tag:blogger.com,1999:blog-80189644917631542322023-11-15T06:04:11.220-08:00Brummet & Olsen, LLPBrummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.comBlogger51125tag:blogger.com,1999:blog-8018964491763154232.post-27873220451064762722020-03-25T11:06:00.001-07:002020-03-25T12:43:27.723-07:00IRS Announces Changes To Installment Agreements, Offers in Compromise, Field, Office, & Correspondence Audits<table border="1" cellpadding="0" cellspacing="3" class="MsoNormalTable" style="mso-cellspacing: 2.2pt; mso-padding-alt: 2.25pt 2.25pt 2.25pt 2.25pt; mso-yfti-tbllook: 1184; width: 675px;"><tbody>
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<strong><span style="font-family: "calibri" , sans-serif; font-size: 13.5pt;">IRS
unveils new People First Initiative; COVID-19 effort temporarily adjusts,
suspends key compliance programs - IRS Newswire IR-2020-59</span></strong><br />
<strong><span style="font-family: "calibri" , sans-serif; font-size: 13.5pt;"><br /></span></strong>
<o:p></o:p><br />
WASHINGTON – To help people facing the challenges of COVID-19 issues, the
Internal Revenue Service announced today a sweeping series of steps to assist
taxpayers by providing relief on a variety of issues ranging from easing
payment guidelines to postponing compliance actions.<o:p></o:p><br />
“The IRS is taking extraordinary steps to help the people of our country,”
said IRS Commissioner Chuck Rettig. “In addition to extending tax deadlines and
working on new legislation, the IRS is pursuing unprecedented actions to ease
the burden on people facing tax issues. During this difficult time, we want
people working together, focused on their well-being, helping each other and
others less fortunate.”<o:p></o:p><br />
“The new IRS People First Initiative provides immediate relief to help
people facing uncertainty over taxes,” Rettig added “We are temporarily
adjusting our processes to help people and businesses during these uncertain
times. We are facing this together, and we want to be part of the solution to
improve the lives of all people in our country.”<o:p></o:p><br />
These new changes include issues ranging from postponing certain payments
related to Installment Agreements and Offers in Compromise to collection and
limiting certain enforcement actions. The IRS will be temporarily modifying the
following activities as soon as possible; the projected start date will be
April 1 and the effort will initially run through July 15. During this period,
to the maximum extent possible, the IRS will avoid in-person contacts. However,
the IRS will continue to take steps where necessary to protect all applicable
statutes of limitations.<o:p></o:p><br />
“IRS employees care about our people and our country, and they have a strong
desire to help improve this situation,” Rettig said. “These new actions reflect
just one of many ways our employees are working hard every day to assist the
nation. We care, a lot. IRS employees are actively engaged, and they have
always delivered for their communities and our country. The People First
Initiative is designed to help people take care of themselves and is a key part
of our ongoing response to the coronavirus effort.”<o:p></o:p><br />
More specifics about the implementation of these provisions will be shared
soon. Highlights of the key actions in the IRS People First Initiative include:<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Existing Installment
Agreements</span></strong> – For taxpayers under an existing Installment
Agreement, payments due between April 1 and July 15, 2020 are suspended.
Taxpayers who are currently unable to comply with the terms of an Installment
Payment Agreement, including a Direct Deposit Installment Agreement, may
suspend payments during this period if they prefer. Furthermore, the IRS will
not default any Installment Agreements during this period. By law,
interest will continue to accrue on any unpaid balances.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">New Installment
Agreements</span></strong> – The IRS reminds people unable to fully pay their
federal taxes that they can resolve outstanding liabilities by entering into a
monthly payment agreement with the IRS. See IRS.gov for further information.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Offers in Compromise
(OIC)</span></strong> – The IRS is taking several steps to assist taxpayers in
various stages of the OIC process:<o:p></o:p><br />
<ul type="disc">
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">Pending
OIC applications</span></strong>
– The IRS will allow taxpayers until July 15 to provide requested
additional information to support a pending OIC. In addition, the IRS will
not close any pending OIC request before July 15, 2020, without the
taxpayer’s consent.<o:p></o:p></li>
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">OIC
Payments</span></strong>
– Taxpayers have the option of suspending all payments on accepted OICs
until July 15, 2020, although by law interest will continue to accrue on
any unpaid balances.<o:p></o:p></li>
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">Delinquent
Return Filings</span></strong>
- The IRS will not default an OIC for those taxpayers who are delinquent
in filing their tax return for tax year 2018. However, taxpayers should
file any delinquent 2018 return (and their 2019 return) on or before July
15, 2020.<o:p></o:p></li>
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">New
OIC Applications</span></strong>
– The IRS reminds people facing a liability exceeding their net worth that
the OIC process is designed to resolve outstanding tax liabilities by providing
a “Fresh Start.” Further information is available at IRS.gov<o:p></o:p></li>
</ul>
<strong><span style="font-family: "Calibri",sans-serif;">Non-Filers</span></strong>
–The IRS reminds people who have not filed their return for tax years before
2019 that they should file their delinquent returns. More than 1 million
households that haven’t filed tax returns during the last three years are
actually owed refunds; they still have time to claim these refunds. Many should
consider contacting a tax professional to consider various available options
since the time to receive such refunds is limited by statute. Once delinquent
returns have been filed, taxpayers with a tax liability should consider taking
the opportunity to resolve any outstanding liabilities by entering into an
Installment Agreement or an Offer in Compromise with the IRS to obtain a “Fresh
Start.” See IRS.gov for further information.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Field Collection
Activities</span></strong> - Liens and levies (including any seizures of a
personal residence) initiated by field revenue officers will be suspended
during this period. However, field revenue officers will continue to pursue
high-income non-filers and perform other similar activities where warranted.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Automated Liens and
Levies</span></strong> – New automatic, systemic liens and levies will be
suspended during this period.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Passport
Certifications to the State Department</span></strong> – IRS will suspend new
certifications to the Department of State for taxpayers who are “seriously
delinquent” during this period. These taxpayers are encouraged to submit a
request for an Installment Agreement or, if applicable, an OIC during this
period. Certification prevents taxpayers from receiving or renewing passports.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Private Debt
Collection</span></strong> – New delinquent accounts will not be forwarded by
the IRS to private collection agencies to work during this period.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Field, Office and
Correspondence Audits</span></strong> – During this period, the IRS will
generally not start new field, office and correspondence examinations. We will
continue to work refund claims where possible, without in-person contact.
