bill or increase their refund, credits normally result in greater tax savings.
The educator expense deduction allows teachers and other educators to deduct the cost of books, supplies, equipment and software used in the classroom. Eligible educators include those who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide in a public or private elementary or secondary school.
Worth up to $250, the educator expense deduction is available, whether or not the educator itemizes their deductions on Schedule A. In tax-year 2005, teachers and educators deducted just over $893 million of these out-of-pocket classroom expenses. Under current law, this deduction is scheduled to expire at the end of this year.
Three key tax breaks — the tuition and fees deduction, the Hope credit and the lifetime learning credit — help parents and students pay for the cost of post-secondary education. All three are available, regardless of whether an eligible taxpayer itemizes their deductions. Under current law, the tuition and fees deduction is scheduled to expire at the end of this year, but the two credits remain in effect. In tax-year 2005, taxpayers claimed tuition and fees deductions totaling nearly $11 billion and education credits of almost $6.2 billion.
Normally, a taxpayer can claim tuition and required enrollment fees paid for their own and their dependent’s college education. A taxpayer cannot take both an education credit and the tuition and fees deduction for the same student in the same year. Income limits and other special rules apply to each of these provisions. Education credits are claimed on Form 8863, and the tuition and fees deduction for 2007 will be claimed on new Form 8917.
IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication also describes other education-related tax benefits, including qualified tuition programs (also known as 529 plans), the student loan interest deduction, Coverdell education savings accounts and the education savings bond program.
Back-to-School Tax Breaks Help Teachers Pay Classroom Costs; Aid Parents, Students With College Tuition
IR-2007-158, Sept. 11, 2007
WASHINGTON — With the new school year now under way, the Internal Revenue Service today reminded teachers, parents and students that saving receipts and keeping good records can help them take advantage of various education-related deductions and credits on their 2007 federal income tax return.
“The start of the school year is a good time to remind parents, students and teachers to save all receipts related to tax-advantaged education expenses,” said IRS Acting Commissioner Linda Stiff. “Good recordkeeping makes sense because it can help avoid missing a deduction or credit at tax time.”
Deductions reduce the income on which tax is figured. Credits reduce the overall tax. Though both can lower a person’s year-end tax bill or increase their refund, credits normally result in greater tax savings.
The educator expense deduction allows teachers and other educators to deduct the cost of books, supplies, equipment and software used in the classroom. Eligible educators include those who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide in a public or private elementary or secondary school.
Worth up to $250, the educator expense deduction is available, whether or not the educator itemizes their deductions on Schedule A. In tax-year 2005, teachers and educators deducted just over $893 million of these out-of-pocket classroom expenses. Under current law, this deduction is scheduled to expire at the end of this year.
Three key tax breaks — the tuition and fees deduction, the Hope credit and the lifetime learning credit — help parents and students pay for the cost of post-secondary education. All three are available, regardless of whether an eligible taxpayer itemizes their deductions. Under current law, the tuition and fees deduction is scheduled to expire at the end of this year, but the two credits remain in effect. In tax-year 2005, taxpayers claimed tuition and fees deductions totaling nearly $11 billion and education credits of almost $6.2 billion.
Normally, a taxpayer can claim tuition and required enrollment fees paid for their own and their dependent’s college education. A taxpayer cannot take both an education credit and the tuition and fees deduction for the same student in the same year. Income limits and other special rules apply to each of these provisions. Education credits are claimed on Form 8863, and the tuition and fees deduction for 2007 will be claimed on new Form 8917.
IRS Publication 970, Tax Benefits for Education, can help eligible parents and students understand the special rules that apply and decide which tax break to claim. The publication also describes other education-related tax benefits, including qualified tuition programs (also known as 529 plans), the student loan interest deduction, Coverdell education savings accounts and the education savings bond program.
Sunday, September 9, 2007
GM's 2008 Chevrolet and Saturn Certified as Qualified Hybrid Vehicles
from www.irs.gov
GM’s 2008 Chevrolet and Saturn Certified As Qualified Hybrid Vehicles
IR-2007-156, Sept. 6, 2007
WASHINGTON — The Internal Revenue Service has acknowledged the certification by General Motors Corp. that two of its Model Year 2008 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.
The credit amount for the certified 2008 model year hybrid vehicles are:
Chevrolet Malibu hybrid — $1,300
Saturn Aura hybrid — $1,300
Original purchasers of these vehicles may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
GM’s 2008 Chevrolet and Saturn Certified As Qualified Hybrid Vehicles
IR-2007-156, Sept. 6, 2007
WASHINGTON — The Internal Revenue Service has acknowledged the certification by General Motors Corp. that two of its Model Year 2008 vehicles meet the requirements of the Alternative Motor Vehicle Credit as qualified hybrid motor vehicles.
The credit amount for the certified 2008 model year hybrid vehicles are:
Chevrolet Malibu hybrid — $1,300
Saturn Aura hybrid — $1,300
Original purchasers of these vehicles may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
Alternative Minimum Tax
from www.optionetics.com
PERSONAL FINANCES FOR 2007: Alternative Minimum TaxThursday September 6, 2:00 pm ET By Clare White, CMT
It’s generally better to think about your tax situation during the year when you have some time to make adjustments, rather than scrambling at year end. One of the biggest issues that a large number of taxpayers continue to face is the status of the Alternative Minimum Tax [AMT]. In recent years the number of taxpayers impacted by the original form of this alternate calculation has increased significantly. Reductions to these numbers have come in the form of temporary relief measures enacted by Congress.
