If you owe the IRS you may have a Federal Tax Lien filed against you. If you do, you can not sell your home unless you pay off your tax liability. You can get a copy of your lien in the county courthouse where you live, but the amount due will be out of date. You have to call the IRS and find out how much is owed currently because interest and penalties have been added to your balance.
You can sell your home if the money you make from the sale of you home is enough to full pay your tax liability. In most cases the only thing to do is to issue checks to the IRS for the taxes and the IRS will automatically release the lien in 30 days from the date the taxes are paid.
In the case that a lien discharge is needed for the title insurance company, you need to apply for a lien discharge with the IRS. Instructions for doing that are here. The really good news is that the IRS is helping to facilitate these discharges in weeks instead of months to help tax payers settle their back taxes.
If you need help with this find a knowledgeable real estate agent and a good tax resolution firm to help with the discharge. The tax firm can research all of your back taxes and help facilitate the discharge by talking with the IRS for you.
Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Wednesday, January 21, 2009
Wednesday, January 14, 2009
How much do you know about your taxes?
In an article on April15.com, H & R Block did a survey of 1000 US Adults on how well they know their taxes. Many can not even answer basic tax questions. Almost 60% did not know the difference between and tax credit (which lowers your tax liability dollar for dollar) and a tax deduction (it lowers your liability by a percentage.
Location was cited as the most popular reason for picking a tax preparer, not how well a preparer was knowledgeable in tax law.
Most do not know which tax bracket they are in and 83% did not know they could go back and amend a tax return for the 3 prior years if errors were made in the return.
A tax payer should never prepare their own tax return. There is way too much involved with it. A simple calculation error or missing a credit or deduction can cost you money, time and a lot of hurt dealing with the IRS. Find a reputable tax preparer and get it done right.
Location was cited as the most popular reason for picking a tax preparer, not how well a preparer was knowledgeable in tax law.
Most do not know which tax bracket they are in and 83% did not know they could go back and amend a tax return for the 3 prior years if errors were made in the return.
A tax payer should never prepare their own tax return. There is way too much involved with it. A simple calculation error or missing a credit or deduction can cost you money, time and a lot of hurt dealing with the IRS. Find a reputable tax preparer and get it done right.
Monday, January 12, 2009
Keep Good IRS Tax Records
Keeping Good Tax Records
In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.
Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.
If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.
Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.
Publication 583, Starting a Business and Keeping Records,
and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.
These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Actually, there is a wealth of free tax information on the IRS Web site. It’s not just about recordkeeping. Individuals and businesses can find answers to almost any question about federal taxes on the web site. Helpful links found at the top of the home page will take you directly to topics centered on Individuals, Businesses, Charities and Non-Profits, Government Entities, Tax Professionals, the Retirement Plan Community and Tax Exempt Bonds.
In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.
Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.
If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.
Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.
Publication 583, Starting a Business and Keeping Records,
and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.
These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676). Actually, there is a wealth of free tax information on the IRS Web site. It’s not just about recordkeeping. Individuals and businesses can find answers to almost any question about federal taxes on the web site. Helpful links found at the top of the home page will take you directly to topics centered on Individuals, Businesses, Charities and Non-Profits, Government Entities, Tax Professionals, the Retirement Plan Community and Tax Exempt Bonds.
Saturday, January 10, 2009
Sale of Business
The sale of a business usually is not a sale of one asset. Instead, all the assets of the business are sold. Generally, when this occurs, each asset is treated as being sold separately for determining the treatment of gain or loss.
A business usually has many assets. When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. The gain or loss on each asset is figured separately. The sale of capital assets results in capital gain or loss. The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction. The sale of inventory results in ordinary income or loss.
Publication 541, Partnership interests
An interest in a partnership or joint venture is treated as a capital asset when sold. The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. For more information, see Publication 541, Partnerships (PDF).
Publication 550, Corporation interests
Your interest in a corporation is represented by stock certificates. When you sell these certificates, you usually realize capital gain or loss. For information on the sale of stock, see chapter 4 in Publication 550, Investment Income and Expenses (PDF).
Corporate liquidations
Corporate liquidations of property generally are treated as a sale or exchange. Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value.
In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. For more information, see Internal Revenue Code section 332 and its regulations.
Allocation of consideration paid for a business
The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method to allocate the consideration to each business asset transferred. This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. It also determines the buyer's basis in the business assets.
Consideration
The buyer's consideration is the cost of the assets acquired. The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets.
Residual method
The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code.
A group of assets constitutes a trade or business is either of the following applies.
Goodwill or going concern value could under any circumstances, attach to them.
The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code.
The residual method provides for the consideration to be reduced first by the cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposits). The consideration remaining after this reduction must be allocated among the various business assets in a certain order. To find out more about how to make the allocation among assets in proportion, refer to Publication 544, Sales and Other Dispositions of Assets.
References/Related Topics
Closing a Business
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
A business usually has many assets. When sold, these assets must be classified as capital assets, depreciable property used in the business, real property used in the business, or property held for sale to customers, such as inventory or stock in trade. The gain or loss on each asset is figured separately. The sale of capital assets results in capital gain or loss. The sale of real property or depreciable property used in the business and held longer than 1 year results in gain or loss from a section 1231 transaction. The sale of inventory results in ordinary income or loss.
Publication 541, Partnership interests
An interest in a partnership or joint venture is treated as a capital asset when sold. The part of any gain or loss from unrealized receivables or inventory items will be treated as ordinary gain or loss. For more information, see Publication 541, Partnerships (PDF).
Publication 550, Corporation interests
Your interest in a corporation is represented by stock certificates. When you sell these certificates, you usually realize capital gain or loss. For information on the sale of stock, see chapter 4 in Publication 550, Investment Income and Expenses (PDF).
Corporate liquidations
Corporate liquidations of property generally are treated as a sale or exchange. Gain or loss generally is recognized by the corporation on a liquidating sale of its assets. Gain or loss generally is recognized also on a liquidating distribution of assets as if the corporation sold the assets to the distributee at fair market value.
In certain cases in which the distributee is a corporation in control of the distributing corporation, the distribution may not be taxable. For more information, see Internal Revenue Code section 332 and its regulations.
Allocation of consideration paid for a business
The sale of a trade or business for a lump sum is considered a sale of each individual asset rather than of a single asset. Except for assets exchanged under any nontaxable exchange rules, both the buyer and seller of a business must use the residual method to allocate the consideration to each business asset transferred. This method determines gain or loss from the transfer of each asset and how much of the consideration is for goodwill and certain other intangible property. It also determines the buyer's basis in the business assets.
