If you have employees, you will be required to report the value of any health insurance you paid for the employee’s benefit beginning with 2011. Thus, you will need to be able to track these amounts beginning in January 2011.
The IRS Treasury Inspector has reported many compliance issues relating to the homebuyer tax credit. For instance, 256 taxpayers took a tax credit for homes at just five addresses. Several prisoners filed claims and had them approved (where their housing should have been a bit easier to verify!). Many amended returns filed questionable claims and the IRS did not devote resources to examining these returns. And if this wasn’t enough, more than 100 current IRS employees filed claims for the credit when they were not entitled to receive this credit. They are now under an internal investigation! And on a related matter: Congress has extended the time to claim the $8,000 first time homebuyer credit or $6,500 credit for longtime owners. This credit was set to expire on April 30 but now any contracts that were signed prior to April 30, 2010, will have until September 30, 2010, to actually close on the transaction. This extension was done to relieve the backlog of homes trying to close before the prior deadline (delays due to lenders and the federal government administering the lending programs). Congress did NOT extend the deadline of April 30 to contract for the purchase of the home.
The IRS offshore income probes just got a bit stronger, with Swiss bank UBS agreeing to turn over more than 4,000 accounts to the IRS where U.S. tax fraud is suspected. If you have an offshore account and did not report any income earned, you may want to talk to a tax professional about your options, as it does not appear that the IRS is slowing down in any way in the offshore tax fraud investigations.
The IRS has released filing data for the 2007 tax year (the most recent year available) and it showed that 4,535,623 US taxpayers reported an Adjusted Gross Income of at least $200,000. This represented about 3.2% of all individual tax returns filed. The actual number and percentage were record highs. Interestingly, more than 10,000 of these tax returns showed no US income tax liability. The IRS has attributed this to tax-exempt income being earned, along with numerous tax deductions (primarily Schedule A itemized deductions).
The IRS has announced that it will be doing more than 1,000,000 audits via mail this year, as it had a great deal of success with last year’s audits (i.e. they raised a lot of new revenue!). They are going to focus on unreimbursed employee business expenses, large charitable donations, earned income credit and advertising and car expenses for self-employed taxpayers.
Showing posts with label Greetings from the IRS. Show all posts
Showing posts with label Greetings from the IRS. Show all posts
Sunday, August 1, 2010
Thursday, April 1, 2010
April: Greetings from the IRS
Business owners making an automobile purchase in 2010 will get less in tax benefits from the purchase than in 2009. This is the case because the bonus depreciation has lapsed and as of this writing Congress has yet to reinstate it. Thus, for 2010, the maximum first year deduction (not including Section 179 for vehicles that weigh in excess of 6,000 pounds) is $3,060, down from $10,960 in 2009.
The IRS has finally agreed to grant relief to taxpayers who have attempted a like-kind (1031) exchange but had the exchange fail due to the bankruptcy or receivership of the Qualified Intermediary (thus preventing the sale transaction from closing). Prior to IRS Revenue Procedure 2010-14, the taxpayer was out of luck in these situations and simply lost the tax benefits of the exchange. Now, a 1031 exchange can still work its magic from a tax perspective if a Qualified Intermediary is bankrupt if the taxpayer satisfied the following requirements: he or she must have transferred the relinquished property to the Qualified Intermediary properly and properly and timely identified the replacement property. In addition, the taxpayer must not have received any funds from the Qualified Intermediary with respect to the relinquished property and did not complete the exchange solely due to the bankruptcy or receivership situation of the Qualified Intermediary. There are a number of complicated calculations that must be performed here (better left for your tax return preparer!) but this revenue procedure is welcome news for those who have been victims of a bankrupt Qualified Intermediary. These new rules apply only to those exchanges in which the Qualified Intermediary defaulted on or after January 1, 2009.
The IRS has ruled that a company that hires a nanny to watch the owners’ children will have the nanny be treated as an employee of the business. While this may sound like good news in that the business will get a tax deduction for the wages, it will also need to pay employment taxes and will also make all corporate fringe benefits available to the nanny. This is simply another good reason why you want to keep your business and personal financial matters separate from each other.
The IRS and Department of Justice have completed a series of successful criminal prosecutions associated with tax fraud. Several tax preparers were caught, including those who were claiming tax withholdings on fictitious Forms W-2, identity theft issues (and using the information to claim tax refunds before the actual folks filed their tax returns), abuse of the homeowners tax credit and many other scams involving false credits and deductions. Given that we are in the middle of Tax Season 2010, it is important that you, as the taxpayer, review your tax preparer’s work very carefully before you sign the return. It is up to you to ask questions if you do not understand your tax return!
