from www.irs.gov
IRS Withholding Calculator
Purpose of This Computer Program The purpose of this application is to help employees to ensure that they do not have too much or too little income tax withheld from their pay. It is not a replacement for Form W-4, but most people will find it more accurate and easier to use than the worksheets that accompany Form W-4. You may use the results of this program to help you complete a new Form W-4, which you will submit to your employer.
Tips For Using This Program
Have your most recent pay stubs handy.
Have your most recent income tax return handy.
Fill in all information that applies to your situation.
Estimate values if necessary, remembering that the results can only be as accurate as the input you provide.
Consult the information links embedded in the program whenever you have a question.
Print out the final screen that summarizes your input and the results, then use it to complete a new Form W-4 (if necessary), and keep it for your records.
Who Can Benefit From This Application?
Employees who would like to change their withholding to reduce their tax refund or their balance due;
Employees whose situations are only approximated by the worksheets on the paper W-4 (e.g., anyone with concurrent jobs, or couples in which both are employed; those entitled to file as Head of Household; and those with several children eligible for the Child Tax Credit);
Employees with non-wage income in excess of their adjustments and deductions, who would prefer to have tax on that income withheld from their paychecks rather than make periodic separate payments through the estimated tax procedures.
For Special Situations If your situation is among those listed below, you will probably achieve more accurate withholding by following the instructions in Publication 919, How Do I Adjust My Tax Withholding?
If you will be subject to alternative minimum tax, self-employment tax, or other taxes; or
If any of your current jobs will end before the end of the year.
NOTE: The information you provide is anonymous and will only be used for purposes of this calculation. It will not be shared, stored or used in any other way, nor can it be used to identify the individual who enters it. It will be discarded when you exit this program.
Continue to the Withholding Calculator
Tuesday, July 31, 2007
Estimated Tax Payments "What's New for 2007" IRS
from www.irs.gov
What's New for 2007
This section summarizes important changes that could affect your estimated tax payments for 2007. More information on these and other changes can be found in Publication 553.
Earned income credit (EIC). You may be able to take the EIC if:
A child lived with you and you earned less than $37,783 ($39,783 if married filing jointly), or
A child did not live with you and you earned less than $12,590 ($14,590 if married filing jointly).
The election to include combat pay as earned income for purposes of claiming the EIC is extended through 2007. The maximum investment income you can have and still get the credit has increased to $2,900. For more information, see Publication 596, Earned Income Credit (EIC).
Retirement savings plans. . The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. For more information, see Publication 590. Traditional IRA deduction limits increased. You may be able to take an IRA deduction if you were covered by a retirement plan at work and your 2007 modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or a qualifying widow(er)). Limit on elective deferral increases. The maximum elective deferral for 2007 is $15,500. For a SIMPLE plan, this amount is $10,500. Retirement savings contributions credit. For 2007, you may be able to claim this credit if your modified AGI is not more than $26,000 ($52,000 if married filing jointly, $39,000 if head of household). Catch-up contributions in certain employer bankruptcies. For 2007, 2008, and 2009, you may be able to deduct catch-up contributions of up to $3,000 each year to your IRA if you participated in a qualified cash or deferred arrangement (section 401(k) plan) of an employer who was a debtor in bankruptcy proceedings. For more details, see chapter 1 in Publication 590.
Certain credits no longer allowed against alternative minimum tax (AMT). The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, residential energy credits, mortgage interest credit, and the District of Columbia first-time homebuyer credit are no longer allowed against AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.
AMT exemption amount decreased. The AMT exemption amount will decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).
Credit for prior year minimum tax. . If you paid AMT before 2004 that you have not been able to credit against your regular tax liability, you may be able to claim a refundable tax credit for part of the AMT. To see if you qualify and to compute the refundable amount of your credit, see Publication 553.
Standard mileage rates. Beginning in 2007, the standard mileage rate for the cost of operating your car is:
48½ cents a mile for all business miles driven,
20 cents a mile for the use of your car for medical reasons,
20 cents a mile for the use of your car for a deductible move, and
14 cents a mile for the use of your car for charitable reasons.
Deduction for domestic production activities. . For 2007, the deduction rate will increase to 6%.
Deduction for qualified mortgage insurance premiums. . A homeowner who obtained a qualified mortgage in 2007, and whose AGI is less than $110,000 ($55,000 if married filing separately), may be able to deduct some of the mortgage insurance premiums paid during the year (as if they were mortgage interest) as an itemized deduction.
Health savings account (HSA). Beginning in 2007:
You can fund your HSA by making a one-time direct transfer from your IRA to your HSA.
The maximum deductible contribution is no longer limited to the annual deductible under the high deductible health plan.
You are allowed a maximum HSA contribution of $2,850 for single coverage ($5,650 for family coverage).
For more information about these and other changes to HSAs, see Publication 553.
Expired tax benefits. The following tax benefits have expired and will not apply for 2007. Certain relief granted for hurricanes Katrina, Wilma, and Rita.
Additional exemption for housing individuals displaced by Hurricane Katrina.
Tax-favored treatment of qualified hurricane distributions from eligible retirement plans.
Increased limits and delayed repayment on loans from qualified employer plans.
Increased limits for the Hope and lifetime learning credits.
Discharge of nonbusiness indebtedness by reason of Hurricane Katrina.
Other benefits.
Qualified electric vehicle credit.
Introduction
Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax on page 22), you may be charged a penalty even if you are due a refund when you file your tax return.
What's New for 2007
This section summarizes important changes that could affect your estimated tax payments for 2007. More information on these and other changes can be found in Publication 553.
Earned income credit (EIC). You may be able to take the EIC if:
A child lived with you and you earned less than $37,783 ($39,783 if married filing jointly), or
A child did not live with you and you earned less than $12,590 ($14,590 if married filing jointly).
The election to include combat pay as earned income for purposes of claiming the EIC is extended through 2007. The maximum investment income you can have and still get the credit has increased to $2,900. For more information, see Publication 596, Earned Income Credit (EIC).
Retirement savings plans. . The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. For more information, see Publication 590. Traditional IRA deduction limits increased. You may be able to take an IRA deduction if you were covered by a retirement plan at work and your 2007 modified adjusted gross income (AGI) is less than $62,000 ($103,000 if married filing jointly or a qualifying widow(er)). Limit on elective deferral increases. The maximum elective deferral for 2007 is $15,500. For a SIMPLE plan, this amount is $10,500. Retirement savings contributions credit. For 2007, you may be able to claim this credit if your modified AGI is not more than $26,000 ($52,000 if married filing jointly, $39,000 if head of household). Catch-up contributions in certain employer bankruptcies. For 2007, 2008, and 2009, you may be able to deduct catch-up contributions of up to $3,000 each year to your IRA if you participated in a qualified cash or deferred arrangement (section 401(k) plan) of an employer who was a debtor in bankruptcy proceedings. For more details, see chapter 1 in Publication 590.
Certain credits no longer allowed against alternative minimum tax (AMT). The credit for child and dependent care expenses, credit for the elderly or the disabled, education credits, residential energy credits, mortgage interest credit, and the District of Columbia first-time homebuyer credit are no longer allowed against AMT and a new tax liability limit applies. For most people, this limit is your regular tax minus any tentative minimum tax.
AMT exemption amount decreased. The AMT exemption amount will decrease to $33,750 ($45,000 if married filing jointly or a qualifying widow(er); $22,500 if married filing separately).
Credit for prior year minimum tax. . If you paid AMT before 2004 that you have not been able to credit against your regular tax liability, you may be able to claim a refundable tax credit for part of the AMT. To see if you qualify and to compute the refundable amount of your credit, see Publication 553.
Standard mileage rates. Beginning in 2007, the standard mileage rate for the cost of operating your car is:
48½ cents a mile for all business miles driven,
20 cents a mile for the use of your car for medical reasons,
20 cents a mile for the use of your car for a deductible move, and
14 cents a mile for the use of your car for charitable reasons.
Deduction for domestic production activities. . For 2007, the deduction rate will increase to 6%.
Deduction for qualified mortgage insurance premiums. . A homeowner who obtained a qualified mortgage in 2007, and whose AGI is less than $110,000 ($55,000 if married filing separately), may be able to deduct some of the mortgage insurance premiums paid during the year (as if they were mortgage interest) as an itemized deduction.
Health savings account (HSA). Beginning in 2007:
You can fund your HSA by making a one-time direct transfer from your IRA to your HSA.
The maximum deductible contribution is no longer limited to the annual deductible under the high deductible health plan.
You are allowed a maximum HSA contribution of $2,850 for single coverage ($5,650 for family coverage).
For more information about these and other changes to HSAs, see Publication 553.
Expired tax benefits. The following tax benefits have expired and will not apply for 2007. Certain relief granted for hurricanes Katrina, Wilma, and Rita.
Additional exemption for housing individuals displaced by Hurricane Katrina.
Tax-favored treatment of qualified hurricane distributions from eligible retirement plans.
Increased limits and delayed repayment on loans from qualified employer plans.
Increased limits for the Hope and lifetime learning credits.
Discharge of nonbusiness indebtedness by reason of Hurricane Katrina.
Other benefits.
Qualified electric vehicle credit.
Introduction
Estimated tax is the method used to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes, and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.
Estimated tax is used to pay both income tax and self-employment tax, as well as other taxes and amounts reported on your tax return. If you do not pay enough through withholding or estimated tax payments, you may be charged a penalty. If you do not pay enough by the due date of each payment period (see When To Pay Estimated Tax on page 22), you may be charged a penalty even if you are due a refund when you file your tax return.
Honda Vehicle qualifies for Tax Credit
from www.irs.gov
Hydrogen-Powered Honda Vehicle Qualifies for Tax Credit
IR-2007-133, July 25, 2007
WASHINGTON — The Internal Revenue Service acknowledged the certification by American Honda Motor Company, Inc, that one of its vehicles meets the requirements of the Alternative Motor Vehicle Credit as a qualified fuel cell vehicle.
Purchasers of the 2005 and 2006 Honda FCX, which is only capable of operating on hydrogen, may rely on their certification concerning the vehicle’s qualification for the Qualified Fuel Cell Motor Vehicle Credit.
The credit amount for the 2005 and 2006 Honda FCX is $12,000.
Hydrogen-Powered Honda Vehicle Qualifies for Tax Credit
IR-2007-133, July 25, 2007
WASHINGTON — The Internal Revenue Service acknowledged the certification by American Honda Motor Company, Inc, that one of its vehicles meets the requirements of the Alternative Motor Vehicle Credit as a qualified fuel cell vehicle.
Purchasers of the 2005 and 2006 Honda FCX, which is only capable of operating on hydrogen, may rely on their certification concerning the vehicle’s qualification for the Qualified Fuel Cell Motor Vehicle Credit.
The credit amount for the 2005 and 2006 Honda FCX is $12,000.
Monday, July 30, 2007
Rental Property Income and Expenses
from www.irs.gov
Rental Property and the Tax Gap
FS-2007-21, July 2007
Not reporting or under-reporting rental income contributes to the tax gap. Landlords need to be aware of everything that counts as income so they pay their fair share of taxes. They also need to be aware of all deductible expenses so they don’t overpay their taxes.
This fact sheet is the 14th in a series to help reduce the tax gap by helping taxpayers better understand the tax code. The tax gap is the difference between the amount of taxes that should be paid in a given year and the amount actually paid voluntarily and in a timely way.
Rental Income
In the simplest terms, rental income is any payment received for the use or occupation of property. Most landlords operate on a cash basis. That means they count payments as income in the period they are received and deduct expenses in the period they are paid.
Landlords also need to be aware of other forms of rental income that may need to be declared. Rental income may also include:
Advance rent payments
Early-termination fees on lease agreements
Expenses paid by tenant for the landlord (These may also be deductible as rental expenses.)
Property or services received in lieu of money (This is based on the fair market value of the property or services.)
Lease payments with option to buy (These payments are usually counted at rental income. If the tenant buys the property, payments received after the sale date are generally counted as part of the selling price.)
Payments for renting a portion of your home may or may not be taxable income depending on certain thresholds. See IRS Publication 527, Residential Rental Property.
Security deposits are not counted as income if they are to be refunded at the end of a lease period per an agreement. Landlords sometimes retain portions of security deposits because tenants don’t live up to the terms of a lease. Any funds withheld from a deposit are counted as income in the year they are retained. Deposits used as final lease payments are considered advance rents and counted as income in the period they are received.
Rental Expenses
Landlords can deduct the ordinary and necessary expenses for managing, conserving, and maintaining their rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.
Other deductible expenses may include:
Expenses incurred from the time a property is made available for rent and is actually rented.
Some or all of the original investment in the rental property may be recovered through depreciation using Form 4562, Depreciation and Amortization. Subsequent improvements may also be depreciated.
The cost of repairs may also be deductible. This may include the cost of labor and materials. However, landlords cannot deduct the value of their own labor.
Improvements that add to the value of a property or prolong its useful life are considered capital expenses and generally must be depreciated. Discussion about whether an expense is an improvement or a repair is included in Publication 946, How to Depreciate Property.
Expenses may be deductible on rental property also used for personal use, but only on a proportional basis. Landlords are permitted to use any reasonable method for calculating what portion of a property should be considered rental. Using square footage is a common method and frequently the most accurate.
Some property is rented out at times and used for personal use other times, such as a beach house. In this case, deductible expenses must be calculated based on the number of days the property is used for each purpose. Deductible rental expenses can not exceed gross rental income for property used for both personal use and as a rental in a given year.
Expenses incurred while property is vacant but available for rent may be deductible. Lost rental income while a property is vacant is not deductible.
Information on other rental expenses and reporting requirements is available in Publication 527.
Rental Property and the Tax Gap
FS-2007-21, July 2007
Not reporting or under-reporting rental income contributes to the tax gap. Landlords need to be aware of everything that counts as income so they pay their fair share of taxes. They also need to be aware of all deductible expenses so they don’t overpay their taxes.
This fact sheet is the 14th in a series to help reduce the tax gap by helping taxpayers better understand the tax code. The tax gap is the difference between the amount of taxes that should be paid in a given year and the amount actually paid voluntarily and in a timely way.
Rental Income
In the simplest terms, rental income is any payment received for the use or occupation of property. Most landlords operate on a cash basis. That means they count payments as income in the period they are received and deduct expenses in the period they are paid.
Landlords also need to be aware of other forms of rental income that may need to be declared. Rental income may also include:
Advance rent payments
Early-termination fees on lease agreements
Expenses paid by tenant for the landlord (These may also be deductible as rental expenses.)
Property or services received in lieu of money (This is based on the fair market value of the property or services.)
