Friday, August 6, 2010
IRS e-mail requesting information
Several clients have recently contacted me regarding an e-mail they received allegedly from the IRS. I can sssure you that the IRS does not send e-mails to taxpayer's requesting information. Should you receive an e-mail you believe Uncle Sam sent, delete it! If you are still uneasy about not responding, pick up the phone and call the IRS. The IRS never has and never will seek information from taxpayer's via e-mail. If you still aren't convinced, call your Power of Attorney and ask them if they also received an e-mail regarding you. By law the IRS must send copies of all correspondence to your Power of Attorney.
Monday, August 2, 2010
Donate Stocks, save $$$$$
Many clients ask me how to avoid paying Capital Gains on stock sales. The short answer is you can't. However, what you can do and what I suggest is donating the stock to a charity. As an example, let's say you purchased IBM many years ago. The purchase price (or the cost basis) was $ 2,000. Today your stock is worth $ 10,000. If you were to donate your shares to a charity you could take an $ 8,000 deduction for charitable contributions and not have to claim the $ 8,000 as income. You wouldn't pay tax on your gains.
Friday, July 30, 2010
Hiring Your Children Can Be Beneficial
I often advise my business clients who are sole proprietors to consider hiring their child who are under the age of 18. If your business is a proprietorship, you pay no payroll taxes on your (under 18 year old) child's wages. Moreover, if your child files as a single taxpayer status, and earns less than $5,700.00 during tax year 2010, your child will pay zero income taxes.
I strongly suggest you pay your child the minimum wage for your state. Also, make sure to keep accurate time sheets reflecting the hours worked as well as copies of the paychecks issued to your child. Should you ever be audited by the IRS, these records will be necessary to prove that you paid your child appropriately and these records will save you a great deal of potential grief.
I strongly suggest you pay your child the minimum wage for your state. Also, make sure to keep accurate time sheets reflecting the hours worked as well as copies of the paychecks issued to your child. Should you ever be audited by the IRS, these records will be necessary to prove that you paid your child appropriately and these records will save you a great deal of potential grief.
Tuesday, July 27, 2010
Hiring Incentives to Restore Employment Act (HIRE)
A number of my corporate clients have used this to their benefit. If you are an employer, think about taking advantage of this new law, by hiring new workers this year.
Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire workers after February 3, 2010 and before January 1, 2011. The employer may qualify for a 6.2 percent payroll tax incentive, in affect, exempting them from their share of Social Security taxes on wages paid to those workers after March 18, 2010. This reduced tax witholding will have no effect on the employee's future social security benefits. The employers would still need to withold the employee's 6.2 percent share of Social Security taxes, as well as other income taxes.
Additionally, for each new worker retained for at least one year, the employer may claim an addtional general business tax credit of up to $1,000 per worker, when they file their 2011 federal income tax returns.
Under the Hiring Incentives to Restore Employment (HIRE) Act, enacted March 18, 2010, two new tax benefits are available to employers who hire workers after February 3, 2010 and before January 1, 2011. The employer may qualify for a 6.2 percent payroll tax incentive, in affect, exempting them from their share of Social Security taxes on wages paid to those workers after March 18, 2010. This reduced tax witholding will have no effect on the employee's future social security benefits. The employers would still need to withold the employee's 6.2 percent share of Social Security taxes, as well as other income taxes.
Additionally, for each new worker retained for at least one year, the employer may claim an addtional general business tax credit of up to $1,000 per worker, when they file their 2011 federal income tax returns.
Monday, July 26, 2010
What Can The IRS Really Seize?
from EA Journal: www.NAEA.org
If the IRS is in a position to levy or seize, it is important to know what is at risk. No matter what the IRS may tell you or your representative or what you may have heard, it is very unlikely the IRS will levy on a house, car, furniture, or equipment. The assets that you may be the most concerned about-your "stuff" are the items the IRS is least likely to take. This is important to know in negotiating with the IRS.
In 2009, the IRS made 581 seizures of "hard" assets such as houses, cars and other personal property. By comparison, in the same year the IRS sent out almost 3,500,000 levies on "soft" assets, such as bank accounts and wages.
IRS attempts to seize "hard" assets are serious, make no mistake about it. But the IRS is clearly more intent on tying up cash.
The reason for the focus on cash, not personal property, are in the Internal Revenue Code (IRC) and the Internal Revenue Manual. Both provide that if an asset-for instance a house- lacks equity, the IRS is prevented from seizing it. This eliminates a vast majority of potential seizures. Even if an asset has equity, it cannot be taken if it is listed as exempt in the IRC and is protected from the IRS as a matter of public policy.