However, the IRS may start new examinations where deemed necessary to protect
the government’s interest in preserving the applicable statute of limitations.<o:p></o:p><br />
<ul type="disc">
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">In-Person
Meetings</span></strong>
- In-person meetings regarding current field, office and correspondence
examinations will be suspended. Even though IRS examiners will not hold
in-person meetings, they will continue their examinations remotely, where
possible. To facilitate the progress of open examinations, taxpayers are
encouraged to respond to any requests for information they already have
received - or may receive - on all examination activity during this period
if they are able to do so.<o:p></o:p></li>
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">Unique
Situations</span></strong>
- Particularly for some corporate and business taxpayers, the IRS
understands that there may be instances where the taxpayers desire to
begin an examination while people and records are available and respective
staffs have capacity. In those instances when it’s in the best interest of
both parties and appropriate personnel are available, the IRS may initiate
activities to move forward with an examination -- understanding that
COVID-19 developments could later reduce activities for an agreed period.<o:p></o:p></li>
<li class="MsoNormal"><strong><span style="font-family: "Calibri",sans-serif; mso-fareast-font-family: "Times New Roman";">General
Requests for Information</span></strong> - In addition to compliance activities and
examinations, the IRS encourages taxpayers to respond to any other IRS
correspondence requesting additional information during this time if
possible. <o:p></o:p></li>
</ul>
<strong><span style="font-family: "Calibri",sans-serif;">Earned Income Tax
Credit and Wage Verification Reviews</span></strong> – Taxpayers have until
July 15, 2020, to respond to the IRS to verify that they qualify for the Earned
Income Tax Credit or to verify their income. These taxpayers are encouraged to
exercise their best efforts to obtain and submit all requested information, and
if unable to do so, please reach out to the IRS indicating the reason such
information is not available. Until July 15, 2020, the IRS will not deny these
credits for a failure to provide requested information. <o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Independent Office of
Appeals</span></strong> – Appeals employees will continue to work their cases.
Although Appeals is not currently holding in-person conferences with taxpayers,
conferences may be held over the telephone or by videoconference. Taxpayers are
encouraged to promptly respond to any outstanding requests for information for
all cases in the Independent Office of Appeals.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Statute of
Limitations</span></strong> - The IRS will continue to take steps where
necessary to protect all applicable statutes of limitations. In instances where
statute expirations might be jeopardized during this period, taxpayers are
encouraged to cooperate in extending such statutes. Otherwise, the IRS will
issue Notices of Deficiency and pursue other similar actions to protect the
interests of the government in preserving such statutes. Where a statutory
period is not set to expire during 2020, the IRS is unlikely to pursue the
foregoing actions until at least July 15, 2020.<o:p></o:p><br />
<strong><span style="font-family: "Calibri",sans-serif;">Practitioner Priority
Service</span></strong> – Practitioners are reminded that, depending on
staffing levels and allocations going forward, there may be more significant
wait times for the PPS. The IRS will continue to monitor this as situations
develop.<o:p></o:p><br />
<br />
“The IRS will continue to review and, where appropriate, modify or expand
the People First Initiative as we continue reviewing our programs and receive
feedback from others,” Rettig said. “We are committed to helping people get
through this period, and our employees will remain focused on these and other
helpful efforts in the days and weeks ahead. I ask for your personal support,
your understanding – and your patience – as we navigate our way forward
together. Stay safe and take care of your families, friends and others.”<o:p></o:p><br />
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-44640994230058808772020-02-19T14:59:00.000-08:002020-02-19T14:59:51.541-08:00Tax Scams Proliferate During Filing Season <div class="news_description" id="nl10" style="background-color: white; box-sizing: border-box; color: #555555; font-family: "Open Sans", sans-serif; font-size: 15px;">
<div style="box-sizing: border-box; margin-bottom: 10px;">
The filing season is the most active time of the year for tax scams. These scams take every shape and form, ranging from telephone calls to individuals to sophisticated schemes targeting employers and businesses. The goal of all these scams is identity theft. Using legitimate identities of unsuspecting individuals allows criminals to file fraudulent returns and claim bogus refunds.</div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
<span style="box-sizing: border-box; font-weight: 700;">Phone scams</span></div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
Phone and email scams are among the most common scams. Every day, individuals receive calls and emails from criminals pretending to be IRS employees. Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. Criminals use IRS employee titles and fake badge numbers to appear legitimate. They may also use the victim’s name, address and other personal information to make the call sound official. The phone calls often threaten legal action or arrest if the taxpayers do not immediately make a payment, usually with a debit or gift card. Taxpayers receiving threatening telephone calls should hang up immediately. The IRS will never demand immediate payment using a specific payment method, such as a prepaid debit card, gift card or wire transfer. The IRS also will never threaten arrest.</div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
<span style="box-sizing: border-box; font-weight: 700;">Email scams</span></div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
Email scams often ask recipients to provide personal and financial information in order “to verify” a tax obligation or claim a “refund.” The emails appear to be genuine communications from the IRS. Criminals create websites that appear legitimate in the hope that individuals will take the bait and provide money, passwords, Social Security numbers and other personal information. Scam emails also can infect a taxpayer’s computer with malware. The malware can give criminals access to the computer, laptop tablet, or other device, enabling them to access all sensitive files or track keyboard strokes, exposing login information. The IRS has repeatedly emphasized that it never initiates contact with taxpayers via email about a bill or refund. Taxpayers should delete these emails immediately.</div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
<span style="box-sizing: border-box; font-weight: 700;">Employers</span></div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