Consideration
The buyer's consideration is the cost of the assets acquired. The seller's consideration is the amount realized (money plus the fair market value of property received) from the sale of assets.
Residual method
The residual method must be used for any transfer of a group of assets that constitutes a trade or business and for which the buyer's basis is determined only by the amount paid for the assets. This applies to both direct and indirect transfers, such as the sale of a business or the sale of a partnership interest in which the basis of the buyer's share of the partnership assets is adjusted for the amount paid under section 743(b) of the Internal Revenue Code. Section 743(b) applies if a partnership has an election in effect under section 754 of the Internal Revenue Code.
A group of assets constitutes a trade or business is either of the following applies.
Goodwill or going concern value could under any circumstances, attach to them.
The use of the assets would constitute an active trade or business under section 355 of the Internal Revenue Code.
The residual method provides for the consideration to be reduced first by the cash and general deposit accounts (including checking and savings accounts but excluding certificates of deposits). The consideration remaining after this reduction must be allocated among the various business assets in a certain order. To find out more about how to make the allocation among assets in proportion, refer to Publication 544, Sales and Other Dispositions of Assets.
References/Related Topics
Closing a Business
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
Terminating your Retirement Plan upon Business Closure
In this stage – Terminating – business owners go through the often-confusing process of shutting down a retirement plan.
This process includes:
Notifying participants
Notifying appropriate government agencies
Distributing plan assets
… and perhaps choosing a new plan.
FAQ's
Why is the IRS holding the money from my retirement plan now that the plan has terminated?
When a plan has formally terminated and submitted a Form 5310, Application for Determination for Terminating Plan, the Service will review the application in an expedient manner. However, on many occasions there are questions raised which need to be addressed before a favorable letter is issued. Also, the employer or trustee is not required to hold the assets until a favorable determination letter is issued, but usually will do so as a safety feature to ensure that distributions will receive the favorable tax treatment to which qualified plan distributions are entitled.
NOTE: The Service does not maintain or hold the assets during the termination process.
When are assets required to be distributed after a plan has terminated?
Generally, an employer is required to distribute assets from a terminated plan as soon as it is administratively feasible after the date of plan termination.
Whether distributions are made as soon as it is administratively feasible is determined under all the facts and circumstances of a given case, but generally the Internal Revenue Service views this to mean within one year after plan termination (see Rev. Rul. 89-87, 1989-2, C.B.
This process includes:
Notifying participants
Notifying appropriate government agencies
Distributing plan assets
… and perhaps choosing a new plan.
FAQ's
Why is the IRS holding the money from my retirement plan now that the plan has terminated?
When a plan has formally terminated and submitted a Form 5310, Application for Determination for Terminating Plan, the Service will review the application in an expedient manner. However, on many occasions there are questions raised which need to be addressed before a favorable letter is issued. Also, the employer or trustee is not required to hold the assets until a favorable determination letter is issued, but usually will do so as a safety feature to ensure that distributions will receive the favorable tax treatment to which qualified plan distributions are entitled.
NOTE: The Service does not maintain or hold the assets during the termination process.
When are assets required to be distributed after a plan has terminated?
Generally, an employer is required to distribute assets from a terminated plan as soon as it is administratively feasible after the date of plan termination.
Whether distributions are made as soon as it is administratively feasible is determined under all the facts and circumstances of a given case, but generally the Internal Revenue Service views this to mean within one year after plan termination (see Rev. Rul. 89-87, 1989-2, C.B.
Closing your Business
If you are closing your business and have an EIN number with the IRS, the process is more involved than just closing your business than just locking the doors.
This section provides procedures for getting out of business, including what forms to file and how to handle additional revenue received or expenses you may incur.
5 things may occur with the closing of your business:
Changing Your Business Structure
Closing a Business Checklist
Declaring Bankruptcy
Sale of a Business
Terminating a Retirement Plan
The most important thing about closing a business is informing the IRS that it is closed and that no more filing requirements are needed. Making sure this is done can help you stay out of hot water. If the IRS thinks you still need to file tax returns, Forms 1065, 1120, 1120s, or employment returns, 941, 940, they will continue to pursue you for that information.
This section provides procedures for getting out of business, including what forms to file and how to handle additional revenue received or expenses you may incur.
5 things may occur with the closing of your business:
Changing Your Business Structure
Closing a Business Checklist
Declaring Bankruptcy
Sale of a Business
Terminating a Retirement Plan
The most important thing about closing a business is informing the IRS that it is closed and that no more filing requirements are needed. Making sure this is done can help you stay out of hot water. If the IRS thinks you still need to file tax returns, Forms 1065, 1120, 1120s, or employment returns, 941, 940, they will continue to pursue you for that information.
Wednesday, January 7, 2009
IRS Help For Financially Distressed Taxpayers: Part 1
IRS Begins Tax Season 2009 with Steps to Help Financially Distressed Taxpayers; Promotes Credits, e-File Options
The Internal Revenue Service today kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.
IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season and announced a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds.
“With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”
Help for People Who Owe Taxes
With many people facing additional financial difficulties, the IRS is taking several additional steps to help people who owe back taxes.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
On a wide range of situations, IRS employees have flexibility to work with struggling taxpayers to assist them with their situation. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.
The IRS reminds taxpayers who are behind on tax payments and need assistance to contact the phone numbers listed on their IRS correspondence. There could be additional help available for these taxpayers facing unusual hardship situations.
Among the areas where the IRS can provide assistance:
Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.
Added Flexibility for Missed Payments: The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.
Further help may be found witha reliable tax resolution firm.
The Internal Revenue Service today kicked off the 2009 tax filing season by announcing a number of new steps to help financially distressed taxpayers maximize their refunds and speed payments while providing additional help to people struggling to meet their tax obligations.
IRS Commissioner Doug Shulman encouraged taxpayers to take advantage of several new tax credits and deductions this filing season and announced a major enhancement to the Free File program that will allow nearly all taxpayers to e-file for free and accelerate their refunds.
“With so many people facing financial difficulties, we want taxpayers to get all the tax credits they’re entitled to as quickly as they can,” Shulman said. “In addition, we are creating new protections to help people trying to meet their tax obligations. The IRS will do everything it can to help during these tough times.”
Help for People Who Owe Taxes
With many people facing additional financial difficulties, the IRS is taking several additional steps to help people who owe back taxes.
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
On a wide range of situations, IRS employees have flexibility to work with struggling taxpayers to assist them with their situation. Depending on the circumstances, taxpayers in hardship situations may be able to adjust payments for back taxes, avoid defaulting on payment agreements or possibly defer collection action.