Lease payments with option to buy (These payments are usually counted at rental income. If the tenant buys the property, payments received after the sale date are generally counted as part of the selling price.)
Payments for renting a portion of your home may or may not be taxable income depending on certain thresholds. See IRS Publication 527, Residential Rental Property.
Security deposits are not counted as income if they are to be refunded at the end of a lease period per an agreement. Landlords sometimes retain portions of security deposits because tenants don’t live up to the terms of a lease. Any funds withheld from a deposit are counted as income in the year they are retained. Deposits used as final lease payments are considered advance rents and counted as income in the period they are received.
Rental Expenses
Landlords can deduct the ordinary and necessary expenses for managing, conserving, and maintaining their rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.
Other deductible expenses may include:
Expenses incurred from the time a property is made available for rent and is actually rented.
Some or all of the original investment in the rental property may be recovered through depreciation using Form 4562, Depreciation and Amortization. Subsequent improvements may also be depreciated.
The cost of repairs may also be deductible. This may include the cost of labor and materials. However, landlords cannot deduct the value of their own labor.
Improvements that add to the value of a property or prolong its useful life are considered capital expenses and generally must be depreciated. Discussion about whether an expense is an improvement or a repair is included in Publication 946, How to Depreciate Property.
Expenses may be deductible on rental property also used for personal use, but only on a proportional basis. Landlords are permitted to use any reasonable method for calculating what portion of a property should be considered rental. Using square footage is a common method and frequently the most accurate.
Some property is rented out at times and used for personal use other times, such as a beach house. In this case, deductible expenses must be calculated based on the number of days the property is used for each purpose. Deductible rental expenses can not exceed gross rental income for property used for both personal use and as a rental in a given year.
Expenses incurred while property is vacant but available for rent may be deductible. Lost rental income while a property is vacant is not deductible.
Information on other rental expenses and reporting requirements is available in Publication 527.
Offers in Compromise Per the IRS Collection Manual
from http://www.irs.gov/
5.8.1.1.3 (09-01-2005)Policy
Policy Statement P-5-100 states: The Service will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An offer in compromise is a legitimate alternative to declaring a case currently not collectible or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the Government.In cases where an offer in compromise appears to be a viable solution to a tax delinquency, the Service employee assigned the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms. The taxpayer will be responsible for initiating the first specific proposal for compromise. The success of the offer in compromise program will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay and the Service makes prompt and reasonable decisions. Taxpayers are expected to provide reasonable documentation to verify their ability to pay. The ultimate goal is a compromise which is in the best interest of both the taxpayer and the government. Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of a fresh start toward compliance with all future filing and payment requirements.
Offers will not be accepted if it is believed that the liability can be paid in full as a lump sum or through installment payments extending through the remaining statutory period for collection (CSED), unless special circumstances exist. See IRM 5.14, Installment Agreements.
Absent special circumstances, a Doubt as to Collectibility (DATC) offer amount must equal or exceed a taxpayers reasonable collection potential (RCP) in order to be considered for acceptance. The exception is that if special circumstances exist as defined in IRM 5.8.4.3, Effective Tax Administration and Doubt as to Collectibility with Special Circumstance , or IRM 5.8.11, Effective Tax Administration , the offer may be accepted on the basis of hardship or Effective Tax Administration (ETA).
for additional information see http://www.taxadvocacyllc.com/
5.8.1.1.3 (09-01-2005)Policy
Policy Statement P-5-100 states: The Service will accept an offer in compromise when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. An offer in compromise is a legitimate alternative to declaring a case currently not collectible or to a protracted installment agreement. The goal is to achieve collection of what is potentially collectible at the earliest possible time and at the least cost to the Government.In cases where an offer in compromise appears to be a viable solution to a tax delinquency, the Service employee assigned the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms. The taxpayer will be responsible for initiating the first specific proposal for compromise. The success of the offer in compromise program will be assured only if taxpayers make adequate compromise proposals consistent with their ability to pay and the Service makes prompt and reasonable decisions. Taxpayers are expected to provide reasonable documentation to verify their ability to pay. The ultimate goal is a compromise which is in the best interest of both the taxpayer and the government. Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of a fresh start toward compliance with all future filing and payment requirements.
Offers will not be accepted if it is believed that the liability can be paid in full as a lump sum or through installment payments extending through the remaining statutory period for collection (CSED), unless special circumstances exist. See IRM 5.14, Installment Agreements.
Absent special circumstances, a Doubt as to Collectibility (DATC) offer amount must equal or exceed a taxpayers reasonable collection potential (RCP) in order to be considered for acceptance. The exception is that if special circumstances exist as defined in IRM 5.8.4.3, Effective Tax Administration and Doubt as to Collectibility with Special Circumstance , or IRM 5.8.11, Effective Tax Administration , the offer may be accepted on the basis of hardship or Effective Tax Administration (ETA).
for additional information see http://www.taxadvocacyllc.com/
Sunday, July 29, 2007
Mortgage short sale is taxable to borrowers
from http://www.orlandosentinel.com/
It's no joke: IRS can tax you if you sell house for a loss
Robert Bruss Inman News
July 29, 2007
Question: Because of my husband's job-location change, we had to sell our house in Michigan where the home-sale market is slow. His employer offered no relocation benefits, but at least my husband has a job.After listing our home on the market for six months with no purchase offers, we were unable to keep up the mortgage payments, and we defaulted. The realty agent suggested a "short sale'' for less than the mortgage balance.Rather than foreclose, the mortgage lender agreed to accept a purchase offer for about $16,000 less than the mortgage balance. We were happy to get rid of the house and its mortgage. But then we received an IRS 1099 form showing $16,000 taxable income to us. Is this a mistake?
Answer: Unfortunately for you, it's no mistake. When a mortgage lender agrees to a "short sale'' for less than the mortgage balance, the IRS considers the amount received by the lender, which was less than the amount owed, to be taxable "debt relief'' income to you as the borrower.The IRS reasons that because you won't have to repay that $16,000 loss the lender incurred, it is the same as if you received $16,000 income, such as job salary. Though we might not agree with the IRS's viewpoint, debt relief in the form of a mortgage short sale is taxable to borrowers.
It's no joke: IRS can tax you if you sell house for a loss
Robert Bruss Inman News
July 29, 2007
Question: Because of my husband's job-location change, we had to sell our house in Michigan where the home-sale market is slow. His employer offered no relocation benefits, but at least my husband has a job.After listing our home on the market for six months with no purchase offers, we were unable to keep up the mortgage payments, and we defaulted. The realty agent suggested a "short sale'' for less than the mortgage balance.Rather than foreclose, the mortgage lender agreed to accept a purchase offer for about $16,000 less than the mortgage balance. We were happy to get rid of the house and its mortgage. But then we received an IRS 1099 form showing $16,000 taxable income to us. Is this a mistake?
Answer: Unfortunately for you, it's no mistake. When a mortgage lender agrees to a "short sale'' for less than the mortgage balance, the IRS considers the amount received by the lender, which was less than the amount owed, to be taxable "debt relief'' income to you as the borrower.The IRS reasons that because you won't have to repay that $16,000 loss the lender incurred, it is the same as if you received $16,000 income, such as job salary. Though we might not agree with the IRS's viewpoint, debt relief in the form of a mortgage short sale is taxable to borrowers.
IRS free tele-file for low income ends
from www.chicagosuntimes.com
Taxpayers paying millions since demise of free TeleFile
July 25, 2007
WASHINGTON -- Low and middle income taxpayers are paying millions of dollars in fees to file their tax returns because of an IRS decision to end a free telephone filing service, an inspector general said Tuesday.
''Once again the IRS has made a taxpayer service decision based on questionable data,'' said J. Russell George.
George said about 2 million taxpayers used the TeleFile program in 2005, when the IRS, citing declining use and rising costs, shut it down.
AP
Taxpayers paying millions since demise of free TeleFile
July 25, 2007
WASHINGTON -- Low and middle income taxpayers are paying millions of dollars in fees to file their tax returns because of an IRS decision to end a free telephone filing service, an inspector general said Tuesday.
''Once again the IRS has made a taxpayer service decision based on questionable data,'' said J. Russell George.
George said about 2 million taxpayers used the TeleFile program in 2005, when the IRS, citing declining use and rising costs, shut it down.
AP
Saturday, July 28, 2007
Tax Break/Capital gains from sale of Real Estate
from www.wsj.com and www.chicagotribune.com
IRS to rescue when sales circumstances are grim
By Tom Herman The Wall Street Journal
July 22, 2007
Being a crime victim is usually no cause for celebration. But there is at least one consolation: The IRS may give you a tax break when you sell your home.Most people who sell their home after having owned it for at least two years don't have to pay federal taxes on their gain. A sale in less than two years after the purchase, however, often triggers some sort of tax hit. But even owners who need to sell in less than two years may qualify for special relief if they had to sell because of "unforeseen circumstances," according to a 1997 law.While those words can be hard to define, a recent survey of Internal Revenue Service rulings indicates the agency generally has been "very sympathetic" to taxpayers in cases of unexpected distress, such as crime victims, says Gail Levin Richmond, a law professor at Nova Southeastern University Law Center in Davie, Fla.
Looking for ways to protect gains from home sales may seem counterintuitive in view of the housing slump. But while prices generally have flattened or fallen in many parts of the country, home values in other markets are still significantly higher than they were two years earlier. Sellers may still be able to reap handsome short-term gains, even if their home doesn't fetch the price they once had dreamed about, says David Stiff, chief economist at Fiserv Lending Solutions in Cambridge, Mass., a unit of Fiserv Inc.The general rule is that you can exclude a gain of as much as $500,000 if filing a joint return with your spouse, or as much as $250,000 if single or filing separately, under certain circumstances.To be eligible for this full exclusion, you typically must have owned your home, and lived in it as your primary residence, for at least two of the five years before the sale. This rule applies only to your main residence, not a vacation home.Even if you can't meet the two-year tests, you still may be eligible for a reduced exclusion if you had to sell because of "a change in place of employment," health reasons or those "unforeseen circumstances."An IRS publication offers a general definition of unforeseen circumstances as "the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home."But how does the IRS react when presented with specific queries? In the latest issue of a quarterly publication of the American Bar Association tax section, Richmond summarizes 10 so-called private-letter rulings since 2004 in which the IRS agreed that taxpayers had sold in less than two years because of "unforeseen circumstances." (The IRS rulings don't identify any of the taxpayers or give dollar amounts.)Technically, a private-letter ruling applies only to the taxpayer who requested it and isn't supposed to be used as precedent. But such rulings are considered important by lawyers and accountants because they offer a window into the IRS's thinking.In one ruling, a taxpayer had to provide a separate bedroom to adopt an orphan child from another country.In another ruling, released recently, marriage was the issue. Taxpayers A and B each had purchased a home. They met, got married and bought a new, larger home for their blended family. They each sold their prior homes. Taxpayer B had owned it less than two years. The IRS said the marriage and need to "suitably accommodate their blended family" represented "unforeseen circumstances."Crime victims often win the IRS's sympathy. In one case, a taxpayer was leaving home when an assailant held a gun to the taxpayer's head and forced the taxpayer into the taxpayer's car."The assailant was agitated, unpredictable and made repeated threats" on the taxpayer's life, the IRS said in the ruling. For about an hour, the taxpayer was forced, at gunpoint, to drive the assailant to several locations, including an ATM, and withdraw money for the crook. The IRS concluded that the taxpayer's main reason for selling that home was an unforeseen circumstance.In another case, two taxpayers moved from one state to another, bought a home and then became aware of "various criminal activities" in their new neighborhood. Their son was assaulted and threatened, and one of the taxpayers was assaulted by several neighbors, resulting in a trip to the emergency room. Because of the assault and general nature of the neighborhood, the two taxpayers sold their home and bought a new one. The IRS agreed the "primary reason" for the sale was an unforeseen circumstance.Calculating the reduced maximum exclusion can often be tricky. Here's a simple example: Suppose you and your spouse sold your home at a $10,000 profit after having owned and lived in it for only one year. You sold because of a move from New York to California to take a new job -- or some other unforeseen circumstance.Since the exclusion amount is pro-rated, you typically would qualify for half the maximum exclusion (since you had owned the home for half of the two-year period) and thus would be able to exclude your entire $10,000 gain. (See IRS Publication
IRS to rescue when sales circumstances are grim
By Tom Herman The Wall Street Journal
July 22, 2007
Being a crime victim is usually no cause for celebration. But there is at least one consolation: The IRS may give you a tax break when you sell your home.Most people who sell their home after having owned it for at least two years don't have to pay federal taxes on their gain. A sale in less than two years after the purchase, however, often triggers some sort of tax hit. But even owners who need to sell in less than two years may qualify for special relief if they had to sell because of "unforeseen circumstances," according to a 1997 law.While those words can be hard to define, a recent survey of Internal Revenue Service rulings indicates the agency generally has been "very sympathetic" to taxpayers in cases of unexpected distress, such as crime victims, says Gail Levin Richmond, a law professor at Nova Southeastern University Law Center in Davie, Fla.