Criminals are increasing disguising emails to make it appear as if the email is from a company or organization executive. Typically, this email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2, Wage and Tax Statement. This scam is sometimes referred to as business email compromise (BEC) or business email spoofing (BES). This scam targets all types of businesses: school districts, tribal casinos, chain restaurants, temporary staffing agencies, healthcare, and shipping and freight. Businesses that received the scam email last year also are reportedly receiving it again this year. The IRS has asked employers and businesses to forward these bogus emails to the agency at phishing@irs.gov.</div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
<span style="box-sizing: border-box; font-weight: 700;">Identity theft</span></div>
<div style="box-sizing: border-box; margin-bottom: 10px;">
The IRS is making progress in identifying and curbing tax-related identity theft, according to the Treasury Inspector General for Tax Administration (TIGTA). The IRS and tax professionals and the tax software community have joined together to better protect taxpayer information. The agency has upgraded its return processing identity theft filters and taken other behind the scenes measures to uncover fraudulent returns. All of these measures, TIGTA reported in February, have helped to deter tax-related identity theft but criminals continue to look for ways to trick taxpayers and the IRS.</div>
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Please contact our office at (630) 986-0540 if you have any questions about filing season tax scams.</div>
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-1662649913127015692019-02-07T10:15:00.003-08:002019-02-07T10:15:52.133-08:00IRS - How To Choose a Tax Preparer<br />
<h3>
The IRS has issued a great list of issues to consider when selecting a new tax preparer. Check out the Tax Tip below before you begin your search.</h3>
<h3>
<span style="color: #001e5a; mso-fareast-font-family: "Times New Roman";"><br /></span></h3>
<h3>
<span style="color: #001e5a; mso-fareast-font-family: "Times New Roman";">Issue
Number: IRS Tax Tip 2019-06<o:p></o:p></span></h3>
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<strong><span style="font-family: "Calibri",sans-serif; font-size: 18.0pt; mso-bidi-font-family: Calibri;">Ten things for
taxpayers to think about when choosing a tax preparer</span></strong><o:p></o:p></div>
It’s the time of the year when many taxpayers choose a tax preparer to help
file a tax return. These taxpayers should choose their tax return preparer
wisely. This is because taxpayers are responsible for all the information
on their income tax return. That’s true no matter who prepares the return.<o:p></o:p><br />
Here are ten tips for taxpayers to remember when selecting a preparer:<o:p></o:p><br />
<ul type="disc">
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><strong><span style="font-family: "Calibri",sans-serif; mso-bidi-font-family: Calibri; mso-fareast-font-family: "Times New Roman";">Check the Preparer’s Qualifications.</span></strong><span style="mso-fareast-font-family: "Times New Roman";"> People can use the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&128&&&https://www.irs.gov/tax-professionals/faqs-directory-of-federal-tax-return-preparers-with-credentials-and-select-qualifications" target="_blank">IRS Directory of Federal Tax Return Preparers with
Credentials and Select Qualifications.</a> This tool helps taxpayers find
a tax return preparer with specific qualifications. The directory is a
searchable and sortable listing of preparers.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Check the Preparer’s History.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Taxpayers can ask the
Better Business Bureau about the preparer. Check for disciplinary actions
and the license status for credentialed preparers. For CPAs, people can
check with the State Board of Accountancy. For attorneys, they can check
with the State Bar Association. For Enrolled Agents, taxpayers can go to
the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&129&&&https://www.irs.gov/tax-professionals/verify-the-status-of-an-enrolled-agent" target="_blank">verify enrolled agent status</a> page on IRS.gov or check
the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&130&&&https://www.irs.gov/tax-professionals/faqs-directory-of-federal-tax-return-preparers-with-credentials-and-select-qualifications" target="_blank">directory</a>. <o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Ask about Service Fees.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> People should avoid
preparers who base fees on a percentage of the refund or who boast bigger
refunds than their competition. When asking about a preparer’s services
and fees, don’t give them tax documents, Social Security numbers or other
information.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Ask to E-File.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Taxpayers should make sure their preparer offers IRS
e-file. The quickest way for taxpayers to get their refund is to <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&131&&&https://www.irs.gov/filing/e-file-options" target="_blank">electronically file</a> their federal tax return and use
direct deposit.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Make Sure the Preparer is Available.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Taxpayers may want to
contact their preparer after this year’s April 15 due date. People should
avoid fly-by-night preparers.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Provide Records and Receipts.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Good preparers will ask
to see a taxpayer’s records and receipts. They’ll ask questions to figure
things like the total income, tax deductions and credits.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Never Sign a Blank Return.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Taxpayers should not
use a tax preparer who asks them to sign a blank tax form.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Review Before Signing.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Before signing a tax
return, the taxpayer should review it. They should ask questions if
something is not clear. Taxpayers should feel comfortable with the
accuracy of their return before they sign it. They should also make sure
that their refund goes directly to them – not to the preparer’s bank
account. The taxpayer should review the routing and bank account number on
the completed return. The preparer should give you a copy of the completed
tax return.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Ensure the Preparer Signs and Includes Their PTIN.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> All paid tax preparers
must have a Preparer Tax Identification Number. By law, paid preparers
must sign returns and include their PTIN.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in;"><b><span style="mso-fareast-font-family: "Times New Roman";">Report Abusive Tax Preparers to the IRS.</span></b><span style="mso-fareast-font-family: "Times New Roman";"> Most tax return
preparers are honest and provide great service to their clients. However,
some preparers are dishonest. People can report abusive tax preparers and
suspected tax fraud to the IRS. Use <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&132&&&https://www.irs.gov/pub/irs-pdf/f14157.pdf" target="_blank">Form 14157</a>, Complaint: Tax Return Preparer. If a
taxpayer suspects a tax preparer filed or changed their return without the
