Year end tax ideas for businesses to save money

The following is from Joy Taylor of the Kiplinger Tax Newsletter about year end 2012 ideas for businesses to save money on their taxes. Great points to pass along. But no matter what lawmakers do with the tax extenders for this year or the Bush tax cuts for 2013, there are moves that you can make between now and December 31 that will save you and your business plenty of taxes. Acquire Needed Business Assets If you're thinking of buying assets for your business, then act quickly so you can expense them this year. In lieu of depreciation, businesses right now can claim an immediate write-off of up to $139,000 of the cost of new or used assets placed in service in 2012. The $139,000 ceiling is reduced dollar for dollar after more than $560,000 of assets are put into use this year. There's a fair chance that before year-end, lawmakers will act to increase the maximum write-off for this year to $500,000 and start the phaseout at $2 million. If Congress decides not to act, then next year businesses can expense only up to $25,000 of acquired assets. Buying assets and placing them in service this year has another tax advantage: the ability to use bonus depreciation. This allows you to deduct 50% of the cost right away, with the remaining 50% recovered through regular deprecation. Bonus depreciation can be claimed only on new assets with useful lives of 20 years or less, including machinery, equipment, land improvements and single-purpose farm buildings such as chicken coops. Ditto for leasehold improvements made to the interiors of commercial buildings. This tax break ends after 2012 and probably won't be revived for next year, so you'd be wise to take advantage of it now. Buy a Vehicle for Your Business 2012 remains a very good year to buy a business vehicle. The maximum deduction for cars acquired and placed in use in 2012 is $11,160. After December 31, the cap falls to a little more than $3,000. The tax benefit increases dramatically if you buy a new SUV with a loaded weight over 6,000 pounds and place it into service in 2012 -- up to $25,000 of the cost can be expensed, the balance is eligible for 50% bonus depreciation, and 20% of the remaining cost is recovered through normal depreciation. Assuming 100% business use, the total first-year write-off for a $60,000 new heavy SUV is $46,000 -- $25,000 expensing, $17,500 bonus depreciation and $3,500 regular depreciation. And, believe it or not, large pickup trucks fare even better. You can expense the full cost of a pickup with a loaded vehicle weight over 6,000 pounds that is put to use in your business in 2012 if the cargo bed is at least six feet long and separate from the cab. But be careful about buying too many assets in the last quarter of 2012. It can cost you some depreciation deductions. If over 40% of your 2012 asset purchases are made after September, regular depreciation (not bonus depreciation or expensing) on all assets put in use in 2012 is determined on a quarterly basis. Therefore, assets acquired near year-end get only 1½ months of depreciation instead of six months' worth. This special limitation doesn't apply to buildings, where depreciation depends on the month put in use. Shift Income and Expenses Between 2012 and 2013 Professionals can delay year-end billings, or alternatively, they can speed them up if they expect to be in a higher tax bracket in 2013. High-income professionals may want to accelerate billings to report income in 2012 to lock in the 35% top individual income tax rate. Those who will be in the same bracket or a lower bracket in 2013 can adopt the opposite strategy and delay their billings. The same applies to bonus payments. Business owners can pay year-end bonuses in 2012 if they want the deduction sooner or they want to ensure that the bonuses are taxed at the 2012 rates. Or they can delay paying them so that recipients are not taxed until 2013. There are limits, however, to bonus deferral. Delaying payment of year-end bonuses does not work for a majority shareholder if the bonus amount is fixed during 2012 and the corporation has the cash to pay the bonus. In that case, the law treats the shareholder as constructively receiving the money in 2012. Also, accrual-method companies cannot deduct in 2012 bonuses that are deferred to 2013 if paid to a more-than-50% shareholder in a regular corporation or to an owner of any stake in an S corporation, personal service company or partnership. Take Dividends in Lieu of Salary Finally, consider having your corporation pay dividends instead of salary. This works out taxwise if the corporation is in a low tax bracket and the shareholder is in a high bracket. Although payment of dividends does not give rise to a corporate deduction, the owner's tax savings upon receipt of a dividend can exceed the benefit of the corporation's forgone deduction in some cases. This is due both to the 15% maximum dividend rate for 2012 and the fact that dividends are not subject to payroll tax. This tax tip does not work for personal service firms that pay a flat 35% tax or for S corporations. And remember, no matter what Congress and President Obama do with the Bush tax cuts for next year, the maximum tax rate on dividends received by high-incomers is going up in 2013 on account of the 3.8% Medicare surtax. If you have any questions or want to discuss any of these issues and how the may impact your business call Larry or Kathy at 702-796-1040.