Looking for ways to protect gains from home sales may seem counterintuitive in view of the housing slump. But while prices generally have flattened or fallen in many parts of the country, home values in other markets are still significantly higher than they were two years earlier. Sellers may still be able to reap handsome short-term gains, even if their home doesn't fetch the price they once had dreamed about, says David Stiff, chief economist at Fiserv Lending Solutions in Cambridge, Mass., a unit of Fiserv Inc.The general rule is that you can exclude a gain of as much as $500,000 if filing a joint return with your spouse, or as much as $250,000 if single or filing separately, under certain circumstances.To be eligible for this full exclusion, you typically must have owned your home, and lived in it as your primary residence, for at least two of the five years before the sale. This rule applies only to your main residence, not a vacation home.Even if you can't meet the two-year tests, you still may be eligible for a reduced exclusion if you had to sell because of "a change in place of employment," health reasons or those "unforeseen circumstances."An IRS publication offers a general definition of unforeseen circumstances as "the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home."But how does the IRS react when presented with specific queries? In the latest issue of a quarterly publication of the American Bar Association tax section, Richmond summarizes 10 so-called private-letter rulings since 2004 in which the IRS agreed that taxpayers had sold in less than two years because of "unforeseen circumstances." (The IRS rulings don't identify any of the taxpayers or give dollar amounts.)Technically, a private-letter ruling applies only to the taxpayer who requested it and isn't supposed to be used as precedent. But such rulings are considered important by lawyers and accountants because they offer a window into the IRS's thinking.In one ruling, a taxpayer had to provide a separate bedroom to adopt an orphan child from another country.In another ruling, released recently, marriage was the issue. Taxpayers A and B each had purchased a home. They met, got married and bought a new, larger home for their blended family. They each sold their prior homes. Taxpayer B had owned it less than two years. The IRS said the marriage and need to "suitably accommodate their blended family" represented "unforeseen circumstances."Crime victims often win the IRS's sympathy. In one case, a taxpayer was leaving home when an assailant held a gun to the taxpayer's head and forced the taxpayer into the taxpayer's car."The assailant was agitated, unpredictable and made repeated threats" on the taxpayer's life, the IRS said in the ruling. For about an hour, the taxpayer was forced, at gunpoint, to drive the assailant to several locations, including an ATM, and withdraw money for the crook. The IRS concluded that the taxpayer's main reason for selling that home was an unforeseen circumstance.In another case, two taxpayers moved from one state to another, bought a home and then became aware of "various criminal activities" in their new neighborhood. Their son was assaulted and threatened, and one of the taxpayers was assaulted by several neighbors, resulting in a trip to the emergency room. Because of the assault and general nature of the neighborhood, the two taxpayers sold their home and bought a new one. The IRS agreed the "primary reason" for the sale was an unforeseen circumstance.Calculating the reduced maximum exclusion can often be tricky. Here's a simple example: Suppose you and your spouse sold your home at a $10,000 profit after having owned and lived in it for only one year. You sold because of a move from New York to California to take a new job -- or some other unforeseen circumstance.Since the exclusion amount is pro-rated, you typically would qualify for half the maximum exclusion (since you had owned the home for half of the two-year period) and thus would be able to exclude your entire $10,000 gain. (See IRS Publication
Reduce your estate tax by contributing to your grandchild's tuition
from www.nydailynews.com
A granny of a tax break for tuition
BY PHYLLIS FURMANDAILY NEWS BUSINESS WRITER
Monday, July 2nd 2007, 4:00 AM
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When it comes to paying for school, grandparents can help their grandchildren - and themselves - at the same time.
As tuition plus room and board at private colleges hit an average of $30,367 last year, a survey by AIG SunAmerica Mutual Funds found more than half of grandparents plan to help. One-fifth said they would shoulder as much as 75% of the college costs.
What these do-gooder grandparents may not know is that contributing wisely to their grandchildren's future can also help them save on estate and gift taxes.
The key is paying the money directly to the school.
By doing that, you reduce the value of your estate and avoid the gift tax that is generally triggered when you give away more than $12,000 to any one individual in a year. This gift-tax break applies to all schools, from nursery to college to grad school.
"You get it to have it both ways," said Robert Burkarth, a CPA in the Stamford office of financial planning firm Householder Group. "You get to transfer the money to benefit the child, and pay a lot less in gift or estate taxes later."
Remember, the tuition must be paid directly to the school, said Howard Sharfstein, a trusts and estates lawyer at Schulte Roth & Zabel in Manhattan. "If you reimburse your child for that child's payment of his child's educational expenses, that is a taxable gift."
Grandparents can contribute to a 529 college savings plan too. But in that case, once you get past a $12,000 contribution, you are subject to the gift tax.
There is an exception. You can give up to $60,000 to a 529 plan in one shot, but you won't be able to give any more gifts for the following four years without triggering the gift tax.
Recently, the IRS made it even easier for grandparents to pay tuition directly to schools, issuing a ruling that allows you to prepay multiple years of tuition in advance. That's good for people who feel they won't live long enough to see their grandchildren through college.
The tuition is not refundable, Burkarth said. So if your grandchild is the kind of kid who might switch schools midstream, this may not be the right strategy.
Of course, before you take out your checkbook, take a look at your own finances and future needs. As much as you want to help out your children and grandkids, you may have more years ahead of you than you think.
pfurman@nydailynews.com
A granny of a tax break for tuition
BY PHYLLIS FURMANDAILY NEWS BUSINESS WRITER
Monday, July 2nd 2007, 4:00 AM
Suggest a Story
When it comes to paying for school, grandparents can help their grandchildren - and themselves - at the same time.
As tuition plus room and board at private colleges hit an average of $30,367 last year, a survey by AIG SunAmerica Mutual Funds found more than half of grandparents plan to help. One-fifth said they would shoulder as much as 75% of the college costs.
What these do-gooder grandparents may not know is that contributing wisely to their grandchildren's future can also help them save on estate and gift taxes.
The key is paying the money directly to the school.
By doing that, you reduce the value of your estate and avoid the gift tax that is generally triggered when you give away more than $12,000 to any one individual in a year. This gift-tax break applies to all schools, from nursery to college to grad school.
"You get it to have it both ways," said Robert Burkarth, a CPA in the Stamford office of financial planning firm Householder Group. "You get to transfer the money to benefit the child, and pay a lot less in gift or estate taxes later."
Remember, the tuition must be paid directly to the school, said Howard Sharfstein, a trusts and estates lawyer at Schulte Roth & Zabel in Manhattan. "If you reimburse your child for that child's payment of his child's educational expenses, that is a taxable gift."
Grandparents can contribute to a 529 college savings plan too. But in that case, once you get past a $12,000 contribution, you are subject to the gift tax.
There is an exception. You can give up to $60,000 to a 529 plan in one shot, but you won't be able to give any more gifts for the following four years without triggering the gift tax.
Recently, the IRS made it even easier for grandparents to pay tuition directly to schools, issuing a ruling that allows you to prepay multiple years of tuition in advance. That's good for people who feel they won't live long enough to see their grandchildren through college.
The tuition is not refundable, Burkarth said. So if your grandchild is the kind of kid who might switch schools midstream, this may not be the right strategy.
Of course, before you take out your checkbook, take a look at your own finances and future needs. As much as you want to help out your children and grandkids, you may have more years ahead of you than you think.
pfurman@nydailynews.com
Major League Baseball under scrutiny from IRS
derived from www.nypost.com
IRS IS OUT TO CATCH BASEBALL'S 'FOUL TIPS'
CLUBHOUSE PROBE AMID 'ROID WOES
By LARRY CELONA
OFF BASE: Workers in the locker rooms of the Yankees (above) and Mets — including confessed steroid distributor Kirk Radomski — can make thousands in tips from good-guy players like Derek Jeter.
July 2, 2007 -- Fence-swinging feds have launched a probe of Major League Baseball clubhouse workers for allegedly pocketing huge, under-the-table tips from players, sources have told The Post.
The IRS has notified MLB of the sweeping investigation, which will examine gratuities paid to the anonymous baseball gofers working in all 30 American and National League locker rooms.
Investigators are playing hardball with about 150 clubhouse employees, the sources said.
A source also revealed that some of the locker-room guys have met independently with George Mitchell, the former U.S. senator spearheading MLB's steroids probe.
The clubhouse-tip investigation - although separate from Mitchell's probe - gained momentum from the guilty plea of former Met clubhouse worker Kirk Radomski, who admitted earlier this year to providing players with steroids.
Investigators stepped to the plate last year after noticing that hundreds of MLB players - who are not accused of any wrongdoing - are annually claiming thousands of dollars in tips to clubhouse workers as tax deductions.
But similar income citations are not being made on returns of clubhouse employees, the sources said.
Federal tax sleuths believe the gap between deductions and nonreported tips could range from $100,000 to over $1 million per clubhouse crew. That means the clubhouse workers could each rake in tips as much as 10 times their salaries.
The probe goes beyond cash and includes free tickets and autographed memorabilia that has sold on secondary markets, such as eBay.
Each MLB team has at least one adult employee running the home and visiting clubhouses, often with the title of equipment manager. The teams usually employ a handful of other workers - often boys and young men in their teens and early 20s - as "clubbies," making $15,000 to $20,000 a year.
The Mets and Yankees each employ about five to seven clubbies whose duties run from managing equipment to doing laundry.
They take care of the dirty uniforms and shoes, clean the clubhouse after games, and tend to a host of logistical issues, such as getting players to sign pre-arranged autographs on memorabilia.
But clubbies have been occasionally seen running nonbaseball errands for players, such as fetching takeout food and dry cleaning, and warming up cars after games - all for generous tips from the wealthy athletes.
Members of playoff teams have also been known to quietly slip their favorite clubhouse guys a share of postseason loot that's supposed to go only to players.
The minimum wage for MLB players is $380,000 this season, although the average Yankee and Met makes much more.
larry.celona@nypost.com
IRS IS OUT TO CATCH BASEBALL'S 'FOUL TIPS'
CLUBHOUSE PROBE AMID 'ROID WOES
By LARRY CELONA
OFF BASE: Workers in the locker rooms of the Yankees (above) and Mets — including confessed steroid distributor Kirk Radomski — can make thousands in tips from good-guy players like Derek Jeter.
July 2, 2007 -- Fence-swinging feds have launched a probe of Major League Baseball clubhouse workers for allegedly pocketing huge, under-the-table tips from players, sources have told The Post.
The IRS has notified MLB of the sweeping investigation, which will examine gratuities paid to the anonymous baseball gofers working in all 30 American and National League locker rooms.
Investigators are playing hardball with about 150 clubhouse employees, the sources said.
A source also revealed that some of the locker-room guys have met independently with George Mitchell, the former U.S. senator spearheading MLB's steroids probe.
The clubhouse-tip investigation - although separate from Mitchell's probe - gained momentum from the guilty plea of former Met clubhouse worker Kirk Radomski, who admitted earlier this year to providing players with steroids.
Investigators stepped to the plate last year after noticing that hundreds of MLB players - who are not accused of any wrongdoing - are annually claiming thousands of dollars in tips to clubhouse workers as tax deductions.
But similar income citations are not being made on returns of clubhouse employees, the sources said.
Federal tax sleuths believe the gap between deductions and nonreported tips could range from $100,000 to over $1 million per clubhouse crew. That means the clubhouse workers could each rake in tips as much as 10 times their salaries.
The probe goes beyond cash and includes free tickets and autographed memorabilia that has sold on secondary markets, such as eBay.
Each MLB team has at least one adult employee running the home and visiting clubhouses, often with the title of equipment manager. The teams usually employ a handful of other workers - often boys and young men in their teens and early 20s - as "clubbies," making $15,000 to $20,000 a year.
The Mets and Yankees each employ about five to seven clubbies whose duties run from managing equipment to doing laundry.
They take care of the dirty uniforms and shoes, clean the clubhouse after games, and tend to a host of logistical issues, such as getting players to sign pre-arranged autographs on memorabilia.
But clubbies have been occasionally seen running nonbaseball errands for players, such as fetching takeout food and dry cleaning, and warming up cars after games - all for generous tips from the wealthy athletes.
Members of playoff teams have also been known to quietly slip their favorite clubhouse guys a share of postseason loot that's supposed to go only to players.
The minimum wage for MLB players is $380,000 this season, although the average Yankee and Met makes much more.
larry.celona@nypost.com
tax breaks for first time home buyers
from www.comcast.net/personal finance
A Primer on Homeowner Tax Breaks
by Bill Bischoff
June 9, 2006
THINKING ABOUT PURCHASING your first home? Then you're probably well aware of the potential tax breaks coming your way.
In case you're not, let's review. While the cost of renting is generally a nondeductible expense (except for when part of the home is used for business purposes), homeowners can claim an itemized deduction for interest on up to $1 million worth of mortgage debt used to acquire or improve their principal residence. Ditto for interest on up to $100,000 of home-equity debt secured by their principal residence. Real-estate property taxes can be claimed as an itemized deduction, too. You also can generally deduct any points you paid (or the seller paid on your behalf) to take out the mortgage.
But you probably knew all that, right? Now for the tax-law catches your realtor probably never told you about. Don't worry: What's detailed below probably won't have you running back into the arms of your landlord. But it just might give you a more realistic expectation of how homeownership will affect your future tax bills.
The Standard-Deduction FactorThe first thing to understand is that your actual tax breaks from home ownership may be less than expected if you were claiming the standard deduction before you bought. Why? Because the standard deduction is a tax-law freebie. You don't need to have any personal deductions whatsoever to claim it. For 2006, the standard deduction amounts are $10,300 for joint filers, $5,150 for singles, and $7,550 for heads of households.
When your itemized deductions are less than the standard deduction, you simply forgo itemizing and claim the standard allowance instead. Many folks are in this situation until home ownership triggers deductions for mortgage interest and property taxes. Those write-offs — when added to other itemized deductions for state and local income taxes, personal property taxes, and charitable donations — are usually enough to exceed the standard-deduction amount.
The question is: How much of a tax break did you really reap from your home ownership write-offs? For example, say you're married and would have claimed the joint standard deduction of $10,300. Then you buy a house and pay $12,000 a year for mortgage interest and $2,500 for property taxes. On first blush, you might think you've just lowered your taxable income by a whopping $14,500 ($12,000 + $2,500). Not so fast! Assume you also pay state income taxes of $2,000 and contribute $450 to charities. So your total itemized deductions add up to $16,950 ($12,000 + $2,500 + $2,000 + 450). That's only $6,650 above the standard deduction you would have claimed in the absence of buying a home. So you really netted only $6,650 in additional write-offs vs. the $14,500 you might have expected.
Now, if you were already itemizing before you bought or were very close to doing so, your additional deductions from mortgage interest and property taxes will reduce your taxable income dollar for dollar (or nearly so). The point is: Be sure to consider the standard-deduction factor when calculating your anticipated tax savings. That way, you won't be shocked by an unforeseen tax bill next April.
The High-Income Phaseout FactorIf you're a high earner, you're less likely to be affected by the standard-deduction factor. Why? Because you probably have enough itemized deductions (from state and local taxes and charitable contributions) to exceed the standard-deduction amount even without any write-offs for home-mortgage interest and real-estate property taxes. Instead, you may have to worry about the dreaded deduction-phaseout rule that afflicts high-income types.
Once your 2006 adjusted gross income (AGI) exceeds $150,500 (regardless of whether you file joint or single taxes), the phaseout rule reduces your itemized deductions by 2% of the excess. For instance, say your AGI is $300,000. Your otherwise allowable itemized deductions are reduced by $2,990 [($300,000 - $150,500) x .02]. If your AGI is $500,000, your otherwise allowable itemized deductions are reduced by $6,990 [($500,000 - $150,500) x .02]. You get the idea. Not all itemized deductions are affected by this nasty rule, but mortgage interest and real-estate property taxes are. The law provides that taxpayers can't lose more than 53.33% of their deductions under this rule, but that's small comfort to its victims. In fact, itemized deductions for some high earners are curtailed to the extent they wind up back in the standard-deduction mode. When that happens, they don't receive any actual tax benefit from their mortgage interest and property-tax expenses.