The IRS reminds taxpayers who are behind on tax payments and need assistance to contact the phone numbers listed on their IRS correspondence. There could be additional help available for these taxpayers facing unusual hardship situations.
Among the areas where the IRS can provide assistance:
Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.
Added Flexibility for Missed Payments: The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.
Further help may be found witha reliable tax resolution firm.
Tuesday, January 6, 2009
IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell
The Internal Revenue Service announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.
The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.
“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.
“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”
Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.
In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.
If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.
The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.
“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.
“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”
Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.
In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt. That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.
Questions about the stimulus rebate from the IRS
Questions and Answers about the Recovery Rebate Credit
The following are answers to some basic questions regarding the recovery rebate credit. Check back periodically for updates and additional questions and answers that may be added.
Basic information
Q. What is the recovery rebate credit?
A. This credit is a new refundable credit that is related to the 2008 economic stimulus payment. Generally, a credit increases the amount of a refund or reduces the amount of taxes owed. Those who did not receive their economic stimulus payment (or did not receive what they were fully entitled to) in 2008 are eligible for the credit.
Q. What is the basis of the recovery rebate credit calculation?
A. The recovery rebate credit is calculated the same way and with the same requirements as the 2008 economic stimulus payment. The only difference is that the credit is based on the tax year 2008 income tax return and the stimulus payment was based on the tax year 2007 income tax return.
Qualifying for the rebate
Q. Who is eligible?
A. Those who were eligible for the stimulus payment but did not receive it (or did not receive what they were fully entitled to) in 2008 are eligible for the credit. Also eligible for the credit are those who did not meet the requirements for the stimulus payment last year but whose circumstances have since changed, causing them to now meet the requirements.
Q. Why doesn’t everyone qualify for the rebate?
A. Most taxpayers have already received their full benefit in advance in the form of the 2008 economic stimulus payment. However, if certain conditions changed for taxpayers in 2008, they may be eligible for an additional benefit.
Q: How will the recovery rebate credit payments be made?
A: The Treasury won't send out separate economic stimulus payments for 2009. Instead, those eligible will claim the rebate credit on their 2008 returns. Credits generally increase the amount of a refund or reduce the amount of taxes owed.
Q. I was claimed as a dependent on my parents’ 2007 tax return, and was not eligible for the stimulus payment, but I lived on my own in 2008. Do I qualify for the rebate?
A. That depends on whether you can be claimed as a dependent on your parents' 2008 return. The rebate is based on circumstances that occurred in 2008, while the stimulus payment was based on the 2007 tax return filing information. You'll have to use the tax booklet's worksheet on claiming the recovery rebate credit to see if you're eligible to claim it.
Claiming the credit
Q. How do I claim the recovery rebate credit?
A. Use the recovery rebate worksheet that is found in your 2008 tax booklet to figure the credit you can take, if any. Then, include that figure in the payments section of your 2008 tax return.
Q. How do I get help figuring the credit?
A. The IRS will figure the credit for you, if you enter “recovery rebate credit” next to line 70 on your Form 1040 (line 42 of Form 1040A; line 9 of Form 1040EZ). You can also access the online recovery rebate tools using the recovery rebate credit link on this Web site. For taxpayers filing electronically, the software will calculate any credit they may be due.
Q. What info do I need to figure the credit?
A. If you received your 2008 economic stimulus payment, you will need to know how much you received. The IRS sent Notice 1378, Economic Stimulus Payment Notice, to taxpayers who received a payment, showing the amount received. If you don’t have your notice, you can use the online tool How Much Was My 2008 Stimulus Payment?.
Q. What tools are available to help figure the credit?
A. The IRS will post interactive tools on this Web site to help figure the Recovery Rebate Credit: the Recovery Rebate Credit Calculator and How Much Was My 2008 Stimulus Payment?. The 2008 tax packages also include a worksheet to help figure the credit.
Q. When can I expect to receive my rebate?
A. The rebate is part of your 2008 income tax refund. The amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the stimulus payment, it will not be issued as a separate check. You can check the status of your refund under Where’s My Refund?. Generally, you will receive your refund within 6–8 weeks after you file your return.
Q. I am not required to file a tax return, but I still would like to get the rebate. How do I claim the rebate?
A. You must file a tax form to claim the credit, and be sure to fill in lines 7, 20a and 70 of your Form 1040 (lines 7, 14a and 42 of Form 1040A; lines 7 and 9 of Form 1040EZ).
Q. Because the IRS applied part of my stimulus payment to an outstanding debt, I actually received less than the total amount as stated on my Notice 1378. What amount should I use when figuring my credit?
A. You must use the total amount — the amount before the deduction to satisfy the debt — as stated on your Notice 1378. That total is considered to be the amount of your stimulus payment, even though part of it was used to satisfy a debt. The recovery rebate credit must be reduced by the amount of your 2008 stimulus payment.
Economic stimulus payments received
Q. Do I have to claim my stimulus payment as income on my 2008 income tax return?
A. No, the stimulus payment is not reportable as income on your 2008 income tax return.
Q. My stimulus payment was more than what the worksheet calculates my recovery rebate credit to be. Does this mean I will have to pay the difference?
A. No, you do not need to repay the difference, and the difference will not affect your return. However, your recovery rebate credit will be zero.
Q. Will the payment I received in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 tax return.
Q. I have no earned income and no filing requirement, but I filed a 2007 economic stimulus payment return to get the payment. Do I have to file a 2008 tax return?
A. If you received your stimulus payment, no. If you did not receive the stimulus payment, and do not pay income tax but have at least $3,000 in qualifying income for 2008, then you should file a 2008 tax return to receive the recovery rebate credit.
The following are answers to some basic questions regarding the recovery rebate credit. Check back periodically for updates and additional questions and answers that may be added.
Basic information
Q. What is the recovery rebate credit?
A. This credit is a new refundable credit that is related to the 2008 economic stimulus payment. Generally, a credit increases the amount of a refund or reduces the amount of taxes owed. Those who did not receive their economic stimulus payment (or did not receive what they were fully entitled to) in 2008 are eligible for the credit.
Q. What is the basis of the recovery rebate credit calculation?
A. The recovery rebate credit is calculated the same way and with the same requirements as the 2008 economic stimulus payment. The only difference is that the credit is based on the tax year 2008 income tax return and the stimulus payment was based on the tax year 2007 income tax return.