taxpayer’s consent, they should file <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTkwMjA3LjEyODU0ODEmbWVzc2FnZWlkPU1EQi1QUkQtQlVMLTIwMTkwMjA3LjEyODU0ODEmZGF0YWJhc2VpZD0xMDAxJnNlcmlhbD0xNzIyNTEwNSZlbWFpbGlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJnVzZXJpZD1rb2xzZW5AYnJ1bW1ldGFuZG9sc2VuLmNvbSZmbD0mZXh0cmE9TXVsdGl2YXJpYXRlSWQ9JiYm&&&133&&&https://www.irs.gov/pub/irs-pdf/f14157a.pdf" target="_blank">Form 14157-A</a>, Return Preparer Fraud or Misconduct
Affidavit.<o:p></o:p></span></li>
</ul>
<br />Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-56248823340383725052018-02-12T15:21:00.003-08:002018-02-12T15:21:56.839-08:00Traveling Soon? Information Regarding Back Taxes and Your Passport.<div align="center" style="text-align: center;">
<strong><span style="font-size: 18pt;">IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements</span></strong></div>
WASHINGTON ─ The Internal Revenue Service today strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.<br />
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This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&127&&&https://www.irs.gov/irb/2018-03_IRB#NOT-2018-01">Notice 2018-1</a>. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.<br />
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Taxpayers affected by this law are those with a seriously delinquent tax debt. A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.<br />
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There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:<br />
<ul type="disc">
<li class="MsoNormal">Paying the tax debt in full<o:p></o:p></li>
<li class="MsoNormal">Paying the tax debt timely under an approved installment agreement,<o:p></o:p></li>
<li class="MsoNormal">Paying the tax debt timely under an accepted offer in compromise,<o:p></o:p></li>
<li class="MsoNormal">Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,<o:p></o:p></li>
<li class="MsoNormal">Having requested or have a pending collection due process appeal with a levy, or<o:p></o:p></li>
<li class="MsoNormal">Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.<o:p></o:p></li>
</ul>
A passport won’t be at risk under this program for any taxpayer:<br />
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<li class="MsoNormal">Who is in bankruptcy<o:p></o:p></li>
<li class="MsoNormal">Who is identified by the IRS as a victim of tax-related identity theft<o:p></o:p></li>
<li class="MsoNormal">Whose account the IRS has determined is currently not collectible due to hardship<o:p></o:p></li>
<li class="MsoNormal">Who is located within a federally declared disaster area<o:p></o:p></li>
<li class="MsoNormal">Who has a request pending with the IRS for an installment agreement<o:p></o:p></li>
<li class="MsoNormal">Who has a pending offer in compromise with the IRS<o:p></o:p></li>
<li class="MsoNormal">Who has an IRS accepted adjustment that will satisfy the debt in full<o:p></o:p></li>
</ul>
For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.<br />
In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:<br />
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<li class="MsoNormal">Taxpayers can request a payment agreement with the IRS by filing <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&128&&&http://www.irs.gov/uac/Form-9465,-Installment-Agreement-Request-2">Form 9465</a>. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&129&&&https://www.irs.gov/payments/online-payment-agreement-application">online payment agreement</a> to set up a monthly payment agreement for up to 72 months.<o:p></o:p></li>
<li class="MsoNormal">Some financially distressed taxpayers may qualify for an <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&130&&&http://www.irs.gov/Individuals/Offer-in-Compromise-1">offer in compromise</a>. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay. To help determine eligibility, use the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&131&&&http://irs.treasury.gov/oic_pre_qualifier/">Offer in Compromise Pre-Qualifier</a>, a free online tool available on IRS.gov.<o:p></o:p></li>
</ul>
<br />
<a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&132&&&https://www.irs.gov/">IRS.gov</a> has other tips for taxpayers to catch up on their filing and tax obligations and more information about the <a href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTgwMTE2LjgzODAzMDkxJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE4MDExNi44MzgwMzA5MSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MTY4NTc4JmVtYWlsaWQ9a29sc2VuQGJydW1tZXRhbmRvbHNlbi5jb20mdXNlcmlkPWtvbHNlbkBicnVtbWV0YW5kb2xzZW4uY29tJmZsPSZleHRyYT1NdWx0aXZhcmlhdGVJZD0mJiY=&&&133&&&https://www.irs.gov/businesses/small-businesses-self-employed/revocation-or-denial-of-passport-in-case-of-certain-unpaid-taxes">revocation or denial of passports because of unpaid taxes</a>.<br />
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Please feel free to contact our office for assistance with any questions you may have at (630) 986-0540. We are here to help.Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-20034478075590040882017-03-16T08:57:00.003-07:002017-03-16T09:01:34.969-07:00IRS Still Coping With Identity Theft and Service Problems<br />
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Identity theft remains at the forefront of the IRS efforts during this filing season. The article below by the editor-in-chief of Accounting Today explains the current status of the situation and the IRS efforts to combat identity thieves.<br />
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IRS Still Coping With Identity Theft and Service Problems</h3>
By: <a class="bsp-tag" data-cms-ai="0" href="https://www.taxprotoday.com/author/michael-cohn">Michael Cohn</a> Published March 15 2017, 2:53pm EDT<br />
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The Internal Revenue Service is continuing to face challenges with identity theft and taxpayer service this tax season, although there have been some improvements since last year.</div>
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IRS deputy commissioner for services and enforcement John M. Dalrymple told lawmakers during a House oversight hearing last week the filing season has been relatively problem-free so far. <br />
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“I am pleased to report that the last several filing seasons have gone smoothly in terms of tax return processing,” he said, according to his prepared testimony. “Thus far the 2017 filing season has been no exception. As of February 24, the IRS received more than 52.3 million individual returns, on the way to a total of about 152 million. We have issued over 41.3 million refunds for more than $127 billion, with the average refund totaling approximately $3,071.” <br />
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Dalrymple noted, however, that the IRS was forced to rely on antiquated IT systems, with approximately 60 percent of the agency’s hardware and 28 percent of its software out of date and in need of an upgrade. “Continuing to rely on such outdated systems is costly and poses a risk of outages or failures,” he added.<br />