Bottom line: If you expect your AGI to exceed $150,500, you'll need to whip out the calculator to figure your actual home-ownership tax savings. (For 2007, the $150,500 amount will be adjusted for inflation.)
The Home-Equity-Loan FactorOnce you're ensconced in your new home, you may decide to take out a home-equity loan. As mentioned above, you can generally claim an itemized deduction for interest on up to $100,000 worth of home-equity debt. The key word here is generally. The fact is, you can't deduct interest to the extent the home-equity-loan principal plus your first mortgage principal exceeds the value of your home. For example, say your first mortgage is $200,000 and your home-equity loan is $75,000. If your home is worth $250,000, you can deduct interest only on $50,000 worth of home-equity-loan principal. Interest on the remaining $25,000 falls into the nondeductible personal-interest category.
A more likely cause for concern is another rule that disallows any alternative minimum tax, or AMT, deduction for home-equity-loan interest unless the loan proceeds were used to improve your property. For example, say you take out a $50,000 home-equity loan and use the money to pay off a car loan and some credit-card balances. For regular tax purposes, that's fine. You can deduct the home-equity-loan interest on Schedule A, along with the interest on your first mortgage. However, if you're in the AMT mode, you can't deduct any of the home-equity-loan interest in calculating your AMT bill.
On the other hand, if you spend your $50,000 home-equity-loan proceeds on a new pool and covered patio, you're good to go for both regular tax and AMT purposes. And one more thing: The high-income deduction-phaseout rule explained earlier can also whittle down your otherwise allowable home-equity-loan interest deduction.
Home Sweet HomeNow you know all the home-ownership tax angles your realtor was afraid to reveal. Still, buying a home usually works out to be at least a decent proposition taxwise. And it will be much better than decent if you eventually sell for a big tax-free gain down the road. If you're married, you can potentially rake in a federal income-tax free profit of up to $500,000, or $250,000 if you're unhitched. Now that's a sweet deal!
-->
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A Primer on Homeowner Tax Breaks
by Bill Bischoff
June 9, 2006
THINKING ABOUT PURCHASING your first home? Then you're probably well aware of the potential tax breaks coming your way.
In case you're not, let's review. While the cost of renting is generally a nondeductible expense (except for when part of the home is used for business purposes), homeowners can claim an itemized deduction for interest on up to $1 million worth of mortgage debt used to acquire or improve their principal residence. Ditto for interest on up to $100,000 of home-equity debt secured by their principal residence. Real-estate property taxes can be claimed as an itemized deduction, too. You also can generally deduct any points you paid (or the seller paid on your behalf) to take out the mortgage.
But you probably knew all that, right? Now for the tax-law catches your realtor probably never told you about. Don't worry: What's detailed below probably won't have you running back into the arms of your landlord. But it just might give you a more realistic expectation of how homeownership will affect your future tax bills.
The Standard-Deduction FactorThe first thing to understand is that your actual tax breaks from home ownership may be less than expected if you were claiming the standard deduction before you bought. Why? Because the standard deduction is a tax-law freebie. You don't need to have any personal deductions whatsoever to claim it. For 2006, the standard deduction amounts are $10,300 for joint filers, $5,150 for singles, and $7,550 for heads of households.
When your itemized deductions are less than the standard deduction, you simply forgo itemizing and claim the standard allowance instead. Many folks are in this situation until home ownership triggers deductions for mortgage interest and property taxes. Those write-offs — when added to other itemized deductions for state and local income taxes, personal property taxes, and charitable donations — are usually enough to exceed the standard-deduction amount.
The question is: How much of a tax break did you really reap from your home ownership write-offs? For example, say you're married and would have claimed the joint standard deduction of $10,300. Then you buy a house and pay $12,000 a year for mortgage interest and $2,500 for property taxes. On first blush, you might think you've just lowered your taxable income by a whopping $14,500 ($12,000 + $2,500). Not so fast! Assume you also pay state income taxes of $2,000 and contribute $450 to charities. So your total itemized deductions add up to $16,950 ($12,000 + $2,500 + $2,000 + 450). That's only $6,650 above the standard deduction you would have claimed in the absence of buying a home. So you really netted only $6,650 in additional write-offs vs. the $14,500 you might have expected.
Now, if you were already itemizing before you bought or were very close to doing so, your additional deductions from mortgage interest and property taxes will reduce your taxable income dollar for dollar (or nearly so). The point is: Be sure to consider the standard-deduction factor when calculating your anticipated tax savings. That way, you won't be shocked by an unforeseen tax bill next April.
The High-Income Phaseout FactorIf you're a high earner, you're less likely to be affected by the standard-deduction factor. Why? Because you probably have enough itemized deductions (from state and local taxes and charitable contributions) to exceed the standard-deduction amount even without any write-offs for home-mortgage interest and real-estate property taxes. Instead, you may have to worry about the dreaded deduction-phaseout rule that afflicts high-income types.
Once your 2006 adjusted gross income (AGI) exceeds $150,500 (regardless of whether you file joint or single taxes), the phaseout rule reduces your itemized deductions by 2% of the excess. For instance, say your AGI is $300,000. Your otherwise allowable itemized deductions are reduced by $2,990 [($300,000 - $150,500) x .02]. If your AGI is $500,000, your otherwise allowable itemized deductions are reduced by $6,990 [($500,000 - $150,500) x .02]. You get the idea. Not all itemized deductions are affected by this nasty rule, but mortgage interest and real-estate property taxes are. The law provides that taxpayers can't lose more than 53.33% of their deductions under this rule, but that's small comfort to its victims. In fact, itemized deductions for some high earners are curtailed to the extent they wind up back in the standard-deduction mode. When that happens, they don't receive any actual tax benefit from their mortgage interest and property-tax expenses.
Bottom line: If you expect your AGI to exceed $150,500, you'll need to whip out the calculator to figure your actual home-ownership tax savings. (For 2007, the $150,500 amount will be adjusted for inflation.)
The Home-Equity-Loan FactorOnce you're ensconced in your new home, you may decide to take out a home-equity loan. As mentioned above, you can generally claim an itemized deduction for interest on up to $100,000 worth of home-equity debt. The key word here is generally. The fact is, you can't deduct interest to the extent the home-equity-loan principal plus your first mortgage principal exceeds the value of your home. For example, say your first mortgage is $200,000 and your home-equity loan is $75,000. If your home is worth $250,000, you can deduct interest only on $50,000 worth of home-equity-loan principal. Interest on the remaining $25,000 falls into the nondeductible personal-interest category.
A more likely cause for concern is another rule that disallows any alternative minimum tax, or AMT, deduction for home-equity-loan interest unless the loan proceeds were used to improve your property. For example, say you take out a $50,000 home-equity loan and use the money to pay off a car loan and some credit-card balances. For regular tax purposes, that's fine. You can deduct the home-equity-loan interest on Schedule A, along with the interest on your first mortgage. However, if you're in the AMT mode, you can't deduct any of the home-equity-loan interest in calculating your AMT bill.
On the other hand, if you spend your $50,000 home-equity-loan proceeds on a new pool and covered patio, you're good to go for both regular tax and AMT purposes. And one more thing: The high-income deduction-phaseout rule explained earlier can also whittle down your otherwise allowable home-equity-loan interest deduction.
Home Sweet HomeNow you know all the home-ownership tax angles your realtor was afraid to reveal. Still, buying a home usually works out to be at least a decent proposition taxwise. And it will be much better than decent if you eventually sell for a big tax-free gain down the road. If you're married, you can potentially rake in a federal income-tax free profit of up to $500,000, or $250,000 if you're unhitched. Now that's a sweet deal!
-->
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State by State Tax Friendly Ratings for Small Businesses
by CNN/MOney.com
FSB Who loves small business best? 2006
Which states are low on taxes and light on government regulations? Exclusive rankings for FSB.com from the Small Business & Entrepreneurship Council.*
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Full list
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States
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Taxes
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Energy costs
Full list
Rank
State
Index score
1
South Dakota
26.36
2
Nevada
29.92
3
Wyoming
35.84
4
Alabama
40.33
5
Washington
40.42
6
Florida
40.82
7
Mississippi
41.09
8
Colorado
42.68
9
Texas
42.71
10
Michigan
42.74
11
South Carolina
44.56
12
Indiana
44.87
13
Tennessee
44.97
14
Virginia
45.46
15
Arizona
45.75
16
Pennsylvania
45.86
17
Alaska
46.77
18
New Hampshire
47.26
19
Delaware
47.31
20
Arkansas
48.16
21
Illinois
48.49
22
Missouri
49.24
23
Oklahoma
49.46
24
North Dakota
49.85
25
Georgia
49.90
26
Utah
50.10
27
Wisconsin
51.48
28
Maryland
51.85
29
New Mexico
52.51
30
Montana
53.90
31
Nebraska
54.22
32
Connecticut
54.25
33
Louisiana
54.27
34
Idaho
54.52
35
Kansas
54.80
36
Kentucky
56.27
37
West Virginia
56.66
38
Ohio
56.73
39
Oregon
57.06
40
North Carolina
57.48
41
Iowa
57.76
42
Vermont
59.48
43
Massachusetts
61.06
44
Hawaii
62.61
45
New York
62.65
46
Minnesota
63.59
47
Maine
63.99
48
Rhode Island
64.97
49
California
65.12
50
New Jersey
65.35
51
Washington, D.C.**
75.42
Footnotes:* SBE Council, a Washington, D.C.-based nonprofit which advocates for reduced government taxes and regulations on small business, tends to lobby for the Republican agenda when it comes to taxes and regulations.** Washington, D.C. was not included in a study ranking states by liability systems, so DC.'s index score is underestimated.
FSB Who loves small business best? 2006
Which states are low on taxes and light on government regulations? Exclusive rankings for FSB.com from the Small Business & Entrepreneurship Council.*
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States
if (location.pathname.match('/magazines/fsb/fsb_beststates/2006/taxes/'))
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Full list
Rank
State
Index score
1
South Dakota
26.36
2
Nevada
29.92
3
Wyoming
35.84
4
Alabama
40.33
5
Washington
40.42
6
Florida
40.82
7
Mississippi
41.09
8
Colorado
42.68
9
Texas
42.71
10
Michigan
42.74
11
South Carolina
44.56
12
Indiana
44.87
13
Tennessee
44.97
14
Virginia
45.46
15
Arizona
45.75
16
Pennsylvania
45.86
17
Alaska
46.77
18
New Hampshire
47.26
19
Delaware
47.31
20
Arkansas
48.16
21
Illinois
48.49
22
Missouri
49.24
23
Oklahoma
49.46
24
North Dakota
49.85
25
Georgia
49.90
26
Utah
50.10
27
Wisconsin
51.48
28
Maryland
51.85
29
New Mexico
52.51
30
Montana
53.90
31
Nebraska
54.22
32
Connecticut
54.25
33
Louisiana
54.27
34
Idaho
54.52
35
Kansas
54.80
36
Kentucky
56.27
37
West Virginia
56.66
38
Ohio
56.73
39
Oregon
57.06
40
North Carolina
57.48
41
Iowa
57.76
42
Vermont
59.48
43
Massachusetts
61.06
44
Hawaii
62.61
45
New York
62.65
46
Minnesota
63.59
47
Maine
63.99
48
Rhode Island
64.97
49
California
65.12
50
New Jersey
65.35
51
Washington, D.C.**
75.42
Footnotes:* SBE Council, a Washington, D.C.-based nonprofit which advocates for reduced government taxes and regulations on small business, tends to lobby for the Republican agenda when it comes to taxes and regulations.** Washington, D.C. was not included in a study ranking states by liability systems, so DC.'s index score is underestimated.
IRS enforcement actions increase. Levies, liens, seizures, audits
from www.irs.gov
Fiscal Year 2006 Enforcement and Service Results
Statement of IRS Commissioner Mark W. Everson
The IRS made strong progress in a number of key enforcement categories. We are showing consistent improvements in areas critical to running a fair, efficient tax system. We are bringing in billions of dollars to the Treasury through our expanded enforcement activity. At the same time, I want to emphasize that this increase has not been at the expense of taxpayer service. We continued to show improvements in key areas involving services for taxpayers in fiscal 2006.
There are a lot of different ways to look at numbers. But no matter how you look at our results, they show a strong rebound in our enforcement efforts. Our enforcement activity is up from the low points following the Restructuring and Reform Act of 1998, and it has climbed significantly since I became Commissioner three-and-a-half years ago.
The bottom line for our enforcement efforts shows that dollars collected rose again last year. There’s a strong trend line going up. Fiscal 2005 was a watershed year for us, with a number of big initiatives that helped push enforcement revenues up 10% to $47.3 billion. In Fiscal 2006, enforcement revenues – the monies we get from our collection, examination, and document matching activities – increased to a record $48.7 billion. Our exam dollars were down slightly this year because of the big bump from the Son of Boss settlement initiative in 2005. Even with that, our overall dollars collected jumped nearly 3% in 2006 principally because of a strong rise in collections.
The individual enforcement categories bear out the significance of our invigorated enforcement efforts. And all these numbers are for fiscal year 2006 that ended September 30:
Total individual returns audited increased by over 6% to 1,293,681 in 2006 from 1,215,000 in 2005. That’s the highest number since 1998. Some people have dismissed our audit increases because of our use of correspondence, or letter exams. While correspondence exams are an effective, efficient enforcement tool that we continue to rely on, it’s important to note there’s an even bigger increase in our field exams – these are the traditional, sit-down audits. The number of field audits increased nearly 23% in 2006 from the previous year, and they climbed by more than half from the level in 2004.
An important part of our enforcement effort has targeted high-income taxpayers. We’ve put a lot of emphasis in increasing audits in this area because it’s critical to ensuring faith in the tax system. If you earn more than $100,000 or you’re a millionaire, you’re a lot more likely to be audited these days than just a few years ago.
Audits of individuals with income of $1,000,000 and higher increased to 17,015 from 12,835, a nearly 33% increase in just one year. About 1 in every 16 of these taxpayers faced audits last year. If you’re earning that kind of money and we notice a problem, you’re going to hear from us.
Audits of individuals with incomes over $100,000 surpassed 257,000, an 18% increase from 2005. That’s the highest figure in more than a decade, and well over double the 92,000 completed in fiscal year 2001.
Let’s turn to businesses. We saw an increase in our efforts to review S corporations and partnerships while our other activity involving small business and large corporations remained relatively stable. Our business numbers reflect that we have placed more emphasis in the growing area of these flow-through returns involving S corporations and partnerships:
Audits of S corporation returns increased to 13,984 from 10,417, a 34% increase. This is the highest level since 2000.
For partnerships, audits of these flow-through returns increased to 9,777 from 8,489, a 15% increase. This category is at the highest level since 1998.