Qualifying for the rebate
Q. Who is eligible?
A. Those who were eligible for the stimulus payment but did not receive it (or did not receive what they were fully entitled to) in 2008 are eligible for the credit. Also eligible for the credit are those who did not meet the requirements for the stimulus payment last year but whose circumstances have since changed, causing them to now meet the requirements.
Q. Why doesn’t everyone qualify for the rebate?
A. Most taxpayers have already received their full benefit in advance in the form of the 2008 economic stimulus payment. However, if certain conditions changed for taxpayers in 2008, they may be eligible for an additional benefit.
Q: How will the recovery rebate credit payments be made?
A: The Treasury won't send out separate economic stimulus payments for 2009. Instead, those eligible will claim the rebate credit on their 2008 returns. Credits generally increase the amount of a refund or reduce the amount of taxes owed.
Q. I was claimed as a dependent on my parents’ 2007 tax return, and was not eligible for the stimulus payment, but I lived on my own in 2008. Do I qualify for the rebate?
A. That depends on whether you can be claimed as a dependent on your parents' 2008 return. The rebate is based on circumstances that occurred in 2008, while the stimulus payment was based on the 2007 tax return filing information. You'll have to use the tax booklet's worksheet on claiming the recovery rebate credit to see if you're eligible to claim it.
Claiming the credit
Q. How do I claim the recovery rebate credit?
A. Use the recovery rebate worksheet that is found in your 2008 tax booklet to figure the credit you can take, if any. Then, include that figure in the payments section of your 2008 tax return.
Q. How do I get help figuring the credit?
A. The IRS will figure the credit for you, if you enter “recovery rebate credit” next to line 70 on your Form 1040 (line 42 of Form 1040A; line 9 of Form 1040EZ). You can also access the online recovery rebate tools using the recovery rebate credit link on this Web site. For taxpayers filing electronically, the software will calculate any credit they may be due.
Q. What info do I need to figure the credit?
A. If you received your 2008 economic stimulus payment, you will need to know how much you received. The IRS sent Notice 1378, Economic Stimulus Payment Notice, to taxpayers who received a payment, showing the amount received. If you don’t have your notice, you can use the online tool How Much Was My 2008 Stimulus Payment?.
Q. What tools are available to help figure the credit?
A. The IRS will post interactive tools on this Web site to help figure the Recovery Rebate Credit: the Recovery Rebate Credit Calculator and How Much Was My 2008 Stimulus Payment?. The 2008 tax packages also include a worksheet to help figure the credit.
Q. When can I expect to receive my rebate?
A. The rebate is part of your 2008 income tax refund. The amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the stimulus payment, it will not be issued as a separate check. You can check the status of your refund under Where’s My Refund?. Generally, you will receive your refund within 6–8 weeks after you file your return.
Q. I am not required to file a tax return, but I still would like to get the rebate. How do I claim the rebate?
A. You must file a tax form to claim the credit, and be sure to fill in lines 7, 20a and 70 of your Form 1040 (lines 7, 14a and 42 of Form 1040A; lines 7 and 9 of Form 1040EZ).
Q. Because the IRS applied part of my stimulus payment to an outstanding debt, I actually received less than the total amount as stated on my Notice 1378. What amount should I use when figuring my credit?
A. You must use the total amount — the amount before the deduction to satisfy the debt — as stated on your Notice 1378. That total is considered to be the amount of your stimulus payment, even though part of it was used to satisfy a debt. The recovery rebate credit must be reduced by the amount of your 2008 stimulus payment.
Economic stimulus payments received
Q. Do I have to claim my stimulus payment as income on my 2008 income tax return?
A. No, the stimulus payment is not reportable as income on your 2008 income tax return.
Q. My stimulus payment was more than what the worksheet calculates my recovery rebate credit to be. Does this mean I will have to pay the difference?
A. No, you do not need to repay the difference, and the difference will not affect your return. However, your recovery rebate credit will be zero.
Q. Will the payment I received in 2008 reduce my 2008 refund or increase the amount I owe for 2008?
A. No, the stimulus payment will not reduce your refund or increase the amount you owe when you file your 2008 tax return.
Q. I have no earned income and no filing requirement, but I filed a 2007 economic stimulus payment return to get the payment. Do I have to file a 2008 tax return?
A. If you received your stimulus payment, no. If you did not receive the stimulus payment, and do not pay income tax but have at least $3,000 in qualifying income for 2008, then you should file a 2008 tax return to receive the recovery rebate credit.
IRS Stimulus Check Recovery
The recovery rebate credit is a one-time benefit for people who didn't receive the full economic stimulus payment last year and whose circumstances may have changed, making them eligible now for some or all of the unpaid portion.
Generally, a credit adds to the amount of a tax refund or decreases the amount of taxes owed. Therefore, the amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the 2008 economic stimulus payment, it will not be issued as a separate check.
You May Be Eligible
People who fall into the categories described below may be eligible for the recovery rebate credit this year:
Individuals who did not receive an economic stimulus payment.
Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
Families who gained an additional qualifying child in 2008.
Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.
How to Get the Recovery Rebate Credit
You need to claim the recovery rebate credit on Form 1040, 1040A or 1040EZ. The instructions for these forms will show you which lines to use. Unlike the economic stimulus payment, the recovery rebate credit will be included in your tax refund for 2008 and will not be issued as a separate payment.
The IRS Will Figure the Credit for You in Most Cases
You can choose to let the IRS do the work when you file your 2008 Form 1040, 1040A or 1040EZ. If you're filing on paper, simply follow the line-by-line instructions to choose this option. If you're filing electronically, the software will figure the credit for you.
Or You Can Figure It Yourself
Likewise, you can figure and claim the recovery rebate credit on your 2008 Form 1040, 1040A or 1040EZ. Two interactive online tools will be available to help you with the calculation, the Recovery Rebate Credit Calculator and How Much Was My 2008 Stimulus Payment?
The Recovery Rebate Credit Calculator will help you figure the amount you should claim on your 2008 tax return. Or, you can use the worksheet in the Form 1040 instruction booklet to help you figure your credit by hand. To use the Recovery Rebate Credit Calculator or complete the worksheet, you'll need the amount of the economic stimulus payment you received in 2008, if any. This amount was provided on Notice 1378, Economic Stimulus Payment Notice, sent by the IRS to taxpayers who received a payment.
You can use How Much Was My 2008 Stimulus Payment? to determine the amount you already received, if you don’t have or didn't receive Notice 1378.
If you still have some questions you can try the question and answer page.
For more information check out the Economic Stimulus Payment Information Center.
For help with tax liabilities check out this web site.