2012 Income tax organizer

If you need a tax organizer for 2012 you can print out the following or call us at 796-1040 and we can mail you a copy. I realize this is not the best format for a form to fill out. Thanks Larry Eisenzimer Tax Organizer Tax Year 2012 Name: Taxpayer ___________________________________ SS No. _____________________ Birthdate/Age _______ Spouse ____________________________________ SS No. _____________________ Birthdate/Age _______ Address: _______________________________________ Telephone (Home) (____)_________________________ ________________________________________ Telephone (Work) (____)_________________________ Cell Phone: (____)_________________________Cell Phone: (____)_______________________________ Email Address:_____________________________________________________________________________ Occupation: Taxpayer ________________________________ Spouse ________________________________ Check One:  Single  Married Filing Joint  Surviving Widow/Widower  Married Filing Separately (enter spouse’s name/SS No. Above)  Unmarried Head of Household Dependents Name Birthdate/ Age Social Security Number* Relationship No. of Months lived in your home in 2011 *A personal exemption is disallowed for any dependent unless the Social Security number is provided on the tax return. Members of your family attending college may make you eligible for a Hope Scholarship Credit, Lifetime Learning Credit, or Tuition and Fees Deduction. # Students_________ Taxpayer:  65 or over  Blind/Disabled Spouse:  65 or over  Blind/Disabled The checklist below could lead to helpful deductions. Please answer and provide supporting information. All questions below pertain to the year 2011. YES NO   Did you receive any employer-provided educational assistance? $ ____________   Did you incur any educational expenses on behalf of yourself, your spouse, or a dependent?   Did you contribute to a Qualified State Tuition Plan?   If you are an educator, did you have un-reimbursed work-related expenses? Amount: $________ (not yet extended)   Do you or your spouse have any kind of pension, profit-sharing, 401K, Retirement, Keogh, IRA, Roth or tax sheltered annuity plan? If yes, please circle above which ones.   If yes, were you or your spouse at least 70 ½ years of age on Dec. 31st?   Did you withdraw IRA or Keogh funds during the year? If so, please indicate the amount of funds: Withdrawn: $______________ Date: ___________ Re-deposited: $___________ Date: __________ Were any funds withheld?  Yes  No Amount: $_________________________ Were the withdrawn funds used to pay medial expenses?  Yes  No   Were you called to active duty before you withdrew the amounts?   If you are self-employed, did you pay health insurance premiums for yourself and your family? Amount: $ _____________   Did you pay alimony? If yes, paid to: _____________________________________________________ SS no.: __________________________________ Amount Paid: $ ____________________________   Did you receive alimony, if so how much?$______________   Did you have any adoption expenses? $ ____________   Did you receive gifts in excess of $14,375 from a foreign person?   Did your college student receive educational benefits under a prepaid tuition program?   Do you wish to designate $3 of your taxes to the Presidential Campaign Fund?   Did you receive an advance child tax credit payment? If yes, how much? $_______________   Have you ever qualified for the Earned Income Tax Credit?   Did you have a casualty of theft loss? If so, attach itemized list (including original cost and the value on date of loss), insurance information regarding coverage, reimbursement and police report.   Did you purchase an alternative fuel motor vehicle?   Did you make qualified energy improvements, such as energy efficient windows, doors, or metal roofs?   Did you purchase alternative energy sources for your personal residence, such as solar water heaters, solar electric equipment, geothermal heat pumps or wind turbines and fuel cell plants?   Did you have a property foreclosed on, have a short sale, or relinquish a property in lieu of foreclosure? Estimated Tax Payments 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter TOTAL Date Paid Amount Date Paid Amount Date Paid Amount Date Paid Amount Federal State City Wage Income Employer’s Name T or S Wages Federal W/H FICA Medicare State W/H City W/H Retirement Benefits Received (Enclose all 1099R Forms) Payer T or S Amount Plan Type Interest Income (Enclose all 1099-INT Forms) Payer T or S Amount Seller Financed Mortgage Early Withdrawal Penalty Tax Exempt (Y or N) Total Municipal Bond Interest Earned in 2011: $________________________ For seller financed mortgage: Buyer’s name, Social Security number and addresses: __________________________________ ___________________________________________________________________________________________________________ Dividend Income (Enclose all 1099-DIV Forms) Payer T or S Total Amount Qualified Dividends Capital Gain Dist. Non-Taxable Do you have funds in a foreign account?  