Audits of small businesses organized as corporations remained about the same. 17,871 audits were completed in 2006, up slightly from 17,858 in 2005.Both of these figures are more than double the 7,294 audits of small businesses in 2004.
Audits of larger corporations – those with assets over $10 million – dipped by 2.2%, to 10,591 from 10,829 in 2005.While down slightly this year, audits remain up nearly 50 percent from 2003.
I also want to talk about our activities in the Exempt Organization area. We’ve placed renewed attention and added resources in the charitable arena to help protect the integrity and maintain faith in the charitable sector. You can really see the turnaround this year. These results show we are taking important steps to combat abuse in exempt organizations.
Our Exempt Organization area audited 7,079 returns this year, an increase of 43% from the previous year. We’re at the highest level since 2000.
In addition to increased exam activity, we introduced a new program in 2004 using non-traditional compliance contacts to expand our enforcement presence within the tax-exempt community. These compliance contacts have been instrumental in addressing problem areas in sectors such as hospitals, executive compensation and credit counseling. In Fiscal 2006, we completed over 5,200 of these new compliance contacts, over and above the traditional examination program. This is a 31% increase from the previous year. Before 2004, we weren’t doing any of these contacts.
Exempt organizations are just one facet of the growing and increasingly important tax-exempt sector, which also includes retirement plans, tax-exempt financing and governmental entities whether federal, state, local or tribal. In addition to our exempt organizations work, IRS is also active in each of these areas.
Overall, some of our most common enforcement tools at the IRS also showed increases:
In our collection activities, levies and liens continue to top their 1998 levels. Levies increased by 36% to 3,742,276.Liens rose nearly 20% to 629,813.
Our increased efforts in the enforcement arena resulted from a variety of factors. We have put more emphasis on enforcement in staffing. But we’ve also worked hard to be more efficient with the resources we have. We’ve improved our analysis and workload identification. We’ve had successful targeted tax compliance efforts.
Finally, let me emphasize that these dramatic enforcement improvements have not been done at the expense of taxpayer service. There’s more information in our charts, but in category after category the numbers have increased in our telephone work, electronic filing and our IRS.gov services.
Electronic filing by individuals continued to increase, up 6% (3 percentage points) to 54% of all individual returns.
The level of service for toll-free assistance was 82%, about the same level of 2005 and up substantially from 2001.
The level of customer satisfaction with the toll-free line remains 94%, the same as last year.
The tax law accuracy of toll-free response edged up a notch to 91% from 89%, the prior year.
Taxpayers continued to find IRS.Gov a useful source of information about the tax system and how to comply with their tax obligations. Visits to the IRS Web site jumped nearly 10% in 2006 to more than 193 million visits.
Taxpayers also increased their use of the online refund status tool 'Where's My Refund." In 2006, there were 24.7 million status checks, up nearly 12% from 2005.
Clearly, more work needs to be done by the IRS to improve services and enforcement. But we are clearly making progress, and these numbers underscore that point.
Related Items:
Fiscal Year 2006 Enforcement Statistics
Fiscal Year 2006 Enforcement and Service Results
Statement of IRS Commissioner Mark W. Everson
The IRS made strong progress in a number of key enforcement categories. We are showing consistent improvements in areas critical to running a fair, efficient tax system. We are bringing in billions of dollars to the Treasury through our expanded enforcement activity. At the same time, I want to emphasize that this increase has not been at the expense of taxpayer service. We continued to show improvements in key areas involving services for taxpayers in fiscal 2006.
There are a lot of different ways to look at numbers. But no matter how you look at our results, they show a strong rebound in our enforcement efforts. Our enforcement activity is up from the low points following the Restructuring and Reform Act of 1998, and it has climbed significantly since I became Commissioner three-and-a-half years ago.
The bottom line for our enforcement efforts shows that dollars collected rose again last year. There’s a strong trend line going up. Fiscal 2005 was a watershed year for us, with a number of big initiatives that helped push enforcement revenues up 10% to $47.3 billion. In Fiscal 2006, enforcement revenues – the monies we get from our collection, examination, and document matching activities – increased to a record $48.7 billion. Our exam dollars were down slightly this year because of the big bump from the Son of Boss settlement initiative in 2005. Even with that, our overall dollars collected jumped nearly 3% in 2006 principally because of a strong rise in collections.
The individual enforcement categories bear out the significance of our invigorated enforcement efforts. And all these numbers are for fiscal year 2006 that ended September 30:
Total individual returns audited increased by over 6% to 1,293,681 in 2006 from 1,215,000 in 2005. That’s the highest number since 1998. Some people have dismissed our audit increases because of our use of correspondence, or letter exams. While correspondence exams are an effective, efficient enforcement tool that we continue to rely on, it’s important to note there’s an even bigger increase in our field exams – these are the traditional, sit-down audits. The number of field audits increased nearly 23% in 2006 from the previous year, and they climbed by more than half from the level in 2004.
An important part of our enforcement effort has targeted high-income taxpayers. We’ve put a lot of emphasis in increasing audits in this area because it’s critical to ensuring faith in the tax system. If you earn more than $100,000 or you’re a millionaire, you’re a lot more likely to be audited these days than just a few years ago.
Audits of individuals with income of $1,000,000 and higher increased to 17,015 from 12,835, a nearly 33% increase in just one year. About 1 in every 16 of these taxpayers faced audits last year. If you’re earning that kind of money and we notice a problem, you’re going to hear from us.
Audits of individuals with incomes over $100,000 surpassed 257,000, an 18% increase from 2005. That’s the highest figure in more than a decade, and well over double the 92,000 completed in fiscal year 2001.
Let’s turn to businesses. We saw an increase in our efforts to review S corporations and partnerships while our other activity involving small business and large corporations remained relatively stable. Our business numbers reflect that we have placed more emphasis in the growing area of these flow-through returns involving S corporations and partnerships:
Audits of S corporation returns increased to 13,984 from 10,417, a 34% increase. This is the highest level since 2000.
For partnerships, audits of these flow-through returns increased to 9,777 from 8,489, a 15% increase. This category is at the highest level since 1998.
Audits of small businesses organized as corporations remained about the same. 17,871 audits were completed in 2006, up slightly from 17,858 in 2005.Both of these figures are more than double the 7,294 audits of small businesses in 2004.
Audits of larger corporations – those with assets over $10 million – dipped by 2.2%, to 10,591 from 10,829 in 2005.While down slightly this year, audits remain up nearly 50 percent from 2003.
I also want to talk about our activities in the Exempt Organization area. We’ve placed renewed attention and added resources in the charitable arena to help protect the integrity and maintain faith in the charitable sector. You can really see the turnaround this year. These results show we are taking important steps to combat abuse in exempt organizations.
Our Exempt Organization area audited 7,079 returns this year, an increase of 43% from the previous year. We’re at the highest level since 2000.
In addition to increased exam activity, we introduced a new program in 2004 using non-traditional compliance contacts to expand our enforcement presence within the tax-exempt community. These compliance contacts have been instrumental in addressing problem areas in sectors such as hospitals, executive compensation and credit counseling. In Fiscal 2006, we completed over 5,200 of these new compliance contacts, over and above the traditional examination program. This is a 31% increase from the previous year. Before 2004, we weren’t doing any of these contacts.
Exempt organizations are just one facet of the growing and increasingly important tax-exempt sector, which also includes retirement plans, tax-exempt financing and governmental entities whether federal, state, local or tribal. In addition to our exempt organizations work, IRS is also active in each of these areas.
Overall, some of our most common enforcement tools at the IRS also showed increases:
In our collection activities, levies and liens continue to top their 1998 levels. Levies increased by 36% to 3,742,276.Liens rose nearly 20% to 629,813.
Our increased efforts in the enforcement arena resulted from a variety of factors. We have put more emphasis on enforcement in staffing. But we’ve also worked hard to be more efficient with the resources we have. We’ve improved our analysis and workload identification. We’ve had successful targeted tax compliance efforts.
Finally, let me emphasize that these dramatic enforcement improvements have not been done at the expense of taxpayer service. There’s more information in our charts, but in category after category the numbers have increased in our telephone work, electronic filing and our IRS.gov services.
Electronic filing by individuals continued to increase, up 6% (3 percentage points) to 54% of all individual returns.
The level of service for toll-free assistance was 82%, about the same level of 2005 and up substantially from 2001.
The level of customer satisfaction with the toll-free line remains 94%, the same as last year.
The tax law accuracy of toll-free response edged up a notch to 91% from 89%, the prior year.
Taxpayers continued to find IRS.Gov a useful source of information about the tax system and how to comply with their tax obligations. Visits to the IRS Web site jumped nearly 10% in 2006 to more than 193 million visits.
Taxpayers also increased their use of the online refund status tool 'Where's My Refund." In 2006, there were 24.7 million status checks, up nearly 12% from 2005.
Clearly, more work needs to be done by the IRS to improve services and enforcement. But we are clearly making progress, and these numbers underscore that point.
Related Items:
Fiscal Year 2006 Enforcement Statistics
How to avoid paying estate taxes
We’ve been told Max Tillman of South Bend, Indiana is so outraged that Congress his week has refused to repeal the Death Tax that he has instructed his children to grind up $100 bills and feed them to him on his death bed. It seems his logic [if you can call it that] is he is not only trying to decrease his double-taxation-without-representation problem but feels this way he can put his money to more productive use than the government. He has said to have touted, “This fertilizer is cheaper and better than anything that has come out of that damned place since FDR!”
from http://www.taxalicious.com/
from http://www.taxalicious.com/
Friday, July 27, 2007
New IRS Commissioner
from www.irs.gov
Home >
Business
New IRS acting commissioner named
Associated Press
Internal Revenue Service official Linda Stiff will take over as provisional head of the tax agency when the current acting commissioner, Kevin M. Brown, departs in September, the IRS said Friday.
July 27, 2007
-->
New IRS acting commissioner named
July 27, 2007
WASHINGTON --Internal Revenue Service official Linda Stiff will take over as provisional head of the tax agency when the current acting commissioner, Kevin M. Brown, departs in September, the IRS said Friday.
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Stiff has been serving as the agency's deputy commissioner for operations support, overseeing development of policy for IRS personnel services, technology and security. She has also been responsible for the accounting of tax revenues collected by the IRS.
The IRS announced on Thursday that Brown, acting commissioner since May, will leave that post in September to become chief operating officer of the American Red Cross.
At the Red Cross, he will join his former boss, onetime IRS Commissioner Mark Everson. The charity selected Everson as its president in April.
The IRS had no information on when the next commissioner would be named.
------
On the Net:
Home >
Business
New IRS acting commissioner named
Associated Press
Internal Revenue Service official Linda Stiff will take over as provisional head of the tax agency when the current acting commissioner, Kevin M. Brown, departs in September, the IRS said Friday.
July 27, 2007
-->
New IRS acting commissioner named
July 27, 2007
WASHINGTON --Internal Revenue Service official Linda Stiff will take over as provisional head of the tax agency when the current acting commissioner, Kevin M. Brown, departs in September, the IRS said Friday.
Article Tools
Printer friendly
E-mail to a friend
Business RSS feed
Available RSS feeds
Most e-mailed
Share on Digg
Share on Facebook
Save this article
powered by Del.icio.us
More:
Business section
Latest business news
Globe front page
Boston.com
Sign up for:
Globe Headlines e-mail
Breaking News Alerts
Stiff has been serving as the agency's deputy commissioner for operations support, overseeing development of policy for IRS personnel services, technology and security. She has also been responsible for the accounting of tax revenues collected by the IRS.
The IRS announced on Thursday that Brown, acting commissioner since May, will leave that post in September to become chief operating officer of the American Red Cross.
At the Red Cross, he will join his former boss, onetime IRS Commissioner Mark Everson. The charity selected Everson as its president in April.
The IRS had no information on when the next commissioner would be named.
------
On the Net:
Private Debt Collectors vs IRS Collection Division
from CNN/MOney.com:
Taxpayer advocate: End private debt collection
Justification for the IRS program doesn't stand up to scrutiny, according to National Taxpayer Advocate Nina Olson.
By Jeanne Sahadi, CNNMoney.com senior writer
July 20 2007: 11:25 AM EDT
NEW YORK (CNNMoney.com) -- In her midyear annual report to Congress, National Taxpayer Advocate Nina Olson this week again called for the repeal of the IRS private debt collection program, which she characterizes as costly and inefficient.
"(T)he money spent on the IRS Private Debt Collection initiative is an inefficient use of government dollars," she wrote in her report.
VideoMore video
Convicted New Hampshire tax evaders who refuse to go into custody are in a standoff with U.S. Marshals. CNN's Allan Chernoff reports.
Play video
~~> -->
cnnad_createAd("906322","http://ads.cnn.com/html.ng/site=cnn_money&cnn_money_position=220x200_ctr&cnn_money_rollup=personal_finance&cnn_money_section=quigo¶ms.styles=fs","200","220");
The National Taxpayer Advocate is appointed by the Treasury Secretary and represents taxpayer interests before the IRS and Congress. The private debt collection initiative, launched in September 2006, is used to handle cases in which the back taxes owed do not exceed $100,000 and in which the taxpayer does not dispute his liability.
Olson's report came a day after the House Ways and Means Committee voted to repeal the IRS private debt collection program.
Supporters of the private debt collection program, including past IRS Commissioner Mark Everson and Acting Commissioner Kevin M. Brown, acknowledge the program's cost. But they say the cases given to the private agencies are ones the IRS wouldn't get to, so the money raised is money that otherwise would go uncollected. The program generates an estimated $185 million a year.
Private debt collection is often cited as one of the strategies to help narrow the tax gap, estimated at roughly $300 billion a year. The gap is the difference between taxes owed and taxes paid.
Beyond Olson's concerns that there is potential for taxpayer harassment by overly aggressive private agencies, Olson contends that the costs the IRS is incurring to set up and regularly monitor the new program (at least $70 million so far) could have been better spent beefing up the IRS' automated collection division known as ACS, which handles a lot of collection efforts by mail.
Olson's office estimates that the return on investment on the cases handled by the private agencies ($4 for every $1 spent on staffing) would be far outpaced if handled by the ACS division, which currently raises as much as $20 for every $1 spent on staffing. If the $70 million had been spent on the ACS division, her office estimates that could have generated $1.4 billion.
By the end of April, nearly 38,000 cases had been outsourced to the two private debt collection agencies currently under contract with the IRS, and 5,440 of them had resulted in full payment or approved installment agreements, according to testimony by IRS Acting Commissioner Brown. The total revenue collected by that point was $19.5 million, in line with IRS projections.