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He said the IRS has been making steady progress in combating identity theft. As a result of the PATH Act of 2015, the IRS is now required to give extra scrutiny to tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit, and hold the tax refunds until February 15. “This change and another change accelerating the filing date of Forms W-2 have together helped the IRS improve its ability to spot incorrect or fraudulent returns,” he added.<br />
Another PATH Act provision required Individual Taxpayer Identification Numbers to expire if they had been issued before 2013, or if the ITINs have not been used on a federal tax return for three years in a row. That too helped the IRS detect fraudulent returns, although the changes required significant resources to implement, Dalrymple noted.<br />
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He said the IRS has been making progress in deterring identity theft in recent years, thanks to the collaborative efforts of the Security Summit, which involves a partnership between the IRS, state tax authorities, tax software companies, and tax preparation chains. They have added extra authentication procedures, filters and information sharing to block criminals. But identity thieves are still trying to steal tax refunds. One CPA recently called Accounting Today and reported that several of his clients received notices this tax season from the IRS informing them their tax refunds had been claimed by someone else.<br />
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Dalrymple acknowledged that identity thieves are still trying to capture the refunds. “Even with this progress, the fraud filters in our processing systems are still catching a large number of false returns, which shows that identity theft continues to be a major threat to tax administration–a threat that receives our sustained vigilance and the continuous strengthening of our defenses against this crime,” he said. <br />
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During fiscal year 2016, Dalrymple noted that the IRS’s systems stopped more than $6.5 billion in fraudulent refunds on 969,000 tax returns confirmed to have been filed by identity thieves.<br />
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<b>Taxpayer Service</b><br />
He said the IRS has also been making progress in helping victims of identity theft. Several years ago, it took an average of 300 days to close a case, but more recently the IRS has been meeting its goal of closing a case in an average of 120 days or less. The case inventory for identity theft victims has also declined from about 95,000 at the end of fiscal year 2015 to 28,900 last month.<br />
The IRS has also been improving its telephone service for taxpayers. Last year, it used $178 million of the additional funding it received from Congress to hire an extra 1,000 temporary employees. As a result, the average level of service on the IRS’s toll-free phone lines during the 2016 tax season exceeded 70 percent, compared to a dismal average of 37 percent during the 2015 filing season. However, when the temporary employees went off the rolls at the end of last tax season, the phone level of service dropped again and ended up with an average of 53 percent for fiscal year 2016, but that was still better than 2015. So far, for the 2017 filing season, Dalrymple reported improved phone service, and he predicts the average phone level of service for the filing season as a whole will be about 75 percent.<br />
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<b>GAO Report</b><br />
A <a data-cms-ai="0" href="http://www.gao.gov/assets/690/683246.pdf" target="_blank">report</a> from the Government Accountability Office released on the day of the hearing also found the IRS provided better telephone service to callers during the 2016 filing season compared to 2015. However, the GAO noted that the IRS’s performance during the full fiscal year remained low. The GAO report also acknowledged that the IRS has improved some aspects of its service for identity theft victims, but still found some lingering problems. <br />
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“However, inefficiencies contribute to delays, and potentially weak internal controls may lead to the release of fraudulent refunds,” said the GAO. “In turn, this limits [the] IRS’s ability to serve taxpayers and protect federal dollars.”<br />
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The GAO recommended the IRS improve its file retrieval and scanning processes to speed up help to victims of identity theft. The GAO also sees problems with the IRS’s internal control processes that could lead to the IRS paying refunds to fraudsters. In discussion groups with the GAO, IRS assistors and managers said some of the assistors may release refunds even if indicators on the account show that the tax return is under review for identity theft, or two returns have been filed for that taxpayer. “Some participants said assistors answering telephone calls can release these holds because they do not understand the codes on the taxpayer's account,” said the report. “IRS officials said that these errors are not widespread and provided data to support their position.” <br />
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However, the GAO said it identified weaknesses in the data, which the IRS officials acknowledged. In response to the GAO’s report, IRS officials provided the GAO with another analysis in January of IRS data that they said showed this type of error does occur but may not be as widespread as its own staff and managers suggested. The GAO said it would continue to work with the IRS to determine if the additional data is enough to address its recommendations.<br />
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Another problem the GAO found is the IRS does not notify taxpayers when a dependent’s identity appears on a fraudulent return. <br />
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“According to IRS officials, the agency does not consider a dependent to be a victim if his or her Social Security number had been used as a dependent on a fraudulent return,” said the report. “However, [the] IRS has previously provided guidance to taxpayers when a dependent was a victim of identity theft. After one data breach in 2015, [the] IRS notified taxpayers and provided information on actions that parents could take to protect a minor's identity when their dependents were also victims. By not notifying taxpayers that their dependents' information may have been used to commit fraud, [the] IRS is limiting taxpayers' ability to take action to protect their dependents' identity.”<br />
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<b>Inspector General Findings</b><br />
Russell P. Martin, assistant inspector general for audit at the Treasury Inspector General for Tax Administration, also presented a <a data-cms-ai="0" href="https://www.treasury.gov/tigta/congress/congress_03082017.pdf" target="_blank">report</a> at last Wednesday’s hearing, which found some continuing problems with how the IRS is handling identity theft victims. TIGTA’s previous reviews from 2015 have identified long delays in case resolution and account errors, and that not all identity-theft victims receive Identity Protection Personal Identification Numbers, or IP PINs, he noted. Not all of those problems have been resolved in follow-up reports.<br />