Yes  No Did you have any stock sales in 2011? If yes, submit all 1099B forms.  Yes  No Installment Sale Payments Received: Interest $____________ Principal $ _________________ Buyer’s name: ________________ SS # _________________ Address: ____________________________ Other Benefits/Income Received (Enclose all 1099, SSA-1099, K-1s and other Misc. Forms) Taxpayer Social Security Unemployment Alimony State Refund Other Spouse Capital Assets Sold (Securities, Real Estate, etc.) Attach Forms 1099B and 1099S Description of Property Date Acquired Date Sold Sale Price Depreciation Taken (if applicable) Cost or Basis *To qualify for long term capital gain rates, assets sold must have been held for more than one year. Rental Income (Attach 1099 Forms) Property Description Gross Income Expenses Advertising Auto & Travel Cleaning & Maintenance Commissions Insurance Professional Fees Mortgage Interest Other Interest Repairs Supplies Taxes Utilities Wages/Schedule % Occupancy by Taxpayer Depreciable Asset Additions For Schedule C, E, F, 2106 Description Date Purchased Cost Trade-In (if any) Improvements to Personal Residence Note: If you refinanced your home this year, please bring a copy of your closing statement. For Schedule C, E, F, 2106 Description Date Purchased Cost Business Income (Attach 1099-MISC Forms) Business Name _______________________________ Federal ID No. _______________________________ Principal Business Activity _____________________ Principal Product _____________________________ Method Used to Value Inventory _________________ Accounting Method:  Cash  Accrual Gross Income Amount Gross Income………………………. __________________ Less Returns/Allowances…………….. __________________ Cost of Sales Beginning Inventory………………….. __________________ Purchases……………………………... __________________ Cost of Labor…………………………. __________________ Materials and Supplies……………….. __________________ Freight In…………………………….. __________________ Other________________________.... __________________ ____________________________... __________________ Ending Inventory…………………….. __________________ Deductions Advertising………………………… __________________ Auto-Truck Expense………………. __________________ Bad Debts………………………….. __________________ Collection Expense………………… __________________ Commissions………………………. __________________ Professional Dues & Subscriptions.. __________________ Employee Benefit Program……….. __________________ Freight & Express ……………….. __________________ Utilities…………………………… __________________ Insurance………………………….. __________________ Interest—Mortgage………………… __________________ Interest—Other…………………….. __________________ Janitorial & Cleaning……………….. __________________ Laundry…………………………….. __________________ Legal & Accounting Fees………….. __________________ Office Expense…………………….. __________________ Postage…………………………….. __________________ Rent………………………………... __________________ Repairs…………………………….. __________________ Salaries…………………………….. __________________ Supplies……………………………. __________________ Telephone………………………….. __________________ Travel……………………………… __________________ Total Meals & Entertainment……… __________________ _______________________............ __________________ _______________________............ __________________ Farm Income (Attach 1099 Forms) Farm Name__________________________________ Principal Activity_____________________________ Accounting Method:  Cash  Accrual Income Sales of Items Bought for Resale……. __________________ Cost of Items Bought for Resale…….. __________________ Sales of Livestock & Produce Raised Except for Breeding Stock Feeders & Calves………………….. __________________ Pigs & Sheep ……………………… __________________ Poultry & Eggs ……………………. __________________ Dairy Products…………………….. __________________ Corn, Peas, etc.. ……………………. __________________ Wheat, Oats, Hay & Straw ………… __________________ Fruit ………………………………... __________________ Patronage Dividends ………………. __________________ Agricultural Program Payments……. __________________ Commodity Credit Loans Neglected…. __________________ CCC Loans: Forfeited……………... __________________ Repaid with Certificates………… __________________ Crop Insurance Proceeds…………… __________________ Federal Gasoline Tax Credit……….. __________________ Other___________________.............. __________________ Deductions Breeding Fees……………………. __________________ Chemicals………………………… __________________ Conservation Expenses…………… __________________ Custom Hire (Machine Work)…… __________________ Employee Benefits Programs……… __________________ Feed Purchased……………………. __________________ Fertilizers & Lime ………………… __________________ Freight & Trucking………………... __________________ Gasoline, Fuel, Oil…………………. __________________ Insurance …………………………… __________________ Interest—Mortgage………………… __________________ Interest—Other……………………… __________________ Labor Hired ………………………… __________________ Pension & Profit Sharing Plans……… __________________ Rent of Farm, Pasture……………… __________________ Repairs, Maintenance ……………… __________________ Seeds, Plants Purchased …………… __________________ Storage, Warehousing……………… __________________ Supplies Purchased………………… __________________ Taxes ……………………………… __________________ Utilities …………………………… __________________ Veterinary Fees, Medicine………… __________________ _______________________............ __________________ _______________________............ __________________ Personal Itemized Deductions Medical Amount Prescription Drugs…………………. __________________ Medical Insurance Premiums..…….. __________________ Long Term Care Ins. Premiums…… __________________ Medicare Premiums……………….. __________________ Doctors/Dentists…………………… __________________ Clinic/Lab Tests…………………… __________________ Hospitals…………………………… __________________ Eyeglasses/Hearing Aids………….. __________________ Orthopedic Shoes/Braces………….. __________________ Medical Long Distance Phone……. __________________ Other_______________.................. __________________ ____________________.................. __________________ _____ Miles..................................... __________________ Fares: Taxi, Bus, etc......................... __________________ Do you have a medical savings acct.? __________________ Interest Deductible Home Mortgage Interest Paid to Financial Institutions……………… __________________ Home Equity Interest……………….. __________________ Deductible Home Mortgage Interest Paid to Individuals:* Name Address:*_____________________________ __________________________________________ Social Security No.:*_________________________ *Failure to provide is subject to a $50 penalty. Deductible Points (Include Amortization Points from Prior Years)………… __________________ Investment Interest (list)…………… __________________ ________________________.............. __________________ ________________________.............. __________________ ________________________.............. __________________ Taxes Real Estate…………………...………. __________________ Personal Property……………….…… __________________ State & Local Income Tax…………… __________________ State & Local General Sales Tax......... __________________ ____________________..................... __________________ Charitable Contributions Cash Contributions*___________....... __________________ ___________________________......... __________________ ___________________________......... __________________ ___________________________......... __________________ Other Than Cash Contributions……. __________________ _________________________............ __________________ _________________________............. __________________ ______Miles for Charity …………… __________________ *Contributions of $250 or more require written substantiation from the organizations. Miscellaneous Deductions Subject to 2% AGI Unreimbursed Employee Business Expense_________________ Union & Professional Dues…………… __________________ Safe Deposit Box Rental…………….. __________________ Tax Return Preparation Fee…………. __________________ Business Publications……………… __________________ Business Telephone Calls…………… __________________ Tools, Supplies, Equipment………… __________________ Employment-Related Education…… __________________ Investment Expenses……………… __________________ Other_________________________.... __________________ Miscellaneous Deductions Not Subject to 2% AGI Gambling Losses (limited to winnings).. __________________ ___________________________________________________ ___________________________________________________ Employee Business Expense Travel Expense Amount Air Fares………………………… __________________ Auto Rentals…………………… __________________ Entertainment…………………… __________________ Garage…………………………….. __________________ Hotel/Motel………………………. __________________ Meals……………………………... __________________ Parking…………………………… __________________ Postage……………………………. __________________ Amount Road Tolls…………………… __________________ Taxi, Subway……………………… __________________ Telephone, Telegraph……………… __________________ Tips………………………………… __________________ Other………………………………. __________________ ________________________......... __________________ ________________________......... __________________ ________________________......... __________________ Car 1 Car 2 Actual Automobile Expenses Gas & Oil Insurance Licenses Lubrication Repairs Tires, Tire Repair Wash Other:

It's Later. That is the answer to I will get to it later.

“It’s Later!” We’ve been telling you since the start of the year that tax planning is the key to paying the minimum tax possible. We’ve urged you to come in for your free tax analysis, but we’ve been disappointed that you haven’t accepted our offer. Most of you agree that tax planning is a good idea that can save you money. But you’ve procrastinated, and made excuses to avoid taking advantage of the opportunity. You told yourself “I’ll wait ‘til later, after April 15.” Then after April 15, you said “I’ll wait ‘til later, when it’s closer to the end of the year.” Then, as the year drew to a close, you said “I’ll wait ‘til later, after the election results are in.” Well, guess what. It’s later. December 31 is just a few short weeks away. If you we don’t sit down to talk before then, your best planning opportunities will vanish, just like Cinderella’s carriage turning back to a pumpkin. And trust us here — you do not want to be left without a ride home that night! December 31 is even more important this year than usual, because there’s so much uncertainty in the air. Will the Bush tax cuts be extended? How much will the new Obamacare taxes cost you? What opportunities are you missing to save? We can’t give you the answers if we don’t sit down to plan. Call me today at (702) 796-1040 ext 105 for your free Tax Analysis. Do it before it’s too late. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how smart planning can save thousands more tomorrow. We guarantee it will be time well spent, or we’ll donate $50 to your favorite charity. So call now to schedule your Analysis! Another great rant from Ed Lyon. Again I just want to share this with our clients. Thanks Larry Eisenzimer

Black Friday Tax Planning puts taxes on SALE!!!!

“Black Friday” Tax Planning Puts Taxes on Sale! The holidays are here, and millions of Americans kicked off the season with “Black Friday” shopping. Braving the crowds and the cold, facing scorn from family they’ve left behind, they line up at obscenely early hours (or duck out of Thanksgiving dinner before the pumpkin pie is even served) to save $20 on a DVD player or $40 on a flat-screen television. It’s sad, but true, that most Americans spend more time planning their “Black Friday” shopping than they spend planning their taxes. But that can be an expensive mistake! What if the IRS had a sale? What if the IRS let you discount your taxes by thousands of dollars, this year and every year to come? And what if they let you do it from the comfort of your home or your office, without lining up in the pre-dawn hours of a chilly November morning? Would you give thanks for a sale like that? You’re probably not holding your breath for the scrooges at the IRS to hold a “sale.” The good news is, you don’t have to wait for that to happen. You just need a plan. Tax planning is the key to paying the legal minimum, especially with the “fiscal cliff” looming on the horizon. And a good tax plan can pay for a holiday season full of gifts and fun. Call me today at (702) 796-1040 ext 105 for your free Tax Analysis. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how “Black Friday” tax planning can save thousands more tomorrow. We guarantee you’ll give thanks for the savings, or we’ll donate $50 to your favorite soup kitchen. So call now to schedule your Analysis. This is a reprint of rant by Ed Lyon but it is so true I wanted to pass it along. Thanks Larry Eisenzimer

A few more updates to the tax law changes.