Generally, a credit adds to the amount of a tax refund or decreases the amount of taxes owed. Therefore, the amount you receive for the recovery rebate credit will be included as part of your refund, as shown on your tax return. Unlike the 2008 economic stimulus payment, it will not be issued as a separate check.
You May Be Eligible
People who fall into the categories described below may be eligible for the recovery rebate credit this year:
Individuals who did not receive an economic stimulus payment.
Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
Families who gained an additional qualifying child in 2008.
Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.
How to Get the Recovery Rebate Credit
You need to claim the recovery rebate credit on Form 1040, 1040A or 1040EZ. The instructions for these forms will show you which lines to use. Unlike the economic stimulus payment, the recovery rebate credit will be included in your tax refund for 2008 and will not be issued as a separate payment.
The IRS Will Figure the Credit for You in Most Cases
You can choose to let the IRS do the work when you file your 2008 Form 1040, 1040A or 1040EZ. If you're filing on paper, simply follow the line-by-line instructions to choose this option. If you're filing electronically, the software will figure the credit for you.
Or You Can Figure It Yourself
Likewise, you can figure and claim the recovery rebate credit on your 2008 Form 1040, 1040A or 1040EZ. Two interactive online tools will be available to help you with the calculation, the Recovery Rebate Credit Calculator and How Much Was My 2008 Stimulus Payment?
The Recovery Rebate Credit Calculator will help you figure the amount you should claim on your 2008 tax return. Or, you can use the worksheet in the Form 1040 instruction booklet to help you figure your credit by hand. To use the Recovery Rebate Credit Calculator or complete the worksheet, you'll need the amount of the economic stimulus payment you received in 2008, if any. This amount was provided on Notice 1378, Economic Stimulus Payment Notice, sent by the IRS to taxpayers who received a payment.
You can use How Much Was My 2008 Stimulus Payment? to determine the amount you already received, if you don’t have or didn't receive Notice 1378.
If you still have some questions you can try the question and answer page.
For more information check out the Economic Stimulus Payment Information Center.
For help with tax liabilities check out this web site.
Friday, December 12, 2008
IRS Plans Crackdown on Withholding Taxes
In a recent article by WebCPA, the IRS Commissioner Douglas Shulman said the agency would begin ramping up enforcement against tax abuses such as the avoidance of withholding taxes, especially on dividends.
In a speech at a Washington, D.C., tax conference, Shulman said that withholding taxes is one of the areas in which the IRS plans to concentrate its enforcement efforts.
"Today, the IRS will add withholding taxes to the Tier I list of issues," he said. "The tier issue process will provide the needed organizational priority and coordination to ensure taxpayer compliance with the U.S. withholding tax provisions. Our compliance efforts will span efforts to ensure individual, business and corporate taxpayers understand and fulfill their withholding tax filing obligations, to addressing transactions that attempt to circumvent withholding taxes or claiming improper tax treaty withholding rates."
The Senate Permanent Subcommittee on Investigations held a hearing in September on how investment banks were helping clients, mainly hedge funds, avoid dividend withholding taxes. Shulman said the IRS was carefully examining transactions whose primary purpose is to avoid dividend withholding tax.
Other areas in which the IRS has recently ramped up scrutiny include transfer pricing, contract manufacturing arrangements designed to avoid Subpart F income in foreign locations that do not have sufficient manufacturing activity, and hybrid structures, such as hybrid entities and hybrid instruments that either exclude income from taxation or obtain double deductions and credits in various jurisdictions.
Among these are foreign tax credit generators. "In my opinion, FTC generator transactions are examples of situations where certain taxpayers may be trending toward the 'bad actor' end of the spectrum," said Shulman.
On the individual tax side, the IRS commissioner also emphasized the agency's efforts to crack down on tax shelters with the help of whistleblowers, informants and John Doe summonses.
"Using informants is another part of our toolkit," said Shulman. "Since the inception of the Whistleblower Office in 2007, the IRS has received hundreds of tips on financial institutions and individuals with foreign accounts and international compliance issues. Some of these have become big money cases."
In a speech at a Washington, D.C., tax conference, Shulman said that withholding taxes is one of the areas in which the IRS plans to concentrate its enforcement efforts.
"Today, the IRS will add withholding taxes to the Tier I list of issues," he said. "The tier issue process will provide the needed organizational priority and coordination to ensure taxpayer compliance with the U.S. withholding tax provisions. Our compliance efforts will span efforts to ensure individual, business and corporate taxpayers understand and fulfill their withholding tax filing obligations, to addressing transactions that attempt to circumvent withholding taxes or claiming improper tax treaty withholding rates."
The Senate Permanent Subcommittee on Investigations held a hearing in September on how investment banks were helping clients, mainly hedge funds, avoid dividend withholding taxes. Shulman said the IRS was carefully examining transactions whose primary purpose is to avoid dividend withholding tax.
Other areas in which the IRS has recently ramped up scrutiny include transfer pricing, contract manufacturing arrangements designed to avoid Subpart F income in foreign locations that do not have sufficient manufacturing activity, and hybrid structures, such as hybrid entities and hybrid instruments that either exclude income from taxation or obtain double deductions and credits in various jurisdictions.
Among these are foreign tax credit generators. "In my opinion, FTC generator transactions are examples of situations where certain taxpayers may be trending toward the 'bad actor' end of the spectrum," said Shulman.
On the individual tax side, the IRS commissioner also emphasized the agency's efforts to crack down on tax shelters with the help of whistleblowers, informants and John Doe summonses.
"Using informants is another part of our toolkit," said Shulman. "Since the inception of the Whistleblower Office in 2007, the IRS has received hundreds of tips on financial institutions and individuals with foreign accounts and international compliance issues. Some of these have become big money cases."
Wednesday, November 26, 2008
IRS Announces 2009 Standard Mileage Rates
The Internal Revenue Service today issued the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
55 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices.
The rate for charitable purposes is set by law and is unchanged from 2008.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
55 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices.
The rate for charitable purposes is set by law and is unchanged from 2008.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
IRS announces Disater Relief help for Midwest
New Law Encourages Cash Donations for Midwest Disaster Relief
Taxpayers who make qualifying cash contributions for disaster relief efforts in the Midwest could benefit from a recently passed law that suspends the percentage-of-income limits that would normally apply when taxpayers deduct the contributions on their 2008 federal tax returns.
Under the Heartland Disaster Tax Relief Act, an individual taxpayer who itemizes deductions may choose to deduct qualifying cash contributions up to 100 percent of his or her adjusted gross income, reduced by deductions for other charitable contributions. Similarly, an electing corporation may deduct qualifying cash contributions up to 100 percent of its taxable income, reduced by deductions for other charitable contributions.