Currently, the program is heavily monitored both by the IRS and the Taxpayer Advocate Service. The number of complaints received account for well below 1 percent of cases so far, and after investigating them, the IRS has found no contractual violations on the part of the private collectors in the majority of instances, Brown told lawmakers in May.
Beyond cost, Olson questions the effectiveness of the program. The private debt collection agents have limited knowledge of tax issues, she contends, and their authority to negotiate is restricted (e.g., they are not allowed to work out an offer in compromise, which is a reduced payment that the taxpayer can afford).
Consequently, they have to send some cases back to the IRS. And she estimates those numbers will grow as the program expands. As that happens, Olson said in written Congressional testimony recently, "the underlying business case for the PCA initiative evaporates."
The IRS is currently conducting two studies that compare the effectiveness of the private debt collection program with that of IRS collection efforts. Results from those studies are expected in August 2008.
Senator pushes Treasury: Narrow that tax gapSenate taxwriters take on fund manager payAMT: Popular tax breaks in the cross hair
Taxpayer advocate: End private debt collection
Justification for the IRS program doesn't stand up to scrutiny, according to National Taxpayer Advocate Nina Olson.
By Jeanne Sahadi, CNNMoney.com senior writer
July 20 2007: 11:25 AM EDT
NEW YORK (CNNMoney.com) -- In her midyear annual report to Congress, National Taxpayer Advocate Nina Olson this week again called for the repeal of the IRS private debt collection program, which she characterizes as costly and inefficient.
"(T)he money spent on the IRS Private Debt Collection initiative is an inefficient use of government dollars," she wrote in her report.
VideoMore video
Convicted New Hampshire tax evaders who refuse to go into custody are in a standoff with U.S. Marshals. CNN's Allan Chernoff reports.
Play video
~~> -->
cnnad_createAd("906322","http://ads.cnn.com/html.ng/site=cnn_money&cnn_money_position=220x200_ctr&cnn_money_rollup=personal_finance&cnn_money_section=quigo¶ms.styles=fs","200","220");
The National Taxpayer Advocate is appointed by the Treasury Secretary and represents taxpayer interests before the IRS and Congress. The private debt collection initiative, launched in September 2006, is used to handle cases in which the back taxes owed do not exceed $100,000 and in which the taxpayer does not dispute his liability.
Olson's report came a day after the House Ways and Means Committee voted to repeal the IRS private debt collection program.
Supporters of the private debt collection program, including past IRS Commissioner Mark Everson and Acting Commissioner Kevin M. Brown, acknowledge the program's cost. But they say the cases given to the private agencies are ones the IRS wouldn't get to, so the money raised is money that otherwise would go uncollected. The program generates an estimated $185 million a year.
Private debt collection is often cited as one of the strategies to help narrow the tax gap, estimated at roughly $300 billion a year. The gap is the difference between taxes owed and taxes paid.
Beyond Olson's concerns that there is potential for taxpayer harassment by overly aggressive private agencies, Olson contends that the costs the IRS is incurring to set up and regularly monitor the new program (at least $70 million so far) could have been better spent beefing up the IRS' automated collection division known as ACS, which handles a lot of collection efforts by mail.
Olson's office estimates that the return on investment on the cases handled by the private agencies ($4 for every $1 spent on staffing) would be far outpaced if handled by the ACS division, which currently raises as much as $20 for every $1 spent on staffing. If the $70 million had been spent on the ACS division, her office estimates that could have generated $1.4 billion.
By the end of April, nearly 38,000 cases had been outsourced to the two private debt collection agencies currently under contract with the IRS, and 5,440 of them had resulted in full payment or approved installment agreements, according to testimony by IRS Acting Commissioner Brown. The total revenue collected by that point was $19.5 million, in line with IRS projections.
Currently, the program is heavily monitored both by the IRS and the Taxpayer Advocate Service. The number of complaints received account for well below 1 percent of cases so far, and after investigating them, the IRS has found no contractual violations on the part of the private collectors in the majority of instances, Brown told lawmakers in May.
Beyond cost, Olson questions the effectiveness of the program. The private debt collection agents have limited knowledge of tax issues, she contends, and their authority to negotiate is restricted (e.g., they are not allowed to work out an offer in compromise, which is a reduced payment that the taxpayer can afford).
Consequently, they have to send some cases back to the IRS. And she estimates those numbers will grow as the program expands. As that happens, Olson said in written Congressional testimony recently, "the underlying business case for the PCA initiative evaporates."
The IRS is currently conducting two studies that compare the effectiveness of the private debt collection program with that of IRS collection efforts. Results from those studies are expected in August 2008.
Senator pushes Treasury: Narrow that tax gapSenate taxwriters take on fund manager payAMT: Popular tax breaks in the cross hair
Tax Resolution & Offer in Compromise Specialists
Welcome to Tax Advocacy, LLC, a firm dedicated to resolving your tax nightmares and advocating for you before the collection and examination divisions of the Internal Revenue Service throughout the United States, and the Massachusetts and Rhode Island state tax agencies. The founding owners, David Malo and Dennis Vieira are veteran Revenue Officers of the Internal Revenue Service. We know what it takes to navigate through the maze and play by their "rules." We specialize in preparing offers in compromise, Federal tax returns, Rhode Island and Massachusetts state tax returns, payment installment agreements, stopping/removing levies and liens, and appeals of penalties.
Dealing with the IRS can be very confusing and frustrating. Going it alone without professional representation can lead to costly mistakes and disastrous results. Don’t let the IRS take advantage of you. We will advise you of all your options and protect your statutory and procedural rights, and those afforded by the Taxpayer Bill of Rights and the Internal Revenue Manual
What sets us apart from other tax representatives is our personal service. We are first in service because we put service first. We know the stress caused by the debt collection process. Let us work for you. Call us now for a free one-half hour consultation.
for further information contact us at http://www.taxadvocacyllc.com/, or call us at (508) 823-5605 for a free 1/2 hour consultation.
Dealing with the IRS can be very confusing and frustrating. Going it alone without professional representation can lead to costly mistakes and disastrous results. Don’t let the IRS take advantage of you. We will advise you of all your options and protect your statutory and procedural rights, and those afforded by the Taxpayer Bill of Rights and the Internal Revenue Manual
What sets us apart from other tax representatives is our personal service. We are first in service because we put service first. We know the stress caused by the debt collection process. Let us work for you. Call us now for a free one-half hour consultation.
for further information contact us at http://www.taxadvocacyllc.com/, or call us at (508) 823-5605 for a free 1/2 hour consultation.
Thursday, July 26, 2007
Non-filed Tax Returns?
courtesy of www.naea.org
Let’s Talk Taxes
Solace for the Non-filer
Has it been awhile since you filed a tax return? Feeling guilty? Scared? Don’t know what to do? Do you even need to file?
Many people become non-filers each year for a number of reasons. They lose the paperwork, they couldn’t pay, or they forgot about it. Sometimes illness, family crisis or depression plays a role. The list goes on and on.
If you are a non-filer, don’t procrastinate any longer. You may be hoping the IRS has forgotten about you, but that rarely happens. In truth, the more you wait, the more costly it will be if you owe money. And if you are due a refund, the statute of limitations on that refund expires three years from the date the return should have been filed. Don’t risk losing your money.
It’s not uncommon to feel overwhelmed when you haven’t filed for a while, but don’t despair. Lost paperwork can be reconstructed. If you owe, it’s better to file and negotiate an installment agreement because this will stop the late filing penalties although interest will continue until the tax bill is paid. Sometimes, penalties can be abated if the circumstances are serious, such as family crisis, illness or other catastrophic situations.
Contact a tax professional to help you get the monkey off your back. An enrolled agent (EA) is licensed by the Treasury Department to represent clients who have problems with tax filing and with the IRS. EAs must pass a rigorous exam to act on a client’s behalf and can help to get taxes filed, negotiate an installment agreement for those who can’t pay in full or, possibly, negotiate an offer in compromise to reduce taxes, penalties and interest. Don’t wait for the IRS to come looking for you; it’s far better to voluntarily come forward.
Every U.S. citizen and resident is required to pay his or her fair share of tax. No more, no less. The IRS has a matching program whereby all 1099s, W-2s, etc., are entered in their computers. They match this information with the tax returns that have been filed to insure that all income has been reported and that everyone who is legally required to do so has filed a return. So, if you haven’t filed for whatever reason, get moving before the IRS comes looking for you!
At Tax Advocacy, LLC we are a firm of former IRS employees. We can assist you in the preparation of any tax returns you may need to file. For additional information contact us at: www.taxadvocacyllc.com
Let’s Talk Taxes
Solace for the Non-filer
Has it been awhile since you filed a tax return? Feeling guilty? Scared? Don’t know what to do? Do you even need to file?
Many people become non-filers each year for a number of reasons. They lose the paperwork, they couldn’t pay, or they forgot about it. Sometimes illness, family crisis or depression plays a role. The list goes on and on.
If you are a non-filer, don’t procrastinate any longer. You may be hoping the IRS has forgotten about you, but that rarely happens. In truth, the more you wait, the more costly it will be if you owe money. And if you are due a refund, the statute of limitations on that refund expires three years from the date the return should have been filed. Don’t risk losing your money.
It’s not uncommon to feel overwhelmed when you haven’t filed for a while, but don’t despair. Lost paperwork can be reconstructed. If you owe, it’s better to file and negotiate an installment agreement because this will stop the late filing penalties although interest will continue until the tax bill is paid. Sometimes, penalties can be abated if the circumstances are serious, such as family crisis, illness or other catastrophic situations.
Contact a tax professional to help you get the monkey off your back. An enrolled agent (EA) is licensed by the Treasury Department to represent clients who have problems with tax filing and with the IRS. EAs must pass a rigorous exam to act on a client’s behalf and can help to get taxes filed, negotiate an installment agreement for those who can’t pay in full or, possibly, negotiate an offer in compromise to reduce taxes, penalties and interest. Don’t wait for the IRS to come looking for you; it’s far better to voluntarily come forward.
Every U.S. citizen and resident is required to pay his or her fair share of tax. No more, no less. The IRS has a matching program whereby all 1099s, W-2s, etc., are entered in their computers. They match this information with the tax returns that have been filed to insure that all income has been reported and that everyone who is legally required to do so has filed a return. So, if you haven’t filed for whatever reason, get moving before the IRS comes looking for you!
At Tax Advocacy, LLC we are a firm of former IRS employees. We can assist you in the preparation of any tax returns you may need to file. For additional information contact us at: www.taxadvocacyllc.com
Trust Fund Recovery Penalty
As a follow-up to our previous post regarding unpaid payroll taxes, the following is derived from www.irs.gov
Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP. These taxes are called trust fund taxes because you actually hold the employee's money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating in order for the TFRP to be assessed.
Who Can Be Responsible for the TFRP
The TFRP may be assessed against any person who:
is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
willfully fails to collect or pay them.
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
an officer or an employee of a corporation,
a member or employee of a partnership,
a corporate director or shareholder,
a member of a board of trustees of a nonprofit organization,
another person with authority and control over funds to direct their disbursement, or
another corporation.
For willfulness to exist, the responsible person:
must have been, or should have been, aware of the outstanding taxes and
either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
You may be asked to complete an interview in order to determine the full scope of your duties and responsibilities. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business. An employee is not a responsible person if the employee's function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid. Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes?, contains additional information regarding the TFRP.
Figuring the TFRP Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
The unpaid income taxes withheld, plus
The employee's portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP
If we determine that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you. You have 60 days after we deliver the letter to appeal our proposal. The letter will explain your appeal rights. Refer to Publication 5 (PDF), Your Appeal Rights and How to Prepare a Protest if You Don't Agree, for a clear outline of the appeals process. If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.
Caution:Once we assert the penalty, we can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Avoiding the TFRP
You can avoid the TFRP by making sure that all employment taxes are collected, accounted for, and paid to the IRS when required. Make your tax deposits and payments on time. Additional information on employment taxes can be found in Publication 15, Employer's Tax Guide, and Form 941 (PDF), Employer's Quarterly Federal Tax Return (PDF).
For additional information contact us at www.taxadvocacyllc.com
Employment Taxes and the Trust Fund Recovery Penalty (TFRP)
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the TFRP. These taxes are called trust fund taxes because you actually hold the employee's money in trust until you make a federal tax deposit in that amount. The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business. The business does not have to have stopped operating in order for the TFRP to be assessed.
Who Can Be Responsible for the TFRP
The TFRP may be assessed against any person who:
is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
willfully fails to collect or pay them.
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
an officer or an employee of a corporation,
a member or employee of a partnership,
a corporate director or shareholder,
a member of a board of trustees of a nonprofit organization,
another person with authority and control over funds to direct their disbursement, or
another corporation.
For willfulness to exist, the responsible person:
must have been, or should have been, aware of the outstanding taxes and
either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).
Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
You may be asked to complete an interview in order to determine the full scope of your duties and responsibilities. Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business. An employee is not a responsible person if the employee's function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid. Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes?, contains additional information regarding the TFRP.
Figuring the TFRP Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax. The penalty is computed based on:
The unpaid income taxes withheld, plus
The employee's portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP
If we determine that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you. You have 60 days after we deliver the letter to appeal our proposal. The letter will explain your appeal rights. Refer to Publication 5 (PDF), Your Appeal Rights and How to Prepare a Protest if You Don't Agree, for a clear outline of the appeals process. If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.
Caution:Once we assert the penalty, we can take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Avoiding the TFRP
You can avoid the TFRP by making sure that all employment taxes are collected, accounted for, and paid to the IRS when required. Make your tax deposits and payments on time. Additional information on employment taxes can be found in Publication 15, Employer's Tax Guide, and Form 941 (PDF), Employer's Quarterly Federal Tax Return (PDF).
For additional information contact us at www.taxadvocacyllc.com
Owe Back Payroll Taxes?