As the election is drawing close very few tax law changes have been passed. Most of what has happened is no action has been taken and laws will expire at the end of 2012. In IRS speak that means for tax years beginning after December 31, 2012. Social security withholding from everyone's paycheck will increase back to the 6.2% from the present 4.2%. The reduction was started in 2011 as a part of the economic plan. For businesses depreciation rates are changing. Businesses could deduct the cost of equipment purchased in 2011 as Bonus depreciation at 100%. In 2012 that amount was reduced to 50%. Beginning in 2013 it disappears. Section 179 to write off more of the cost of equipment is also being reduced. In 2010 and 2011 a business could write off up to $500,000 of equipment purchased. In 2012 that amount was reduced to $139,000. Starting in January that amount is reduced again to $25,000. These changes greatly reduce the incentive for a business to purchase new equipment. While it may not seem like a big deal the sale of that new dozer from Cat impacts thier employees, the employees of the parts suppliers and ripples out throught the economy. Voluntary Classification Settlement Program lets business owners confess their misclassification of workers as 1099 independent contractors and reclassify them as W2 employees. By doing this the employer receives audit protection going back in connection to the reclassified workers. The employer pays only 10% of the normal employer tax liability for the past year and is not liable for any penalties or interest. If an employer has been using the 1099 folks that should have been W2 now is the time to come clean and get rid of all the potential back liability. Maybe some help on the way after the election but not until after the new year when all the new folks get sworn in.

Tax changes for 2013

A number of tax law changes will occur on January 1, 2013 as existing tax rules expire. The existing tax law has a number of sunset provisions that effect the average taxpayer. I don't expect congress to do anything to extend these provisions prior to the elections in November. Congress may change some or all of these provisions in 2013 and make them retoactive to January 1. The 10% tax rate for lower income amounts will go away and the 15% bracket will be the lowest. The 25% bracket increases to 28%, the 28% goes to 33%, the 33% goes to 36% and the top bracket goes from 35% to 39.6%. Capital gains tax rate increases from 15% to 20%; 18% is held over 5 years. Dividends will be taxed at ordinary income rates. Coverdale Education Savings accounts have the maximum contribution reduced to $500 per year. Student loan interst will only be deductable for the first 60 months of interest payments on the loans. Deductions for adoptions will be decreased. Marriage penalty is back. Standard deduction of married filing joint is 167% of the standard deduction for single filers. It was 200%. Likewise the 15% tax rate applies to 167% of the income spread of the single filers 15% tax table. Again it was 200%. The child tax credit drops from $1,000 per child under 17 years old to $500. Payroll tax cut for social security to 4.2% from 6.2% will return to the 6.2% Likewise the self employment tax rate increases from 10.4% to 12.4%. Hope credit for education drops from $2,000 plus 25% of the next $2,000 in education expenses to $1,000 and 50% of the next $1,000. From a maximum credit of $2,500 to a maximum of $1,500. Exclusion for the discharge of qualified personal residence debt goes away. The short sale or forclosure on your personal residence may result in taxable income. In the past we were able to exclude from income any 1099C issued for cancellation of debt on the personal residence. We may be able to exclude some but not all in the future. A number of other changes are going to happen as well but the changes are more complex and don't effect but a few people. As you can see from the list all these changes result in more taxes being collected. If you have any questions please call KatTax at 702-796-1040 and we will be happy to discuss these issues with you and how they may impact your taxes.