Cash contributions qualify for this special treatment if they are made to a public charity for disaster relief efforts related to certain areas in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska or Wisconsin. The areas must have been declared federal disaster areas on or after May 20 and before Aug. 1 of this year as a result of severe storms, tornados or flooding, and the areas must have been designated to receive individual assistance from the federal government because of the damage resulting from the disasters.
The contributions must be made no later than Dec. 31, 2008. “Cash” includes payments made by check or credit card. Qualifying cash contributions do not include payments to a supporting organization as described in section 509(a)(3) or for the establishment of a new, or maintenance of an existing, donor-advised fund.
Qualifying cash contributions of more than the amount allowed as a deduction can be carried over and deducted in succeeding tax years, subject to the normal limits. To substantiate the deduction, a taxpayer must obtain from the charity a written acknowledgment that the contribution was or will be used for relief efforts related to one or more of the Midwestern disaster areas.
In addition, deductions by individuals for qualifying contributions are not treated as itemized deductions for purposes of the overall limitation on itemized deductions. This means that, for taxpayers with higher adjusted gross incomes, the deduction for these qualifying contributions is not limited the way other itemized deductions are limited.
For other tax help go here.
Taxpayers who make qualifying cash contributions for disaster relief efforts in the Midwest could benefit from a recently passed law that suspends the percentage-of-income limits that would normally apply when taxpayers deduct the contributions on their 2008 federal tax returns.
Under the Heartland Disaster Tax Relief Act, an individual taxpayer who itemizes deductions may choose to deduct qualifying cash contributions up to 100 percent of his or her adjusted gross income, reduced by deductions for other charitable contributions. Similarly, an electing corporation may deduct qualifying cash contributions up to 100 percent of its taxable income, reduced by deductions for other charitable contributions.
Cash contributions qualify for this special treatment if they are made to a public charity for disaster relief efforts related to certain areas in Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska or Wisconsin. The areas must have been declared federal disaster areas on or after May 20 and before Aug. 1 of this year as a result of severe storms, tornados or flooding, and the areas must have been designated to receive individual assistance from the federal government because of the damage resulting from the disasters.
The contributions must be made no later than Dec. 31, 2008. “Cash” includes payments made by check or credit card. Qualifying cash contributions do not include payments to a supporting organization as described in section 509(a)(3) or for the establishment of a new, or maintenance of an existing, donor-advised fund.
Qualifying cash contributions of more than the amount allowed as a deduction can be carried over and deducted in succeeding tax years, subject to the normal limits. To substantiate the deduction, a taxpayer must obtain from the charity a written acknowledgment that the contribution was or will be used for relief efforts related to one or more of the Midwestern disaster areas.
In addition, deductions by individuals for qualifying contributions are not treated as itemized deductions for purposes of the overall limitation on itemized deductions. This means that, for taxpayers with higher adjusted gross incomes, the deduction for these qualifying contributions is not limited the way other itemized deductions are limited.
For other tax help go here.
Thursday, November 20, 2008
EFTPS: The Electronic Federal Tax Payment System
A Secure Way to Pay All Your Federal Taxes
EFTPS, the Electronic Federal Tax Payment System, is a tax payment system provided free by the U.S. Department of Treasury. Pay federal taxes electronically via the Internet or phone 24/7. Visit EFTPS to enroll.Businesses and Individuals can pay all their federal taxes using EFTPS. Individuals can pay their quarterly 1040ES estimated taxes electronically using EFTPS, and they can make payments weekly, monthly, or quarterly. Both business and individual payments can be scheduled in advance.
More than 8 million taxpayers are currently enrolled in the system. Since EFTPS started in 1996, there have been over 717 million electronic payments made, totaling almost $17 trillion!
EFTPS is ...
Secure
Fast
Accurate
Convenient
Easy to Use
Helps Reduce Penalties
A Secure Government Web Site EFTPS via the Internet is a secure government web site that uses the highest level of security available. Every user must have a secure Internet browser with 128-bit encryption in order to access the site. To log on to the system, an enrolled user must be authenticated with three pieces of unique information known only to the user: Taxpayer Identification Number (EIN or SSN), EFTPS Personal Identification Number (PIN) and an Internet Password. The combination of these three pieces of identification adds to the security of the site and the privacy of taxpayer data.
Convenience at Your Fingertips
EFTPS offers you the convenience and flexibility of making your tax payments via the Internet or phone. By 8:00 P.M.(ET) at least one calendar day in advance of the due date, you access EFTPS directly to report your tax information. You will instruct EFTPS to move the funds from your account to the Treasury's account for payment of your federal taxes. Funds will not move from your account until the date you indicate. You receive an immediate acknowledgement of your payment instructions, and your bank statement will confirm the payment was made.
You can initiate your tax payment 24 hours a day, seven days a week. As an added convenience, EFTPS allows taxpayers to schedule tax payments in advance. Businesses can schedule payments up to 120 days in advance of their tax due date. Individuals can schedule payments up to 365 days in advance of their tax due date. EFTPS will automatically make your payments for you on the due date you indicate. Scheduled payments can be changed or cancelled up to 2 business days in advance of the scheduled payment date.
You can use EFTPS to make all your federal tax payments, including income, employment, estimated and excise taxes.
EFTPS, the Electronic Federal Tax Payment System, is a tax payment system provided free by the U.S. Department of Treasury. Pay federal taxes electronically via the Internet or phone 24/7. Visit EFTPS to enroll.Businesses and Individuals can pay all their federal taxes using EFTPS. Individuals can pay their quarterly 1040ES estimated taxes electronically using EFTPS, and they can make payments weekly, monthly, or quarterly. Both business and individual payments can be scheduled in advance.
More than 8 million taxpayers are currently enrolled in the system. Since EFTPS started in 1996, there have been over 717 million electronic payments made, totaling almost $17 trillion!
EFTPS is ...
Secure
Fast
Accurate
Convenient
Easy to Use
Helps Reduce Penalties
A Secure Government Web Site EFTPS via the Internet is a secure government web site that uses the highest level of security available. Every user must have a secure Internet browser with 128-bit encryption in order to access the site. To log on to the system, an enrolled user must be authenticated with three pieces of unique information known only to the user: Taxpayer Identification Number (EIN or SSN), EFTPS Personal Identification Number (PIN) and an Internet Password. The combination of these three pieces of identification adds to the security of the site and the privacy of taxpayer data.