The AMT calculation was originally intended to set minimum tax levels for high income individuals. The end result is a flat-tax rate to prevent these taxpayers from using a large number of deductions to avoid taxes. The law was set-up with triggers to adjust income levels over the years with the intention of maintaining this high income pool of individuals. However, the calculations may have been too aggressive because in recent years many taxpayers deemed to be on the upper end of middle income earners have been caught up in the tax.
There is no set income level that triggers payment of AMT, but rather a series of calculations to determine if the tax applies. In general, those taxpayers impacted include individuals/families with significant deductions from a high number of exemptions, itemized deductions, and/or high state and local taxes. Increased income from capital gains and other sources may also contribute to AMT payment. This is a good point for a disclaimer, nothing in this article should be construed as tax advice – you need to contact an accountant for that.
As mentioned, more taxpayers have been subject to the AMT in its original form, but fewer taxpayers have paid it due to temporary changes made by Congress. Planning for 2007 is difficult because it’s uncertain whether or not these temporary changes will be enacted again for the tax year. If you were close to paying it last year and your tax and financial situation hasn’t changed that much this year, your accountant will have to run the calculation again this year and in future years until your situation changes significantly or the law is changed. That is, if a permanent change in tax law ever takes place.
As always, the best defense is a good offense, so you may want to be preemptive by having a conversation with your accountant in the short-term to get his or her pulse on the issue. They can provide you with planning ideas that can include putting more money in pre-tax accounts, mapping out years for asset sales, shifting expenses to years that will less likely be impacted by AMT and considering investments that are more AMT friendly. Pre-tax accounts include applicable retirement and medical accounts. Shifting expenses may include small things like pushing forward your Jan 2008 mortgage payment.
One thing to keep in mind is that you will be completing your 2007 taxes during an election year. It’s up to you to weigh whether either party wants to be the heavy by not extending AMT relief and forcing more payments.
To access other articles written by Clare White, please click here.
Clare White, CMT Contributing Writer and Options Strategist Optionetics.com ~ Your Options Education Site Questions for Clare? Visit the Optionetics.com Discussion Board
For more information on learning how to make money with options, go to the Optionetics.com full site! We empower investors through knowledge.
PERSONAL FINANCES FOR 2007: Alternative Minimum TaxThursday September 6, 2:00 pm ET By Clare White, CMT
It’s generally better to think about your tax situation during the year when you have some time to make adjustments, rather than scrambling at year end. One of the biggest issues that a large number of taxpayers continue to face is the status of the Alternative Minimum Tax [AMT]. In recent years the number of taxpayers impacted by the original form of this alternate calculation has increased significantly. Reductions to these numbers have come in the form of temporary relief measures enacted by Congress.
The AMT calculation was originally intended to set minimum tax levels for high income individuals. The end result is a flat-tax rate to prevent these taxpayers from using a large number of deductions to avoid taxes. The law was set-up with triggers to adjust income levels over the years with the intention of maintaining this high income pool of individuals. However, the calculations may have been too aggressive because in recent years many taxpayers deemed to be on the upper end of middle income earners have been caught up in the tax.
There is no set income level that triggers payment of AMT, but rather a series of calculations to determine if the tax applies. In general, those taxpayers impacted include individuals/families with significant deductions from a high number of exemptions, itemized deductions, and/or high state and local taxes. Increased income from capital gains and other sources may also contribute to AMT payment. This is a good point for a disclaimer, nothing in this article should be construed as tax advice – you need to contact an accountant for that.
As mentioned, more taxpayers have been subject to the AMT in its original form, but fewer taxpayers have paid it due to temporary changes made by Congress. Planning for 2007 is difficult because it’s uncertain whether or not these temporary changes will be enacted again for the tax year. If you were close to paying it last year and your tax and financial situation hasn’t changed that much this year, your accountant will have to run the calculation again this year and in future years until your situation changes significantly or the law is changed. That is, if a permanent change in tax law ever takes place.
As always, the best defense is a good offense, so you may want to be preemptive by having a conversation with your accountant in the short-term to get his or her pulse on the issue. They can provide you with planning ideas that can include putting more money in pre-tax accounts, mapping out years for asset sales, shifting expenses to years that will less likely be impacted by AMT and considering investments that are more AMT friendly. Pre-tax accounts include applicable retirement and medical accounts. Shifting expenses may include small things like pushing forward your Jan 2008 mortgage payment.
One thing to keep in mind is that you will be completing your 2007 taxes during an election year. It’s up to you to weigh whether either party wants to be the heavy by not extending AMT relief and forcing more payments.
To access other articles written by Clare White, please click here.
Clare White, CMT Contributing Writer and Options Strategist Optionetics.com ~ Your Options Education Site Questions for Clare? Visit the Optionetics.com Discussion Board
For more information on learning how to make money with options, go to the Optionetics.com full site! We empower investors through knowledge.
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