Repairs or Replacement

The following is from CCH Inc. which publishes a number of tax related books and software. They put together a very nice explination of an area the has created confusion in the past with IRS. The IRS and Treasury have issued long-awaited, comprehensive regulations on the capitalization of amounts paid to acquire, produce or improve tangible property. The regulations, released at the end of 2011 and effective immediately for most taxpayers, provide the standards that businesses must now apply to determine whether expenditures can be deducted as repairs or must be capitalized and then recovered over a period of years. The regulations are broad and far-reaching – they apply to every business taxpayer that uses tangible property, whether owned or leased, regardless of the form of entity that operates the business, and regardless of the entity’s foreign or domestic status. They apply to manufacturers, wholesalers, distributors, and retailers. The new regulations have taken effect and steps must be taken to comply with them. They generally apply to amounts paid or incurred in tax years beginning on or after January 1, 2012. Thus, for calendar year taxpayers, the rules already apply. Some of the rules build upon rules already in place; other requirements, however, are completely new. The IRS will take comments and consider further changes, so any plans set forth to respond to these new regulations must themselves be ready for fine tuning. In the meantime, however, the new regulations must be followed precisely or the loss of tax benefits and imposition of penalties can ensue. The regulations are generally beneficial to most businesses, but they also add complexity. They provide a more defined framework for determining capital expenditures, along with some clarifications of the law and some simplifying conventions. The regulations make significant and substantial changes to previous regulations issued by the government in 2008. In many cases, the tax treatment of an expenditure will vary from its treatment for book purposes, putting an additional burden on taxpayers to apply new tax accounting systems to track and collect data. The regulations will require many decisions by taxpayers in determining the appropriate tax treatment. In some cases, taxpayers are given an explicit election to decide what type of tax treatment to follow, creating new opportunities as well as challenges. In other cases, taxpayers must make a de facto election. In either case, once the taxpayer adopts a particular method of accounting for particular assets, that business must continue to follow that method of accounting, and will not be able to change it without the IRS’s permission. There will be more guidance from the IRS. Most taxpayers must now change their method of accounting for certain covered items to comply with the new regulations. The IRS has issued revenue procedures that provide transition rules for taxpayers changing their method of accounting. When changing accounting methods, however, the regulations require that taxpayers make so-called Code Section 481(a) adjustments to prevent duplicated or omitted tax benefits. Because of this requirement, taxpayers will in effect have to apply the new rules to costs incurred prior to the effective date of the regulations. As a result, some taxpayers may have to capitalize amounts they previously deducted, and recognize income based on the difference in treatment. Conversely, other taxpayers may be able to deduct amounts previously capitalized, and take a deduction for the difference. The retroactive impact of these changes can be significant for many businesses. Our firm is here to help you determine how the regulations affect your business, what you must do to comply, what changes are necessary, what decisions must be made, and what opportunities are available. Please call or e-mail me so that we can arrange to discuss how this important development directly affects your business.

Identity Theft is growing issue with IRS tax returns being filed

The following is a re-print from the National Society of Accountants about the problems identity theft is creating with fake tax returns being filed with IRS. What is happening is people steal an identity and make up a false tax return. File the return with the IRS and receive a refund. The real person files their return only to have it returned by the IRS stating the return has already been filed. Or the real person receives a letter from IRS stating there is an error on the return and the real person must repay thousands of dollars in excess refunds. The IRS Office of Chief Counsel addressed several disclosure issues that have arisen as a result of continuing efforts to address identity theft. Some interesting twists: * A “bad return”—one filed by an alleged identity thief—upon its filing and receipt by IRS is the return information of both the victim and the alleged identity thief, the Office of Chief Counsel said. “Because section 6103 does not incorporate any temporal limit on the designation or identification of returns and return information as being that of a particular taxpayer, the ‘bad return’ remains the return information of the victim (as well as the thief) even if it is later determined that it was not filed by the victim and even if and when the victim's account is ‘restored’ to its status prior to the fraudulent filing,” it said. * Under Section 6103(e)(7), an identity theft victim may obtain from IRS a copy of a bad return filed by an alleged identity thief, as well as other return information associated with the processing of such a return. The office noted, however, that the tax code provides no authority for disclosure of an identity thief's return information to an identity theft victim. “This would include the identity of the person who filed the ‘bad return.’ ” it said. * Section 6103(i)(3)(A), which authorizes the disclosure of certain return information to federal agencies with jurisdiction to enforce federal non-tax crimes, allows the disclosure of a bad return to appropriate federal law enforcement agencies. The office warned that it is essential such a disclosure occur only after a factual determination has been made that the bad return is fictitious in order to avoid unauthorized disclosure. * State and local law enforcement agents appointed to the Justice Department as part of Internal Revenue Code and non-I.R.C. grand jury investigations may access return information under Sections 6103(h)(2) or (i)(1), (i)(2), and (i)(3)(A) respectively. State and local law enforcement personnel may be considered federal employees for Section 6103 purposes so long as they are formally appointed as federal employees, they are assisting in a federal investigation, and are supervised by a federal employee. * Under Section 6103(c), an identity theft victim may consent to the disclosure of a bad return filed by the alleged identity thief to state and local law enforcement agencies in connection with their investigations.