Convenience at Your Fingertips
EFTPS offers you the convenience and flexibility of making your tax payments via the Internet or phone. By 8:00 P.M.(ET) at least one calendar day in advance of the due date, you access EFTPS directly to report your tax information. You will instruct EFTPS to move the funds from your account to the Treasury's account for payment of your federal taxes. Funds will not move from your account until the date you indicate. You receive an immediate acknowledgement of your payment instructions, and your bank statement will confirm the payment was made.
You can initiate your tax payment 24 hours a day, seven days a week. As an added convenience, EFTPS allows taxpayers to schedule tax payments in advance. Businesses can schedule payments up to 120 days in advance of their tax due date. Individuals can schedule payments up to 365 days in advance of their tax due date. EFTPS will automatically make your payments for you on the due date you indicate. Scheduled payments can be changed or cancelled up to 2 business days in advance of the scheduled payment date.
You can use EFTPS to make all your federal tax payments, including income, employment, estimated and excise taxes.
Personal Exemptions and Standard Deductions to Rise in 2009
2009 Inflation Adjustments Widen Tax Brackets and Expand Tax Benefits
For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:
The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
The annual gift exclusion rises to $13,000, up from $12,000 in 2008.
For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009. Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:
The value of each personal and dependency exemption, available to most taxpayers, is $3,650, up $150 from 2008.
The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $67,900, up from $65,100 in 2008.
The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $5,028, up from $4,824. The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
The annual gift exclusion rises to $13,000, up from $12,000 in 2008.
Thursday, November 13, 2008
Why Pay Taxes
Why Pay Taxes? —
The Truth about Frivolous Tax Arguments
The Truth About Frivolous Tax Arguments (PDF 405K) addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the federal tax laws. These arguments are grouped under six general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention. The second section deals with frivolous arguments encountered in collection due process cases. The final section illustrates penalties imposed on those pursuing frivolous cases.
Many people have been lead to believe that there is not a substantial basis for the IRS to collect income taxes. Working for a tax resolution firm I have heard many of those arguments. I believe that the IRS is right in collecting taxes and if everyone paid there fair share we would all owe less than we do.
The Truth about Frivolous Tax Arguments
The Truth About Frivolous Tax Arguments (PDF 405K) addresses some of the more common false "legal" arguments made by individuals and groups who oppose compliance with the federal tax laws. These arguments are grouped under six general categories, with variations within each category. Each contention is briefly explained, followed by a discussion of the legal authority that rejects the contention. The second section deals with frivolous arguments encountered in collection due process cases. The final section illustrates penalties imposed on those pursuing frivolous cases.
Many people have been lead to believe that there is not a substantial basis for the IRS to collect income taxes. Working for a tax resolution firm I have heard many of those arguments. I believe that the IRS is right in collecting taxes and if everyone paid there fair share we would all owe less than we do.
IRS Stimulus Checks Undeliverable
IRS Seeks to Return $266 Million in Undeliverable Refunds And Economic Stimulus Payments to Taxpayers
The Internal Revenue Service is looking for taxpayers who are missing more than 279,000 economic stimulus checks totaling about $163 million and more than 104,000 regular refund checks totaling about $103 million that were returned by the U.S. Postal Service due to mailing address errors.
“People across the country are missing tax refunds and stimulus checks. We want to get this money into the hands of taxpayers where it belongs,” said IRS Commissioner Doug Shulman. “We are committed to making the process as easy as possible for taxpayers to update their addresses with the IRS and get their checks.”
All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due.
Stimulus Checks
It is crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28, 2008. By law, economic stimulus checks must be sent out by Dec. 31 of this year. The undeliverable economic stimulus checks average $583.
The “Where’s My Stimulus Payment?" tool on the IRS Web site is the quickest and easiest way for a taxpayer to check the status of a stimulus check and receive instructions on how to update his or her address. Taxpayers without Internet access should call 1-866-234-2942.
Regular Refunds
The regular refund checks that were returned to the IRS average $988. These checks are resent as soon as taxpayers update their address.
Taxpayers can update their addresses with the “Where’s My Refund?” tool on the IRS Web site. It enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2007 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
Unsure?
Taxpayers not sure of which type of check they may be due should check on a potential economic stimulus check first because of the looming deadline. See instructions above.
For Most People
The vast majority of checks mailed out by the IRS reach their rightful owner every year. Only a very small percent are returned by the U.S. Postal Service as undeliverable.
Through September 2008, the government distributed 116 million economic stimulus payments with only about 279,000 checks being undeliverable. Meanwhile, the IRS has distributed more than 105 million regular refunds this year with only about 104,000 being undeliverable. In both cases, well under one percent of refunds or stimulus checks were undeliverable.
Avoiding Future Problems
The IRS encourages taxpayers to choose direct deposit when they file their return because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.
The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors and speeds up refunds.
The Internal Revenue Service is looking for taxpayers who are missing more than 279,000 economic stimulus checks totaling about $163 million and more than 104,000 regular refund checks totaling about $103 million that were returned by the U.S. Postal Service due to mailing address errors.
“People across the country are missing tax refunds and stimulus checks. We want to get this money into the hands of taxpayers where it belongs,” said IRS Commissioner Doug Shulman. “We are committed to making the process as easy as possible for taxpayers to update their addresses with the IRS and get their checks.”
All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due.
Stimulus Checks
It is crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28, 2008. By law, economic stimulus checks must be sent out by Dec. 31 of this year. The undeliverable economic stimulus checks average $583.
The “Where’s My Stimulus Payment?" tool on the IRS Web site is the quickest and easiest way for a taxpayer to check the status of a stimulus check and receive instructions on how to update his or her address. Taxpayers without Internet access should call 1-866-234-2942.
Regular Refunds
The regular refund checks that were returned to the IRS average $988. These checks are resent as soon as taxpayers update their address.
Taxpayers can update their addresses with the “Where’s My Refund?” tool on the IRS Web site. It enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2007 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.
Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.
Unsure?
Taxpayers not sure of which type of check they may be due should check on a potential economic stimulus check first because of the looming deadline. See instructions above.
For Most People
The vast majority of checks mailed out by the IRS reach their rightful owner every year. Only a very small percent are returned by the U.S. Postal Service as undeliverable.
Through September 2008, the government distributed 116 million economic stimulus payments with only about 279,000 checks being undeliverable. Meanwhile, the IRS has distributed more than 105 million regular refunds this year with only about 104,000 being undeliverable. In both cases, well under one percent of refunds or stimulus checks were undeliverable.
Avoiding Future Problems
The IRS encourages taxpayers to choose direct deposit when they file their return because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.
The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors and speeds up refunds.