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TIGTA is also concerned about the IRS’s increasing reliance on technology-based assistance to make up for cuts in face-to-face service. “The risk of unauthorized access to tax accounts increases as the IRS expands its focus on delivering online tools,” said the report. “The increasing number of data breaches in the private and public sectors means more personal information than ever before is available to unscrupulous individuals. Many of these data are detailed enough to enable circumvention of most authentication processes.”<br />
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The IRS isn't the only federal agency struggling to control identity theft. On Wednesday, members of the House Ways and Means Committee introduced two pieces of bipartisan legislation to protect Americans from identity theft. One bill would prevent the Social Security Administration from mailing any document containing a full Social Security number unless it is necessary. The other bill would require the Social Security Administration to issue a new Social Security number to any children under the age of 14 who have had their Social Security card stolen after it was mailed by the SSA.<br />
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<a class="author-image" data-cms-ai="0" href="https://www.taxprotoday.com/author/michael-cohn" title="Michael Cohn"><img alt="Michael Cohn" class="grayscale" src="https://assets.sourcemedia.com/dims4/default/d6cd369/2147483647/thumbnail/70x70%5E/quality/90/?url=https%3A%2F%2Fassets.sourcemedia.com%2F5f%2F71%2F90783ef04e41a9e02b54eef58240%2Fmichaelcohn107.jpg" /> </a> <br />
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<a data-cms-ai="0" href="https://www.taxprotoday.com/author/michael-cohn">Michael Cohn</a></h4>
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Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985. </div>
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-2817251569770368402017-01-30T14:13:00.002-08:002017-01-30T14:13:45.363-08:00Tax Reform Possible in 2017?<div class="news_title" style="background-color: white; box-sizing: border-box; color: #555555; font-family: "Open Sans", sans-serif; font-size: 17px; padding-bottom: 10px;">
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<a class="news_link" href="https://www.blogger.com/null" style="background: 0px 0px; box-sizing: border-box; color: #005329;">All eyes on tax reform in 2017</a></div>
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Congress ended 2016 passing a few targeted tax bills and lawmakers focused on the incoming Trump administration and tax reform in 2017. President-elect Donald Trump campaigned on tax cuts for individuals and businesses. Already, lawmakers from both sides of the aisle are preparing for what is expected to be spirited debate over tax cuts in 2017.</div>
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<span style="box-sizing: border-box; font-weight: 700;">Year-end legislation</span></div>
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In December, President Obama signed the 21st Century Cures Act and the Combat-Injured Veterans Tax Fairness Act. Under the 21st Century Cures Act, eligible small employers may adopt qualified small employer health reimbursement arrangements (QSEHRAs) to reimburse employees for the cost of premiums for individual or family health coverage without being subject to group-health plan requirements. The new law also extends transition relief for small employers. Without the new law, small employers ran the risk of a costly excise tax. The Combat-Injured Veterans Tax Fairness Act will refund money that was improperly withheld for tax purposes from severance payments to certain veterans of the U.S. Armed Forces. Both bills enjoyed bipartisan support in the House and Senate.</div>
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Unlike past years, Congress did not take up the so-called tax extenders in December. The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended or made permanent many extenders but left out some incentives for energy efficiency and production, along with a few incentives for individuals. These remaining extenders could be taken up in 2017 as part of tax reform.</div>
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<span style="box-sizing: border-box; font-weight: 700;">New administration</span></div>
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On the campaign trail, President-elect Donald Trump called for reducing the tax rates on individuals, lowering the corporate tax rate, repealing the federal estate tax, and creating new incentives for families. President-elect Trump also called for eliminating some unspecified tax preferences and taxing carried interest as ordinary income. More details are expected to be unveiled after President-elect Trump’s takes office on January 20.</div>
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House Republicans in June 2016 put forth a tax reform package that has many similar features to President-elect Trump’s proposals. The House GOP plan calls for individual and business rate cuts. However, there are differences. One difference is the House GOP’s so-called border adjustability; another difference is the GOP’s elimination of the IRS Oversight Board. These and other provisions are certain to generate debate in the early part of 2017.</div>
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Any tax reform package will need not only to pass the House but also the Senate before reaching the White House. While Republicans have a majority in the Senate, the chamber’s rules generally require a super-majority to pass tax bills. Republicans could use a process known as reconciliation to pass a tax reform bill with a simple majority. Any move to use reconciliation will also likely spark debate among lawmakers.</div>
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If you have any questions about year-end 2016 tax legislation or the prospects for tax reform in 2017, please contact our office at (630) 986-0540.</div>
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-47834306835599345812016-02-23T19:03:00.000-08:002016-02-23T19:03:02.008-08:00Taxpayers Have False Sense of Security about Identity Theft<div style="line-height: 30px; margin: 0px; padding: 0px;">
Tax identity theft is a serious topic at any time, but especially at this early point in the 2016 filing season. The following article from Accounting Today provides some timely information.</div>
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<span style="font-weight: bold;">Taxpayers Have False Sense of Security about Identity Theft</span></div>
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SCOTTSDALE, ARIZ. (FEBRUARY 23, 2016)</div>
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BY <a href="http://www.accountingtoday.com/authors/michael-cohn-2.html" rel="author" style="color: #333333; margin: 0px; padding: 0px; text-decoration: none;">MICHAEL COHN</a></div>
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Taxpayers are not doing enough to protect themselves from identity theft-related tax fraud and a majority of them don’t expect it to happen to them, according to a new survey.</div>
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The survey, from security company IDT911, found that 63 percent of Americans are taking an “it could never happen to me” approach and say they aren’t worried about their identities being stolen this tax season despite high-profile data breaches involving the Internal Revenue Service and some service providers.</div>