The IRS has finally agreed to grant relief to taxpayers who have attempted a like-kind (1031) exchange but had the exchange fail due to the bankruptcy or receivership of the Qualified Intermediary (thus preventing the sale transaction from closing). Prior to IRS Revenue Procedure 2010-14, the taxpayer was out of luck in these situations and simply lost the tax benefits of the exchange. Now, a 1031 exchange can still work its magic from a tax perspective if a Qualified Intermediary is bankrupt if the taxpayer satisfied the following requirements: he or she must have transferred the relinquished property to the Qualified Intermediary properly and properly and timely identified the replacement property. In addition, the taxpayer must not have received any funds from the Qualified Intermediary with respect to the relinquished property and did not complete the exchange solely due to the bankruptcy or receivership situation of the Qualified Intermediary. There are a number of complicated calculations that must be performed here (better left for your tax return preparer!) but this revenue procedure is welcome news for those who have been victims of a bankrupt Qualified Intermediary. These new rules apply only to those exchanges in which the Qualified Intermediary defaulted on or after January 1, 2009.
The IRS has ruled that a company that hires a nanny to watch the owners’ children will have the nanny be treated as an employee of the business. While this may sound like good news in that the business will get a tax deduction for the wages, it will also need to pay employment taxes and will also make all corporate fringe benefits available to the nanny. This is simply another good reason why you want to keep your business and personal financial matters separate from each other.
The IRS and Department of Justice have completed a series of successful criminal prosecutions associated with tax fraud. Several tax preparers were caught, including those who were claiming tax withholdings on fictitious Forms W-2, identity theft issues (and using the information to claim tax refunds before the actual folks filed their tax returns), abuse of the homeowners tax credit and many other scams involving false credits and deductions. Given that we are in the middle of Tax Season 2010, it is important that you, as the taxpayer, review your tax preparer’s work very carefully before you sign the return. It is up to you to ask questions if you do not understand your tax return!
Wednesday, July 1, 2009
July Greetings from the IRS
The IRS has issued additional guidance for victims of Ponzi schemes (not only those victims of the Madoff schemes but at least two dozen other schemes the IRS has recently identified). The IRS is trying to be sympathetic to those taxpayers who lost money in scams in which there was never any real economic or legitimate investment activities. For additional guidance on this, please see Revenue Procedure 2009-20, available at www.irs.gov.
The IRS has indicated that any rebates received from current tax legislation (including a potential bill to pay taxpayers to remove old cars and buy new ones– known as the “Cash for Clunkers” bill) will NOT be taxable to the recipient.
The annual contribution caps for Health Savings Account for 2009 will be increased to $6,150 (for family coverage) and $3,050 for self-only coverage. The minimum policy deductibles will also rise to $2,400 for families and $1,200 for singles.
IRS has ruled that the first-time homebuyer tax credit (up to $8,000) can be used for a down payment. The FHA will allow lenders to provide a bridge loan in the amount of the tax credit and buyers can repay the lender when the tax refund arrives. This is another avenue of potential relief to encourage home purchases and assist the depressed real estate market.
The IRS will begin doing employment tax audits in November 2009 and will be increasing the number of audits due to the many new leads it has received from workers unhappy with their independent contractor status. At least 6000 companies with potential employees will be audited. The IRS will be focusing on worker classification, treatment of fringe benefits (i.e. are they taxable?) and expense reimbursement plans and recordkeeping.
The IRS is moving forward with its plan to regulate tax return preparers who aren’t already licensed. Thus, any preparers who are not Attorneys, CPAs or Enrolled Agents would need to meet certain minimum education, training and continuing education requirements before they would be permitted to prepare tax returns for a fee. Congress would need to approve the final plan before it is implemented and the IRS is modeling its plan on the one used by the State of Oregon.
Finally, the IRS is considering easing its rules on cell phones used by businesses. As we have previously discussed, cell phones are considered to be “listed property” and thus time logs need to be kept to determine how much of the phone is used for business purposes (with personal use not tax deductible). Some ideas include a flat percentage (25% is being considered) to use for personal calls or some sampling methods. The IRS will decide how to proceed after September 4, 2009.
.