Offers to settle IRS debts for less than the full amount

The following is a re-print of an IRS article. The IRS has had a program call Offer in Compromise where taxpayers could make a settlement offer with the IRS on past due income taxes. Unfortunately the numbers of offers accepted by the IRS has declined steadily over the past 5 years. The IRS has started a new offer program that they call Fresh Start. The IRS has expanded its “Fresh Start” initiative by offering more flexible terms to its Offer-in-Compromise Program. These newest rules enable some financially distressed taxpayers to clear up their tax problems even quicker. An offer-in-compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to determine the reasonable collection potential. This expansion of the “Fresh Start” initiative focuses on the financial analysis used to determine which taxpayers qualify for an OIC. Here are the OIC changes: • Revising the calculation for a taxpayer’s future income. The IRS will now look at only one year (instead of four years) of future income for offers paid in five or fewer months; and two years (instead of five years) of future income for offers paid in six to 24 months. All OICs must be paid in full within 24 months of the date the offer is accepted. • Allowing taxpayers to repay their student loans. Minimum payments on student loans guaranteed by the federal government will be allowed for the taxpayer’s post-high school education. Proof of payment must be provided. • Allowing taxpayers to pay state and local delinquent taxes. When a taxpayer owes delinquent federal and state or local taxes, and does not have the ability to fully pay the liabilities, monthly payments to state taxing authorities may be allowed in certain circumstances. • Expanding the Allowable Living Expense allowance. Standard allowances incorporate average expenses for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer-in-compromise requests. The National Standard miscellaneous allowance has been expanded. Taxpayers can use the allowance to cover expenses such as credit card payments and bank fees and charges. Hopefully these new rules will allow more taxpayers to qualify for the offer program with workable solutions.

1099s need to be mailed by January 31.

Businesses need to mail their 1099s by January 31. Businesses file a 1099 MISC for payments to independent contractors ONLY for those payments NOT PAID with a credit card or debit card. A 1099 MISC needs for be issued for each person you paid at least $600 to for rents, services including parts and materials, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish, any fishing boat proceeds or gross proceeds paid to an attorney.

Report on 1099 MISC only when payments are made in the course of your trade or business. Non profits are considered to be in a trade or business.

Need help with your 1099s call KatTax at 702-796-1040

IRS targets Independent Contractors

Classifying workers as independent contractors can save employers as much as 30% on their payroll costs. As an independent contractor the employer does not have to pay the state unemployment, federal unemployment, no social security and medicare matching plus no workers comp or other benefits. The IRS has hired 100 employees to go after the business most likely to try to evade employment taxes. Those businesses are small firms and self employed individuals. With the newest computer technology the IRS and the States are now sharing information.

If you are unsure of how to classify a worker the IRS offers a free determination service or if you would rather not deal with the IRS call KatTax and we can help you.