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Nineteen percent admitted they have not ensured their Wi-Fi network is password protected if they are filing their taxes online, and 49 percent said they don’t even lock their mailbox when receiving their tax refund through the mail, potentially exposing sensitive personal and financial information to thieves.</div>
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Despite the uptick in tax-related identity theft incidents, 48 percent of those surveyed believe the holiday shopping season is the most risky time of year. Tax-filing season came in second at 30 percent.More than a third (38 percent) of the 1,500 adult U.S. consumers surveyed said they’re unsure how to vet a tax preparer, including an overwhelming 92 percent of Millennials aged 18 to 34. Over half of the respondents (52 percent) said they do not trust, or are not sure if they trust, online tax services, likely due to the recent data breaches of multiple providers.</div>
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Only 12 percent planned to file their taxes in January despite experts advising consumers to file as early as possible in order to beat out identity thieves who might potentially claim their tax refunds.</div>
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“Tax season has become fraud season,” said IDT911 chairman Adam Levin. “As breaches have become the third certainty in life, cybercriminals are able to glean information from literally hundreds of millions of compromised records in order to target consumers in tax related identity theft and phishing schemes. In today's dangerous digital world, each of us must be vigilant and remain on high alert.”</div>
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IDT911 said its fraud center saw a 154 percent increase in tax-related cases from 2014 to 2015, with 2016 showing no signs of slowing down. Tax refund fraud losses are estimated to reach $21 billion by 2016, according to the Treasury Inspector General for Tax Administration, and the Federal Trade Commission recently announced that it received a 47 percent increase in identity theft complaints in 2015, with tax refund fraud being by far the biggest contributor. These numbers are expected to rise if the proper precautions are not put in place.</div>
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Despite the increased likelihood of identity theft during tax season, many Americans may not know where to go when they are eventually impacted. More than a third of the survey respondents (38 percent) are unsure if their financial services or insurance providers offer identity theft or fraud protection services. The majority of respondents (57 percent) said their financial institution would be the first entity they’d contact once they learned they were the victim of a data breach.</div>
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<span style="font-size: small;">Please contact our office at (630) 986-0540 or taxes@brummetandolsen.com with any questions.</span></div>
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-72583878354222976932016-02-15T09:34:00.000-08:002016-02-15T09:37:16.164-08:00IRS Looking For Taxpayers Who Pad Their Tax Deductions The following article demonstrates the increasing role advancing technology is playing in the automated analysis of tax returns. It is important to know your tax preparer and know your responsibilities and rights as a taxpayer.<br />
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<strong>IRS Looking For Taxpayers Who Pad Their Tax Deductions</strong><br />
<cite class="content content-author normal uppercase standard clear-left"><span class="author-name"><!-- Article-->Isaac M. O'Bannon, Managing Editor, CPA Tax and Advisor Compliance</span></cite><br />
<cite class="content content-author normal uppercase standard clear-left"><span class="author-name">On Feb 12, 2016 <!-- Blog --> </span> </cite> <!-- Gated By external Survey --> <!-- Gated content access --> <br />
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It's tax time. For those who might think, "I'll add a little here, maybe add a little more there ... nobody will notice, right?" Well, the IRS is looking harder at deductions and is warning taxpayers to avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe and possibly receive larger refunds.<br />
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The vast majority of taxpayers file honest and accurate tax returns on time every year. However, each year some taxpayers fail to resist the temptation of fudging their information. That’s why falsely claiming deductions, expenses or credits on tax returns is on the “Dirty Dozen” tax scams list for the 2016 filing season.<br />
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"Taxpayers should file accurate returns to receive the refunds they are entitled to receive and shouldn't gamble with their taxes by padding their deductions," said IRS Commissioner John Koskinen.<br />
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Taxpayers should think twice before overstating deductions such as <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&127&&&https://www.irs.gov/pub/irs-pdf/p526.pdf">charitable contributions</a>, padding their claimed <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&128&&&https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/Deducting-Business-Expenses">business expenses</a> or including credits that they are not entitled to receive – like the <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&129&&&https://www.irs.gov/Credits-%26-Deductions/Individuals/Earned-Income-Tax-Credit">Earned Income Tax Credit</a> or <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&130&&&https://www.irs.gov/pub/irs-pdf/p972.pdf">Child Tax Credit</a>.<br />
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Increasingly efficient automated systems generate most IRS audits. The IRS can normally audit returns filed within the last three years. Additional years can be added if substantial errors are identified or fraud is suspected.<br />
Significant civil penalties may apply for taxpayers who file incorrect tax returns including:<br />
<ul>
<li>20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.</li>
<li>$5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.</li>
<li>In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the return resulted from tax fraud.</li>
</ul>
Taxpayers even may be subject to criminal prosecution (brought to trial) for actions such as:<br />
<ul>
<li>Tax evasion</li>
<li>Willful failure to file a return, supply information, or pay any tax due</li>
<li>Fraud and false statements</li>
<li>Preparing and filing a fraudulent return, or</li>
<li>Identity theft.</li>
</ul>
Criminal prosecution could lead to additional penalties and even prison time.<br />
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Using tax software is one of the best ways for taxpayers to ensure they file an accurate return and claim only the tax benefits they’re eligible to receive. <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&131&&&https://www.irs.gov/uac/Free-File%3A-Do-Your-Federal-Taxes-for-Free">IRS Free File</a> is an option for taxpayers to use online software programs to prepare and e-file their tax returns for free.<br />