Employer's are required to withhold payroll taxes from their employees paychecks and pay this tax to the IRS on their employees' behalf. At the end of each calendar quarter, employer's are required to file the form 941 Employer's Quarterly Tax Return which reports to the IRS the amount of wages paid to their employees, the amount of withholding for the total amount of wages paid as well as social security and medicare withholding taxes. Also, at the end of each calendar year the employer is required to file the form 940 Employer's Annual Unemployment Tax Return which reports the amount of unemployment tax that was collected for the previous calendar year. Of all of the taxes that are owed to the IRS due to non-payment, payroll taxes are the worse type to owe. Payroll taxes for all intents and purposes are a trust fund tax. The employer acts, if you will, as an agent of the government. The IRS is aggressive in collection of past due payroll taxes. If the employer in unable to pay what is owed, then the IRS will begin enforced collection action to collect what is owed. This can result in levy of the employer's bank account, an immediate filing of a federal tax lien, levy of the employer's accounts receivables and seizure of the companies assets. If the IRS is still unable to pay what is owed after taking enforcement action against the employer and their assets, the IRS will then pursue what is called the Trust Fund Recovery Penalty. What this means is that the IRS can assess against those individuals deemed responsible for not paying over the payroll taxes, an amount that is equal to the withholding tax and one half of the social security tax for each quarter that was not paid. Among those who can have this assessment made against them are any corporate officer, anyone who shows that they were both willfull and responsible for not paying these taxes, ie: a bookkeeper, accountant, etc. To help make this determination, the IRS will summons the corporate bank records to see who was writing and signing corporate checks, check UCC filings, interview all potential responsible parties to name a few. Who had a fiduciary responsibility to pay the payroll tax? Many times in our experience as Revenue Officer's we had a corporate officer claim that they had nothing to do with payroll or attempted to absolve themselves due to sheer ignorance. Unfortunately for them, these were not valid arguments. Of course taxpayer's are afforded their appeal rights for any potential assessment against them. At Tax Advocacy, LLC we are well versed in all aspects of resolving the back payroll tax issues.
A 941/940 tax debt can cause serious problems for an operating business. Don't leave your back tax issues to chance. Contact us at http://www.taxadvocacyllc.com/ for additional information.
A 941/940 tax debt can cause serious problems for an operating business. Don't leave your back tax issues to chance. Contact us at http://www.taxadvocacyllc.com/ for additional information.
Wednesday, July 25, 2007
IRS Overseer critical of ending free phone service
From the L.A. Times/Associated Press
IRS overseer critical of ending free phone filing service in '05
From the Associated Press
July 25, 2007
WASHINGTON — Low- and middle-income people are paying millions of dollars in fees to file their tax returns because of an Internal Revenue Service decision to end a free telephone filing service, an inspector general said Tuesday. "Once again the IRS has made a taxpayer service decision based on questionable data," said J. Russell George, Treasury inspector general for tax administration. George, whose office performs independent oversight of the IRS, said about 2 million individual- and joint-filing taxpayers used the TeleFile program in 2005, when the IRS, citing declining usage and increasing costs, shut it down. He said about half of these people reverted to filing paper tax returns, slowing the refund process and increasing IRS processing costs, while those who used tax preparers or purchased software paid nearly $24 million to file their taxes in 2006. The TeleFile program, instituted in the early 1990s, enabled people with simple individual or joint tax returns to file at no cost by using a telephone keypad. "The IRS made a foolish mistake in eliminating TeleFile, and their error is costing hardworking Americans time and money," said Senate Finance Committee Chairman Max Baucus (D-Mont.), who joined the top Republican on the committee, Sen. Charles E. Grassley of Iowa, in criticizing the IRS decision. The IRS, in response to the inspector general's report, said it believed that it acted appropriately in choosing to end the program and did not think the move would have any long-term negative consequences on its goal of getting more taxpayers to file electronically.
IRS overseer critical of ending free phone filing service in '05
From the Associated Press
July 25, 2007
WASHINGTON — Low- and middle-income people are paying millions of dollars in fees to file their tax returns because of an Internal Revenue Service decision to end a free telephone filing service, an inspector general said Tuesday. "Once again the IRS has made a taxpayer service decision based on questionable data," said J. Russell George, Treasury inspector general for tax administration. George, whose office performs independent oversight of the IRS, said about 2 million individual- and joint-filing taxpayers used the TeleFile program in 2005, when the IRS, citing declining usage and increasing costs, shut it down. He said about half of these people reverted to filing paper tax returns, slowing the refund process and increasing IRS processing costs, while those who used tax preparers or purchased software paid nearly $24 million to file their taxes in 2006. The TeleFile program, instituted in the early 1990s, enabled people with simple individual or joint tax returns to file at no cost by using a telephone keypad. "The IRS made a foolish mistake in eliminating TeleFile, and their error is costing hardworking Americans time and money," said Senate Finance Committee Chairman Max Baucus (D-Mont.), who joined the top Republican on the committee, Sen. Charles E. Grassley of Iowa, in criticizing the IRS decision. The IRS, in response to the inspector general's report, said it believed that it acted appropriately in choosing to end the program and did not think the move would have any long-term negative consequences on its goal of getting more taxpayers to file electronically.
Hybrid Vehicle Tax Credits
From www.IRS.gov
Hybrid Cars and Alternative Motor Vehicles
Updated frequently — last updated July 6, 2007
Vehicles Purchased or Placed in Service
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.
The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the tax credit.
These models have been certified for the credit in the following amounts:
† This reflects a decrease in the credit amount as of Oct. 1, 2006, due to the manufacturers meeting quarterly sales of 60,000 qualified hybrid cars — See Quarterly Sales, below.
†† This credit amount does not phase out. The full amount of the altenative fuel vehicle credit would be available for vehicles purchased on or before December 31, 2010.
Model Year 2008
Ford Escape 2WD Hybrid — $3,000
Ford Escape 4WD Hybrid — $2,200
Mazda Tribute 2WD Hybrid — $3,000
Mazda Tribute 4WD Hybrd — $2,200
Mercury Mariner 2WD Hybrid — $3,000
Mercury Mariner 4WD Hybrid — $2,200
Model Year 2007
Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Honda Accord Hybrid AT — $1,300
Honda Accord Hybrid Navi AT — $1,300
Honda Civic GX — $4,000 ††
Honda Civic Hybrid CVT — $2,100
Lexus GS 450h — $775†
Lexus RX 400h 2WD and 4WD — $1,100†
Mercury Mariner 4WD Hybrid — $1,950
Nissan Altima Hybrid — $2,350
Saturn Aura Hybrid — $1,300
Saturn Vue Green Line — $650
Toyota Camry Hybrid — $1,300†
Toyota Prius — $1,575†
Toyota Highlander Hybrid 2WD and 4WD — $1,300†
Model Year 2006
Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid (Front) 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration — $1,300*
Honda Civic GX — $4,000 ††
Honda Civic Hybrid CVT — $2,100
Honda Insight CVT — $1,450
Lexus RX400h 2WD — $1,100†
Lexus RX400h 4WD — $1,100†
Mercury Mariner Hybrid 4WD — $1,950
Toyota Highlander 2WD Hybrid — $1,300†
Toyota Highlander 4WD Hybrid — $1,300†
Toyota Prius — $1,575†
* 2006 Honda Accord Hybrid AT and Navi AT without updated calibration qualify for a credit of $650.
Model Year 2005
Ford Escape 2 WD Hybrid — $2,600
Ford Escape 4 WD Hybrid — $1,950
Honda Accord Hybrid AT and Navi AT — $650
Honda Civic GX — $4,000 ††
Honda Civic Hybrid MT and CVT — $1,700
Honda Insight CVT — $1,450
Toyota Prius — $1,575†
Quarterly Sales
Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers 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 hybrid or advance lean burn technology. 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.
For example, F Company is a manufacturer of hybrid motor vehicles, but not advanced lean burn technology motor vehicles. F Company sells its 60,000th hybrid car on March 31, 2006.
Ms. Smith buys an F Company hybrid car on June 30, 2006, and claims the full credit.
Ms. Maple buys an F Company hybrid car on Dec. 31, 2006, and claims 50 percent of the credit.
Mr. Grey buys an F Company hybrid car on June 30, 2007, and claims 25 percent of the credit.
Mr. Green buys an F Company hybrid car on July 1, 2007, and is unable to claim the credit, because the credit has phased out for F Company vehicles.
Toyota Motor Sales, U.S.A., Inc., has submitted quarterly reports indicating that its cumulative sales of qualified vehicles to retail dealiers has reached the 60,000-vehicle limit during the calendar quarter ending June 30, 2006. Effective Oct. 1, 2006, the tax credit amounts for certified Toyota models will be reduced. The models and allowable credits may be found in news releases IR-2006-145, Toyota Hybrids Begins Phaseout on October 1and IR-2006-154, Additional Toyota and Lexus Vehicles Certified for the Energy Tax Credit.
More detailed information may be found in the Summary of the Credit for Qualified Hybrid Vehicles
Vehicles Purchased or Placed in Service 2001 through 2005
In August 2002, the IRS announced that it had certified the first hybrid gas-electric automobile as eligible for the clean-burning fuel deduction, effective 2001. Federal law allowed individuals to claim a deduction for the incremental cost of buying a motor vehicle propelled by a clean-burning fuel. A tax deduction is subtracted from income, thus reducing the amount of adjusted gross income on which the taxpayer is taxed.
The deduction is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.Related Items:
News Releases and Fact Sheets on Hybrid Cars and Alternative Motor Vehicles
Clean Fuel Vehicle Deduction Available for Certain Models
Tax Tip 2006-56, Deduction for Hybrid Vehicles
Hybrid Cars and Alternative Motor Vehicles
Updated frequently — last updated July 6, 2007
Vehicles Purchased or Placed in Service
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.
The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the tax credit.
These models have been certified for the credit in the following amounts:
† This reflects a decrease in the credit amount as of Oct. 1, 2006, due to the manufacturers meeting quarterly sales of 60,000 qualified hybrid cars — See Quarterly Sales, below.
†† This credit amount does not phase out. The full amount of the altenative fuel vehicle credit would be available for vehicles purchased on or before December 31, 2010.
Model Year 2008
Ford Escape 2WD Hybrid — $3,000
Ford Escape 4WD Hybrid — $2,200
Mazda Tribute 2WD Hybrid — $3,000
Mazda Tribute 4WD Hybrd — $2,200
Mercury Mariner 2WD Hybrid — $3,000
Mercury Mariner 4WD Hybrid — $2,200
Model Year 2007
Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Honda Accord Hybrid AT — $1,300
Honda Accord Hybrid Navi AT — $1,300
Honda Civic GX — $4,000 ††
Honda Civic Hybrid CVT — $2,100
Lexus GS 450h — $775†
Lexus RX 400h 2WD and 4WD — $1,100†
Mercury Mariner 4WD Hybrid — $1,950
Nissan Altima Hybrid — $2,350
Saturn Aura Hybrid — $1,300
Saturn Vue Green Line — $650
Toyota Camry Hybrid — $1,300†
Toyota Prius — $1,575†
Toyota Highlander Hybrid 2WD and 4WD — $1,300†
Model Year 2006
Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid (Front) 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration — $1,300*
Honda Civic GX — $4,000 ††
Honda Civic Hybrid CVT — $2,100
Honda Insight CVT — $1,450
Lexus RX400h 2WD — $1,100†
Lexus RX400h 4WD — $1,100†
Mercury Mariner Hybrid 4WD — $1,950
Toyota Highlander 2WD Hybrid — $1,300†
Toyota Highlander 4WD Hybrid — $1,300†
Toyota Prius — $1,575†
* 2006 Honda Accord Hybrid AT and Navi AT without updated calibration qualify for a credit of $650.
Model Year 2005
Ford Escape 2 WD Hybrid — $2,600
Ford Escape 4 WD Hybrid — $1,950
Honda Accord Hybrid AT and Navi AT — $650
Honda Civic GX — $4,000 ††
Honda Civic Hybrid MT and CVT — $1,700
Honda Insight CVT — $1,450
Toyota Prius — $1,575†
Quarterly Sales
Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers 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 hybrid or advance lean burn technology. 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.
For example, F Company is a manufacturer of hybrid motor vehicles, but not advanced lean burn technology motor vehicles. F Company sells its 60,000th hybrid car on March 31, 2006.
Ms. Smith buys an F Company hybrid car on June 30, 2006, and claims the full credit.
Ms. Maple buys an F Company hybrid car on Dec. 31, 2006, and claims 50 percent of the credit.
Mr. Grey buys an F Company hybrid car on June 30, 2007, and claims 25 percent of the credit.
Mr. Green buys an F Company hybrid car on July 1, 2007, and is unable to claim the credit, because the credit has phased out for F Company vehicles.
Toyota Motor Sales, U.S.A., Inc., has submitted quarterly reports indicating that its cumulative sales of qualified vehicles to retail dealiers has reached the 60,000-vehicle limit during the calendar quarter ending June 30, 2006. Effective Oct. 1, 2006, the tax credit amounts for certified Toyota models will be reduced. The models and allowable credits may be found in news releases IR-2006-145, Toyota Hybrids Begins Phaseout on October 1and IR-2006-154, Additional Toyota and Lexus Vehicles Certified for the Energy Tax Credit.
More detailed information may be found in the Summary of the Credit for Qualified Hybrid Vehicles
Vehicles Purchased or Placed in Service 2001 through 2005
In August 2002, the IRS announced that it had certified the first hybrid gas-electric automobile as eligible for the clean-burning fuel deduction, effective 2001. Federal law allowed individuals to claim a deduction for the incremental cost of buying a motor vehicle propelled by a clean-burning fuel. A tax deduction is subtracted from income, thus reducing the amount of adjusted gross income on which the taxpayer is taxed.
The deduction is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.Related Items:
News Releases and Fact Sheets on Hybrid Cars and Alternative Motor Vehicles
Clean Fuel Vehicle Deduction Available for Certain Models
Tax Tip 2006-56, Deduction for Hybrid Vehicles
"The Best Tax Shelter Around"
Clients frequently ask us about Tax Shelters. The following is provided by the National Association of Enrolled Agents: www.naea.org
LET’S TALK TAX
The Best Tax Shelter around—your Personal Residence!
If you’re a homeowner, Uncle Sam has thrown you a tax shelter that’s beyond compare. You may deduct the mortgage interest paid on your annual tax return and deduct the property taxes on your Schedule A. If you don’t currently own a home, this tax benefit is significant enough to make you look seriously at home ownership.
“Points”
The concept is simple, but it starts to get a little more complicated when you add in “points.” Points are one type of fee paid at closing to your lender. If you pay points when you buy your new home, these may be deducted in full in the year of purchase. However, if you refinance your loan, the points must then be deducted over the life of the new loan. In the event you are deducting points annually and then decide to refinance again, you will be able to deduct the balance of the points when you pay off the old mortgage. Of course, all these deductions are based on being able to itemize your deductions on Schedule A.
There are some limitations.
Points must not be more than amounts generally charged in your area.
Funds provided at closing must be at least equal to the points.
Loan must be used to buy or build taxpayer’s main home.
Points are stated as a percentage of the principal amount of loan.
Points are clearly stated on the settlement statement as charged for the mortgage.
Predictably, there are limits on mortgage interest deduction. Only the interest on the first $1 million of home acquisition debt is deductible. (Acquisition debt is defined as debt to purchase, build or substantially improve the residence.) Home equity debt limits are the lesser of the fair market value of the home reduced by the acquisition debt or $100,000 ($50,000 if married filing separately).
