IRS auditors are requesting a backup copy of taxpayer's QuickBooks file

The IRS has purchased QuickBooks licenses and installed the program on computers at various sites where they do income tax return audits.  The IRS is requesting a back up copy of the firm's QuickBooks along with the other typical information like bank statements and copies of expense receipts.  The IRS uses the extracted information from the QuickBooks to calculate sales and expenses.  For example is the amount reported as sales on the state sales tax return consistent with the amount of sales reported on the income tax return.  One area that the IRS is looking at is the Undeposited Funds account in the QuickBooks.  Several IRS auditors have looked at the undeposited funds as unreported sales that the business owner is trying to hide.  Most of our QuickBooks clients don't clear the undeposited funds account when they make their bank deposits.  The second part of the entry for the bank deposit is to clear the undeposited funds account so it doesn't appear that the business is not depositing all their sales.  Might be a good time to have KatTax review your QuickBooks on a monthly basis to make sure all the accounting entries are going through properly.   

Intuit raises prices on Quickbooks Payroll services

Intuit Quickbooks is increasing their prices for their payroll services.  That increase affects client's payroll subscriptions for both new and renewing effective September 1, 2011.  If you use the assisted payroll services those fee increases are effective  August 8, 2011. 

Most clients started using QuickBooks payroll to save money.  With these rate increases the savings has largely disappeared.  Our fees for standard payroll are about the same or lower than QuickBooks fees.  Plus we calculate and print payroll checks, prepare all the quarterly reports and deliver the payroll the next day.  Why would you want to risk doing it yourself? 

Call KatTax today at 702-796-1040

Health care reform act is still in place and it will be here soon

The Patient Protection and Affordable Care Act and the amendment Health Care and Education Reconciliation Act of 2010 will require most of the 32 million uninsured individuals to acquire health coverage.  Who pays for all this? 

Starting in 2016 anyone not covered by health insurance will have a penalty of $695.  In government speak that is a "Shared responsibility payment" not a penalty.

Starting in 2013 employee Medicare tax will increase .09% to 2.35% for married couples earning more than $250,000 or single people earning more than $200,000.

A new Medicare tax of 3.8% on net investment income for married couples with an AGI over $250,000 and for single people with an AGI over $200,000 will go into effect in 2013.

Also starting in 2013 medical expenses will have to exceed 10% of AGI to be deductible instead of the 7.5% now.

Starting in 2011 employers will now report the cost of your health coverage on your year end W2.  No tax as yet on your medical coverage expenses.  Starting in 2018 the tax will be 40% on premiums in excess of $10,200 for individual coverage and $27,500 for family coverage.

Children under 27 can stay on their parents insurance policy even though the child is not a dependent.

Want more info go to www.healthcare.gov for all the latest.

Powers of attorney for financial matters and health care decisions.

I am not an attorney nor is KatTax.  This is not intended to provide legal advice.

Every person needs two powers of attorney.  One relates to transacting financial business.  The second relates to health care decisions.

An agent under a power of attorney for financial affairs has the ability to sign income tax returns or transact financial business including access to the principal's assets like their bank and investment accounts.

An agent under a power of attorney for health care decisions has the ability to direct medical care or to make the decision to "pull the plug."  Without anyone to make the medical decisions it is left up to the doctors to keep you alive.

Copies of these powers of attorney should be available to anyone at the time of need.  Post them on your refrigerator door, put them in your night stand, or give a copy to the person who is the responsible party.  A power of attorney that is locked in your safe deposit box does not help anyone.

A power of attorney lapses when the principal dies!

Many types of powers of attorney exist.  Get you attorney involved early.  Besides the powers of attorney you may need a will or a trust.  These are all hard issues to deal with.  Everyone thinks they will liver forever.  So far no one has.

IRS just made an Iphone/Itouch/Andriod Application! You can check your refund status and get tax updates! The App is called IRS2GO!Check out the IRS website for more details: http://ping.fm/ajTum

Debt cancellation or forgiveness may be exempt from tax.

Canceled or forgiven debt usually creates taxable income.  When your mortgage lender cancels or forgives your debt, the Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude up to $2 million of debt forgiven on your personal residence.

The $2 million includes debt reduced through mortgage restructuring, foreclosure or through short sale.

The debt must have been used to purchase, build or substantially improve your property.  If you refinanced the property to pay off credit cards, vehicles or other uses it does not qualify for the exclusion.

Debt cancelled for credit cards, car loans, rental properties or second homes does not qualify for this act.  You may be able to exclude the amount under other areas including insolvency.  Insolvency is when you owe more than the value of your assets.  Assets also include your 401(k) and retirement account balances.

Your lender is required to issue a 1099 C for the amount of debt cancelled.  The lender is supposed to issue the 1099 by January 31st.  Unfortunately the lender usually mails it to your last address which is the house you just did the short sale on or the lender foreclosed on.  As long as the lender can show they mailed the form they have met their legal requirements.

More questions call KatTax at 702-796-1040 and we can help you determine if you will owe any taxes.

Don't forget to report your F-BAR (Foreign Bank Account Report) to the IRS! They are due June 30th, and if you miss the deadline they are subject to a 25% penalty!  There are no extensions for this form.  You can download the form from www.irs.gov and the form number is TD F 90-22.1 or type FBAR in the search window.  The form is your name and address, the bank name and address, the account number and the maximum amount in the account for the year. The penalty for late filing is based on the highest amount in the account.