Thursday, October 30, 2008
What is an Enrolled Agent?
As I work in my job assissting people with resolving their tax issues, I have decided to become an enrolled agent. We have several EA's in our office. Most people have no idea of the importance of an enrolled agent or what you must do to become one so I decided to shed some light on the subject.
An enrolled agent is a person who has earned the privilege of practicing, that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before.
How do you become an enrolled agent?
There are two tracks to becoming an enrolled agent.
The two tracks are:
Written examination.
You can become an enrolled agent by demonstrating special competence in tax matters by taking a written examination. This track requires that you -
Apply to take the Special Enrollment Examination (SEE); prometric.com/irs;
Achieve passing scores on all parts of the SEE;
Apply for enrollment; and
Pass a background check to ensure that you have not engaged in any conduct that would justify the suspension or disbarment of an attorney, CPA, or enrolled agent from practice before the IRS.
IRS experience.
You can become an enrolled agent by virtue of past service and technical experience with the IRS that qualifies you for enrollment.
This track requires that you -
Possess the years of past service and technical experience specified in Circular 230;
Apply for enrollment; and
Pass a background check to ensure that you have not engaged in any conduct that would justify the suspension or disbarment of an attorney, CPA, or enrolled agent from practice before the IRS.
An enrolled agent is a person who has earned the privilege of practicing, that is, representing taxpayers, before the Internal Revenue Service. Enrolled agents, like attorneys and certified public accountants (CPAs), are unrestricted as to which taxpayers they can represent, what types of tax matters they can handle, and which IRS offices they can practice before.
How do you become an enrolled agent?
There are two tracks to becoming an enrolled agent.
The two tracks are:
Written examination.
You can become an enrolled agent by demonstrating special competence in tax matters by taking a written examination. This track requires that you -
Apply to take the Special Enrollment Examination (SEE); prometric.com/irs;
Achieve passing scores on all parts of the SEE;
Apply for enrollment; and
Pass a background check to ensure that you have not engaged in any conduct that would justify the suspension or disbarment of an attorney, CPA, or enrolled agent from practice before the IRS.
IRS experience.
You can become an enrolled agent by virtue of past service and technical experience with the IRS that qualifies you for enrollment.
This track requires that you -
Possess the years of past service and technical experience specified in Circular 230;
Apply for enrollment; and
Pass a background check to ensure that you have not engaged in any conduct that would justify the suspension or disbarment of an attorney, CPA, or enrolled agent from practice before the IRS.
Thursday, October 23, 2008
OIC? You have a better chance of getting a foul ball at a baseball game
I get incensed by the false advertising of companies that state that they can get you "pennies on the dollar"- as if it was dependent on the skill of that practitioner. Another false advertising claim by these companies is the statement, "it is your last chance to get rid of your tax debt." This one could not be farther from the truth. These companies are referring to the IRS Offer in Compromise program. In fact, this program has been with the IRS for about 60 years, with no end proposed by Congress, the US Treasury, or the IRS.
Now, your chances of an Offer- Doubt as to Collectibility (this is the one that they are advertising), are quite small. In fact, by conservative standards, the chances are about 1 in 714 for those who owe taxes.
Compare that with your chances of catching a foul ball at a baseball game: 563 to 1
The fact is that the Offer in Compromise is a rarely used form of resolving your debt. There are many other options you need to explore with a competent tax professional.
Now, your chances of an Offer- Doubt as to Collectibility (this is the one that they are advertising), are quite small. In fact, by conservative standards, the chances are about 1 in 714 for those who owe taxes.
Compare that with your chances of catching a foul ball at a baseball game: 563 to 1
The fact is that the Offer in Compromise is a rarely used form of resolving your debt. There are many other options you need to explore with a competent tax professional.
Paying Your Fair Share
I work for a tax resolution firm. Every day I see the hard times people have that owe the IRS money. They owe for just a few reasons.
They fail to file their tax returns and the IRS prepares returns for them, called SFRs, and they end up with a liability with huge penalties and a lot of interest. This causes a lot of hardship for the taxpayer and puts them in a hole that is VERY hard to get out of.
They fail to withhold the correct amount of taxes from their paychecks. This makes them short on their withholdings at the end of the year. When they file their return , they have not had enough taxes withheld from their paychecks to pay their tax. Therefore they can not pay what they owe and end up in a deficit. You can figure how much you need to withhold from your checks by using this withholding calculator form the IRS website.
Another reason why people owe the IRS at the end of the year is self employed people fail to make their estimated tax payments each quarter during the year. A self employed person is paid by the job and is usually issued a 1099 misc. at the end of the year. No taxes are withheld during the year and the tax payer is not only resposible for the reagular tax amount he would owe for working but also the self employment tax. The self employment tax is what an employer would pay, matching FICA, if the taxpayer was employed earning a W-2. So as you can see, a self employed person will owe more tax that a regular employee.
A taxpayer really needs to set up a budget to live by and stick to it. Make your estimated tax payments if you are self employed and make sure your withholdings are correct if you are a W-2 employee. You do not want to owe the IRS. They can make life VERY miserable for a taxpayer.
If its to late for you and you owe the IRS now, please get in touch with a reputable tax resolution firm to resolve your tax debt issue.
They fail to file their tax returns and the IRS prepares returns for them, called SFRs, and they end up with a liability with huge penalties and a lot of interest. This causes a lot of hardship for the taxpayer and puts them in a hole that is VERY hard to get out of.
They fail to withhold the correct amount of taxes from their paychecks. This makes them short on their withholdings at the end of the year. When they file their return , they have not had enough taxes withheld from their paychecks to pay their tax. Therefore they can not pay what they owe and end up in a deficit. You can figure how much you need to withhold from your checks by using this withholding calculator form the IRS website.
Another reason why people owe the IRS at the end of the year is self employed people fail to make their estimated tax payments each quarter during the year. A self employed person is paid by the job and is usually issued a 1099 misc. at the end of the year. No taxes are withheld during the year and the tax payer is not only resposible for the reagular tax amount he would owe for working but also the self employment tax. The self employment tax is what an employer would pay, matching FICA, if the taxpayer was employed earning a W-2. So as you can see, a self employed person will owe more tax that a regular employee.
A taxpayer really needs to set up a budget to live by and stick to it. Make your estimated tax payments if you are self employed and make sure your withholdings are correct if you are a W-2 employee. You do not want to owe the IRS. They can make life VERY miserable for a taxpayer.
If its to late for you and you owe the IRS now, please get in touch with a reputable tax resolution firm to resolve your tax debt issue.
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