The IRS has indicated that any rebates received from current tax legislation (including a potential bill to pay taxpayers to remove old cars and buy new ones– known as the “Cash for Clunkers” bill) will NOT be taxable to the recipient.
The annual contribution caps for Health Savings Account for 2009 will be increased to $6,150 (for family coverage) and $3,050 for self-only coverage. The minimum policy deductibles will also rise to $2,400 for families and $1,200 for singles.
IRS has ruled that the first-time homebuyer tax credit (up to $8,000) can be used for a down payment. The FHA will allow lenders to provide a bridge loan in the amount of the tax credit and buyers can repay the lender when the tax refund arrives. This is another avenue of potential relief to encourage home purchases and assist the depressed real estate market.
The IRS will begin doing employment tax audits in November 2009 and will be increasing the number of audits due to the many new leads it has received from workers unhappy with their independent contractor status. At least 6000 companies with potential employees will be audited. The IRS will be focusing on worker classification, treatment of fringe benefits (i.e. are they taxable?) and expense reimbursement plans and recordkeeping.
The IRS is moving forward with its plan to regulate tax return preparers who aren’t already licensed. Thus, any preparers who are not Attorneys, CPAs or Enrolled Agents would need to meet certain minimum education, training and continuing education requirements before they would be permitted to prepare tax returns for a fee. Congress would need to approve the final plan before it is implemented and the IRS is modeling its plan on the one used by the State of Oregon.
Finally, the IRS is considering easing its rules on cell phones used by businesses. As we have previously discussed, cell phones are considered to be “listed property” and thus time logs need to be kept to determine how much of the phone is used for business purposes (with personal use not tax deductible). Some ideas include a flat percentage (25% is being considered) to use for personal calls or some sampling methods. The IRS will decide how to proceed after September 4, 2009.
.
Monday, June 1, 2009
June: Greetings From the IRS
The IRS will begin to examine employment tax returns beginning this fall and will start with a sample size of 4,500. These audits will focus on worker classification rules (employee vs. independent contractor), along with wages for S corporation shareholders, fringe benefits and executive compensation (“reasonable compensation”) issues.
If you are retired, you should have received a check from the IRS in May for $250. This check represents a retirees’ stimulus payment and applies to those on Social Security, Railroad Retirement, veterans pension or SSI.
The IRS has announced that it is reducing the penalties associated with offshore accounts and the failure to report all earnings in the past. These reductions apply only if you come forward before the IRS notifies you of a potential problem. In order to take advantage of this offer, you must contact the IRS and enter into an agreement with the IRS to adjust your taxes (as needed) for the previous six years. If you do this, the maximum penalty will be an accuracy-related penalty, along with a penalty of 20% of the highest amount in the foreign bank account during these years. The 20% amount may be reduced to 5% if the taxpayer did not open the account, there was no activity on the account and all taxes have been paid regarding the account. These penalties, while potentially high, are still much less than a potential civil (or criminal) fraud situation. See IRS Document 2009-10280.
The IRS has corrected a previous announcement that audits of millionaires are on the rise by stating that they actually decreased in 2008. Previously, the IRS reported that had a 9.25% increase in the number of audits for those taxpayers making more than $1 Million per year. It turns out that this was actually a decrease. Oops!
If you use your credit card to pay your IRS tax bill, you are now permitted to claim a tax deduction for the processing fee the IRS charges to accept the payment. It can be claimed as a miscellaneous itemized deduction on Schedule A (subject to the 2% floor for miscellaneous deductions).
The IRS has privately ruled that a like-kind exchange under Section 1031 of the Internal Revenue Code will fail if the intermediary goes bankrupt. Even though this was not the seller’s fault, if the exchange is not completed within 180 days due to the bankruptcy, the sale will be considered a taxable event and will not qualify for tax deferral.
Continuing with like-kind exchanges, the IRS has also decided that certain intangible assets, such as trademarks, trade names, and customer-based intangibles that can be separated from goodwill, will now qualify for tax deferral under Section 1031.
The IRS has provided updated depreciation and leasing tables for 2009 (Revenue Procedure 2009-24). Any leased vehicle worth in excess of $18,500 will be subject to a “lease inclusion” amount that must be added back into taxable income. These amounts attempt to provide a way to equalize the tax advantages between leasing and purchasing a vehicle.
Finally, the IRS is now reviewing many refund claims from taxpayers claiming the first-time homebuyers credit, as nearly 10% of those claiming this credit have been determined to be not eligible.
Subscribe to:
Posts (Atom)