If the IRS is in a position to levy or seize, it is important to know what is at risk. No matter what the IRS may tell you or your representative or what you may have heard, it is very unlikely the IRS will levy on a house, car, furniture, or equipment. The assets that you may be the most concerned about-your "stuff" are the items the IRS is least likely to take. This is important to know in negotiating with the IRS.
In 2009, the IRS made 581 seizures of "hard" assets such as houses, cars and other personal property. By comparison, in the same year the IRS sent out almost 3,500,000 levies on "soft" assets, such as bank accounts and wages.
IRS attempts to seize "hard" assets are serious, make no mistake about it. But the IRS is clearly more intent on tying up cash.
The reason for the focus on cash, not personal property, are in the Internal Revenue Code (IRC) and the Internal Revenue Manual. Both provide that if an asset-for instance a house- lacks equity, the IRS is prevented from seizing it. This eliminates a vast majority of potential seizures. Even if an asset has equity, it cannot be taken if it is listed as exempt in the IRC and is protected from the IRS as a matter of public policy.
Friday, July 23, 2010
IRS Whistleblower Reward Program
Whistleblower - Informant Reward
The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay tax. If the IRS uses information provided by the whistleblower, it may award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects from the non-compliant taxpayer.
Who qualifies for the reward?
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the non-compliant taxpayer.
What are the rules for receiving a reward?
There are two types of rewards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million (and a few additional qualifications are met), the IRS may pay 15 to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code (IRC) Section 7623(b) - Whistleblower Rules.
The IRS also has an reward program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The reward through this program are less, with a maximum reward of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at IRC Section 7623(a) - Informant Claims Program.
If you decide to submit information and seek a reward, use IRS Form 211. The same form is used for both award programs. -- Source - www.irs.gov
The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay tax. If the IRS uses information provided by the whistleblower, it may award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects from the non-compliant taxpayer.
Who qualifies for the reward?
The IRS may pay awards to people who provide specific and credible information to the IRS if the information results in the collection of taxes, penalties, interest or other amounts from the non-compliant taxpayer.
What are the rules for receiving a reward?
There are two types of rewards. If the taxes, penalties, interest and other amounts in dispute exceed $2 million (and a few additional qualifications are met), the IRS may pay 15 to 30 percent of the amount collected. If the case deals with an individual, his or her annual gross income must be more than $200,000. If the whistleblower disagrees with the outcome of the claim, he or she can appeal to the Tax Court. These rules are found at Internal Revenue Code (IRC) Section 7623(b) - Whistleblower Rules.
The IRS also has an reward program for other whistleblowers - generally those who do not meet the dollar thresholds of $2 million in dispute or cases involving individual taxpayers with gross income of less that $200,000. The reward through this program are less, with a maximum reward of 15 percent up to $10 million. In addition, the awards are discretionary and the informant cannot dispute the outcome of the claim in Tax Court. The rules for these cases are found at IRC Section 7623(a) - Informant Claims Program.
If you decide to submit information and seek a reward, use IRS Form 211. The same form is used for both award programs. -- Source - www.irs.gov
Five Tax Scams to Avoid this Summer
Five Tax Scams to Avoid this Summer
The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list.
1. Phishing. Phishing (contra fishing) is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.
2. Return Preparer Fraud. Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.
3. Hiding Income Offshore. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
4. Abuse of Charitable Organizations and Deductions. The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
5. Frivolous Arguments. Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.
The Internal Revenue Service issues a list of the top 12 tax scams each year – known as the Dirty Dozen. The scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. These scams don’t just happen during the tax filing season, they can happen anytime during the year. Here are five scams from the 2010 Dirty Dozen list.
1. Phishing. Phishing (contra fishing) is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information in an electronic communication. Scams can take the form of e-mails, tweets or phony websites and they try to mislead consumers by telling them they are entitled to a tax refund from the IRS and they must reveal personal information to claim it. Regardless of how official this e-mail may look and sound, the IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Phishers use the personal information obtained to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.
2. Return Preparer Fraud. Dishonest tax return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers are skimming a portion of their clients’ refunds, charging inflated fees for tax preparation or are attracting new clients by promising refunds that are too good to be true. To increase confidence in the tax system, the IRS is requiring all paid return preparers to register with the IRS, pass competency tests and attend continuing education.
3. Hiding Income Offshore. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks and brokerage accounts. IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from more than 14,700 voluntary disclosures received last year. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans.
4. Abuse of Charitable Organizations and Deductions. The IRS continues to observe the misuse of tax-exempt organizations. This includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets. The IRS also continues to investigate various schemes where donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets.
5. Frivolous Arguments. Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid on IRS.gov. These arguments are false and have been thrown out of court.
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