Probably the greatest advantage of home ownership occurs when you decide to sell your home. If you have owned and lived in your personal residence for two out of five years, you can sell the home and not be taxed on a profit up to $250,000 for singles and $500,000 for couples. The way home values have increased in recent years, this can be a tremendous investment opportunity. This rule seems very straight forward and simple, but beware! There are a number of exceptions.
Job related move—if you have to move out of your area (a 50-mile radius), and are unable to meet the two year time period, you can prorate the time based on a formula utilizing a ratio consisting of the number of days that you owned and lived in the home to the total number of days in the relevant 24-month period (approximately 730), multiplied by the exclusion amount.
Health problems requiring a sale—if health problems force you to move from your principal residence, you can prorate the time and exclusion based on the formula above.
Ideally, a couple that kept good records of time of ownership could buy and live in a home for two years, sell for a profit and then repeat this process. Still, there are a number of pitfalls that cause tax problems, such as the special rules surrounding home offices and move out/rent/return situations that effect the two in five requirement (this involves adjusting for depreciation recapture). Given the many regulations and nuances of the tax laws, many people opt to hire a licensed tax practitioner, such as an enrolled agent.
The author is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
For more information you can contact www.naea.org, or you can contact us at www.taxadvocacyllc.com
LET’S TALK TAX
The Best Tax Shelter around—your Personal Residence!
If you’re a homeowner, Uncle Sam has thrown you a tax shelter that’s beyond compare. You may deduct the mortgage interest paid on your annual tax return and deduct the property taxes on your Schedule A. If you don’t currently own a home, this tax benefit is significant enough to make you look seriously at home ownership.
“Points”
The concept is simple, but it starts to get a little more complicated when you add in “points.” Points are one type of fee paid at closing to your lender. If you pay points when you buy your new home, these may be deducted in full in the year of purchase. However, if you refinance your loan, the points must then be deducted over the life of the new loan. In the event you are deducting points annually and then decide to refinance again, you will be able to deduct the balance of the points when you pay off the old mortgage. Of course, all these deductions are based on being able to itemize your deductions on Schedule A.
There are some limitations.
Points must not be more than amounts generally charged in your area.
Funds provided at closing must be at least equal to the points.
Loan must be used to buy or build taxpayer’s main home.
Points are stated as a percentage of the principal amount of loan.
Points are clearly stated on the settlement statement as charged for the mortgage.
Predictably, there are limits on mortgage interest deduction. Only the interest on the first $1 million of home acquisition debt is deductible. (Acquisition debt is defined as debt to purchase, build or substantially improve the residence.) Home equity debt limits are the lesser of the fair market value of the home reduced by the acquisition debt or $100,000 ($50,000 if married filing separately).
Probably the greatest advantage of home ownership occurs when you decide to sell your home. If you have owned and lived in your personal residence for two out of five years, you can sell the home and not be taxed on a profit up to $250,000 for singles and $500,000 for couples. The way home values have increased in recent years, this can be a tremendous investment opportunity. This rule seems very straight forward and simple, but beware! There are a number of exceptions.
Job related move—if you have to move out of your area (a 50-mile radius), and are unable to meet the two year time period, you can prorate the time based on a formula utilizing a ratio consisting of the number of days that you owned and lived in the home to the total number of days in the relevant 24-month period (approximately 730), multiplied by the exclusion amount.
Health problems requiring a sale—if health problems force you to move from your principal residence, you can prorate the time and exclusion based on the formula above.
Ideally, a couple that kept good records of time of ownership could buy and live in a home for two years, sell for a profit and then repeat this process. Still, there are a number of pitfalls that cause tax problems, such as the special rules surrounding home offices and move out/rent/return situations that effect the two in five requirement (this involves adjusting for depreciation recapture). Given the many regulations and nuances of the tax laws, many people opt to hire a licensed tax practitioner, such as an enrolled agent.
The author is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
For more information you can contact www.naea.org, or you can contact us at www.taxadvocacyllc.com
Tax records needed for an Business Tax Audit
The Internal Revenue Service has issued the following statement pertaining to what type of records you should keep on file and have readily available if called for an audit.
What kind of records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes. Your recordkeeping system should also include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checkbook is the main source for entries in the business books.
Supporting Business DocumentsPurchases, sales, payroll, and other transactions you have in your business will generate supporting documents such as invoices and receipts. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense. For more detailed information refer to Publication 583, Starting a Business and Keeping Records .
The following are some of the types of records you should keep:
Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:
Cash register tapes
Bank deposit slips
Receipt books
Invoices
Credit card charge slips
Forms 1099-MISC
Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Documents for purchases include the following:
Canceled checks
Cash register tape receipts
Credit card sales slips
Invoices
Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:
Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments
Travel, Transportation, Entertainment, and Gift ExpensesIf you deduct travel, entertainment, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses. For additional information on how to prove certain business expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets.
Employment taxesThere are specific employment tax records you must keep. Keep all records of employment for at least four years. For additional information, refer to Recordkeeping for Employers.
References/Related Topics
You can never be too prepared for an audit. At Tax Advocacy, LLC we are well aware of the inner workings of the IRS Audit/Exam Divisions. For related topis or information pertaining to record keeping visit www.IRS.gov, or visit us at www.taxadvocacyllc.com
What kind of records should I keep?
You may choose any recordkeeping system suited to your business that clearly shows your income and expenses. Except in a few cases, the law does not require any special kind of records. However, the business you are in affects the type of records you need to keep for federal tax purposes. Your recordkeeping system should also include a summary of your business transactions. This summary is ordinarily made in your business books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits. For most small businesses, the business checkbook is the main source for entries in the business books.
Supporting Business DocumentsPurchases, sales, payroll, and other transactions you have in your business will generate supporting documents such as invoices and receipts. Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. These documents contain the information you need to record in your books. It is important to keep these documents because they support the entries in your books and on your tax return. You should keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense. For more detailed information refer to Publication 583, Starting a Business and Keeping Records .
The following are some of the types of records you should keep:
Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts. Documents for gross receipts include the following:
Cash register tapes
Bank deposit slips
Receipt books
Invoices
Credit card charge slips
Forms 1099-MISC
Purchases are the items you buy and resell to customers. If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Your supporting documents should show the amount paid and that the amount was for purchases. Documents for purchases include the following:
Canceled checks
Cash register tape receipts
Credit card sales slips
Invoices
Expenses are the costs you incur (other than purchases) to carry on your business. Your supporting documents should show the amount paid and that the amount was for a business expense. Documents for expenses include the following:
Canceled checks
Cash register tapes
Account statements
Credit card sales slips
Invoices
Petty cash slips for small cash payments
Travel, Transportation, Entertainment, and Gift ExpensesIf you deduct travel, entertainment, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses. For additional information on how to prove certain business expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Assets are the property, such as machinery and furniture, that you own and use in your business. You must keep records to verify certain information about your business assets. You need records to compute the annual depreciation and the gain or loss when you sell the assets.
Employment taxesThere are specific employment tax records you must keep. Keep all records of employment for at least four years. For additional information, refer to Recordkeeping for Employers.
References/Related Topics
You can never be too prepared for an audit. At Tax Advocacy, LLC we are well aware of the inner workings of the IRS Audit/Exam Divisions. For related topis or information pertaining to record keeping visit www.IRS.gov, or visit us at www.taxadvocacyllc.com
Tuesday, July 24, 2007
Tax Collection Statutes, Tax Audit Statutes and Refund Statutes
The IRS by law (Internal Revenue Code 6502) has a 10 year period with which to collect all unpaid taxes that you owe for any particular year or period. Once a tax liability has been finalized. Tax liabilities can be finalized on a balance due return( one that you filed), an assessment that the IRS made against you via an audit, or based on a proposed assessment, such as a potential Trust Fund Recovery Penalty (for non-payment of payroll taxes). If the IRS does not collect the total amount that you owe within a 10 year period, then the remaining outstanding balance disappears as the Statute for collection of this liability has expired. We recently had a client at our firm http://www.taxadvocacyllc.com/ who was not aware that the government has only 10 years to collect what he owed. We recognized that there were only 8 months left for the IRS to collect from this client.We immediately contacted the IRS and established an Installment Agreement for his outstanding liability (approx $ 40,000). The taxpayer paid the IRS $ 240.00 per month for a total of 8 months. (The client had come to Tax Advocacy because he had his wages levied.) We got an immediate release of the wage levy and the taxpayer made his monthly payments for 8 months. At the end of this period we contacted the IRS and and notified them that the collection statue had expired. Case closed!
We have been asked many times "how long should we keep our tax records?" The answer is: The IRS has 3 years to audit your tax return or assess any additional tax liabilities. Per Internal Revenue Code 6501, the 3 year clock begins on the 16th day of April for the year the return was due. As an example, a 2005 tax return was due on April 15, 2006. The 3 year audit assessment date begins on April 16, 2006. That simply means that the IRS has until April 16, 2009 to make an audit assessment or assess any additional liabilities against you. By law they cannot make an additional assessment against you as the result of an audit after that date.
By the same token, taxpayer's have 3 years after the due date of a tax return to claim their refund. (Internal Revenue Code 6511) As an example, let's say that your 2005 Individual Income Tax Return (form 1040) is due on April 15,2006. If you fail to file your refund due tax return by April 16, 2009 then you can say bye bye to the refund you are anticipating. We cannot stress enough to you that you need to become complaint with filing of your tax returns! You would be amazed at how many taxpayer's have lost refunds due to procrastination of filing their tax returns! For additional information check with http://www.irs.gov/ or, http://www.taxadvocacyllc.com/ .
We have been asked many times "how long should we keep our tax records?" The answer is: The IRS has 3 years to audit your tax return or assess any additional tax liabilities. Per Internal Revenue Code 6501, the 3 year clock begins on the 16th day of April for the year the return was due. As an example, a 2005 tax return was due on April 15, 2006. The 3 year audit assessment date begins on April 16, 2006. That simply means that the IRS has until April 16, 2009 to make an audit assessment or assess any additional liabilities against you. By law they cannot make an additional assessment against you as the result of an audit after that date.
By the same token, taxpayer's have 3 years after the due date of a tax return to claim their refund. (Internal Revenue Code 6511) As an example, let's say that your 2005 Individual Income Tax Return (form 1040) is due on April 15,2006. If you fail to file your refund due tax return by April 16, 2009 then you can say bye bye to the refund you are anticipating. We cannot stress enough to you that you need to become complaint with filing of your tax returns! You would be amazed at how many taxpayer's have lost refunds due to procrastination of filing their tax returns! For additional information check with http://www.irs.gov/ or, http://www.taxadvocacyllc.com/ .
Offer in Compromise Info/updates
At Tax Advocacy, LLC we have had numerous clients who have been unable to pay a 20% deposit on lump sum Offers in Compromise. This in turn prohibits them form submitting an offer thereby causing them continued stress and anxiety. The National Taxpayer Advocate's office has just issued the following statement regarding the 20% deposit requirement. They state that they want to"Make the IRS’s Offer In Compromise Program Accessible for Appropriate Taxpayers." A taxpayer who is unable to pay his or her tax liability in full may seek to compromise the debt by submitting an “offer in compromise.” The offer program is a good deal for both the government and the taxpayer. The government benefits because it frequently collects more than it would in the absence of the program and the taxpayer is induced to pay taxes on time and in full in the future; a taxpayer whose offer is accepted must remain fully compliant for five years or face reinstatement of the compromised tax debt. The taxpayer benefits because he or she is able to make a fresh start. Legislation enacted in 2006 requires taxpayers who submit “lump sum” offers to make a down payment of 20 percent of the amount of the offer with the submission. To determine the impact of this requirement on bona fide offers, TAS reviewed a sample of 414 offers that the IRS accepted prior to the enactment of the down-payment requirement. In about 70 percent of those cases, the taxpayer did not have access to sufficient liquid funds to make the required down payment. The National Taxpayer Advocate will work with the IRS and the Treasury Department to try to improve the accessibility of the offer program.
Hopefully they will implement the changes necessary to afford everyone the opportunity to resolve their tax obligations via the Offer in Compromise program. For additional information visit the IRS website @ www.IRS.gov, or www.taxadvocacyllc.com.
Hopefully they will implement the changes necessary to afford everyone the opportunity to resolve their tax obligations via the Offer in Compromise program. For additional information visit the IRS website @ www.IRS.gov, or www.taxadvocacyllc.com.
Monday, July 23, 2007
Electronic Filing for Forms 720, 2290 and 8849
The Internal Revenue Service will add three excise tax forms this year to the ever-expanding list of federal tax returns and schedules that can be filed electronically.
“Electronic filing is a key component to modernizing our tax system,” IRS Acting Commissioner Kevin M. Brown said. “Expanding e-file opportunities to include excise tax returns will help improve service to taxpayers using these forms.”
The 2007 tax filing season set a number of electronic records, highlighted by more than 77 million electronically-filed individual tax returns.
IRS expects to receive the first electronically-filed excise tax return this summer, when Form 2290, Heavy Highway Vehicle Use Tax Return, becomes the first available excise tax return that can be e-filed. Last year, more than 575,000 Forms 2290 were filed with the IRS.
As the IRS begins implementation of electronic filing for excise tax returns later this year, taxpayers may continue to file paper Forms 2290, including those reporting 25 or more vehicles. IRS will issue further guidance regarding the applicable tax code section, IRC section 4481(e).
Form 720, Quarterly Federal Excise Tax Return, and Form 8849, Claim for Refund of Excise Taxes, will be available to e-file later this year.http://taxadvocacyllc.com
“Electronic filing is a key component to modernizing our tax system,” IRS Acting Commissioner Kevin M. Brown said. “Expanding e-file opportunities to include excise tax returns will help improve service to taxpayers using these forms.”
The 2007 tax filing season set a number of electronic records, highlighted by more than 77 million electronically-filed individual tax returns.
IRS expects to receive the first electronically-filed excise tax return this summer, when Form 2290, Heavy Highway Vehicle Use Tax Return, becomes the first available excise tax return that can be e-filed. Last year, more than 575,000 Forms 2290 were filed with the IRS.
As the IRS begins implementation of electronic filing for excise tax returns later this year, taxpayers may continue to file paper Forms 2290, including those reporting 25 or more vehicles. IRS will issue further guidance regarding the applicable tax code section, IRC section 4481(e).
Form 720, Quarterly Federal Excise Tax Return, and Form 8849, Claim for Refund of Excise Taxes, will be available to e-file later this year.http://taxadvocacyllc.com
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