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<a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&132&&&https://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers">Community-based volunteers</a> at locations around the country also provide free face-to-face tax assistance to qualifying taxpayers helping make sure they file their taxes correctly, claiming only the credits and deductions for which they’re entitled by law.<br />
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Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else, so they should be wise when selecting a tax professional. The IRS offers important <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&133&&&https://www.irs.gov/uac/Tips-for-Choosing-a-Tax-Return-Preparer">tips for choosing a tax preparer</a> at IRS.gov.<br />
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More information about <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&134&&&https://www.irs.gov/Businesses/Small-Businesses-%26-Self-Employed/IRS-Audits">IRS audits</a>, the <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&135&&&https://www.irs.gov/taxtopics/tc201.html">balance due collection process</a> and possible civil and criminal penalties for noncompliance is available at the IRS.gov website. Taxpayers can also learn more about the <a class="outbound_link_tracking" href="http://links.govdelivery.com/track?type=click&enid=ZWFzPTEmbWFpbGluZ2lkPTIwMTYwMjEwLjU1MDI3MzExJm1lc3NhZ2VpZD1NREItUFJELUJVTC0yMDE2MDIxMC41NTAyNzMxMSZkYXRhYmFzZWlkPTEwMDEmc2VyaWFsPTE3MDY5MzA4JmVtYWlsaWQ9aXNhYWMub2Jhbm5vbkBjeWdudXMuY29tJnVzZXJpZD1pc2FhYy5vYmFubm9uQGN5Z251cy5jb20mZmw9JmV4dHJhPU11bHRpdmFyaWF0ZUlkPSYmJg==&&&136&&&https://www.irs.gov/Taxpayer-Bill-of-Rights">Taxpayer Bill of Rights</a> at IRS.gov. This is a set of fundamental rights each and every taxpayer should be aware of when dealing with the IRS, including when the IRS audits a tax return. <br />
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Please contact our office at (630) 986-0540 if you have any questions about this 2016 filing season.<br />
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</section><br />Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-78817553310976971022015-01-24T12:51:00.001-08:002015-01-24T12:51:44.192-08:006 Tips on Gambling and Income Taxes: Don't Play the IRS for a Sucker<header class="full content content-header">Each year we have clients that have received a tax document from a casino documenting their gambling winnings. They always state that they have lost far more than they have won, but the following article highlights the scrutiny this area is under from the IRS.<br />
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<span style="font-size: large;">6 Tips on Gambling and Income Taxes: Don't Play the IRS for a Sucker</span><br />
<cite class="content content-author normal uppercase standard clear-left"><span class="author-name"><!-- Article--><header class="full content content-header"><cite class="content content-author normal uppercase standard clear-left"><span class="author-name"><br /></span></cite></header> By Ken Berry, JD - CPA Practice Advisor Tax Correspondent On Jan 23, 2015 <!-- Blog --> </span> </cite> </header><div class="block full relative carousel-container" id="12037957">
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Do you have clients who enjoy wagering? It can be anything from buying daily lottery tickets to playing blackjack at a casino to betting at the racetrack. Naturally, if a client is lucky enough to pocket some loot, the IRS will make sure it receives its fair share in taxes. Silver lining: At least the client can use losers sustained in the same tax year to offset the winners.</div>
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In other words, gambling losses aren’t completely tax-deductible on their own, but you can write off losses up to the amount of your winnings. Those winnings are taxed at ordinary income rates reaching as high as 39.6% on the federal level.<br />
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But you can’t just deduct the amounts that you say you lost on your return. The IRS is a stickler for requiring adequate records to substantiate losses and this is a frequent audit item. Practically speaking, you should advise clients – especially those who are heavy gamblers – to keep a log of their activities stating the date of the activity, the location, names of any people who were there with you, the amounts wagered, the type of gambling and your winnings and losses. Supplement this log with receipts, tickets, statements and forms and the like.<br />
<br />
The specific proof required by the IRS may vary according to the type of gambling activity. For instance:<br />
<ul>
<li>Bingo and similar games: Keep records of the number of games played, the cost of cards purchased, and amounts collected on winning cards.</li>
<li>Slot machines: Maintain a record of the machine number and all winnings by date and time the machine was played.</li>
<li>Casino table games (e.g., blackjack, craps, poker and roulette): Write down the number of the table where you played and any casino credit information.</li>
<li>Racing (horses, harness, dog, etc.): Keep track of the number of races, the amounts of your wagers and the amounts you won and lost.</li>
</ul>
<strong>Reminder</strong>: Don’t try to play the IRS for a sucker. For example, if you finally hit the jackpot at the racetrack and offset the income with hundreds of tickets for small wagers the same day, an examiner will suspect that you simply scooped up losing ticket stubs off the ground. Losses should be realistic under the circumstances.<br />
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In addition, the <a class="outbound_link_tracking" href="http://www.irs.gov/" target="_blank">IRS </a>offers these tips:<br />
<ol>
<li>As noted above, gambling income can include a variety of types, as well as the fair market value of prizes a person may win, such as cars or trips.</li>
<li>The taxpayer may, or may not, receive a Form W2-G. </li>
<li>With or without that form, winnings should be reported as income for tax purposes.</li>
<li>Winnings should be entered on the "Other Income" line of a federal tax return or tax software.</li>
<li>Gambling losses can be deducted against the total amount of winnings, but not over.</li>
<li>And, of course, keep accurate records.</li>
</ol>
Finally, be aware of this one “tax edge” for bettors: Gambling losses must be deducted as miscellaneous expenses on Schedule A, but they’re not subject to the usual floor of 2 percent of adjusted gross income (AGI). Thus, the losses are deductible, up to the amount of winnings, regardless of your client’s AGI or the amount of other miscellaneous expenses. You can take that to the bank.<br /><br />------<br />
<h2>
Leave It to the Pros</h2>
There’s another way around the gambling loss restrictions for a select few taxpayers. If gambling legitimately is your livelihood, you may report winnings and losses from such activities on Schedule C, but you can’t claim an overall loss. In addition, the value of complimentary rooms, vacations, and other gifts from casinos is treated as taxable income, but can be offset by losses from your gambling activities.<br />
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Of course, it’s not easy to establish yourself as a professional gambler. Be prepared for an argument from the IRS. And the agency usually prevails in court, so be wary of the odds against you.</div>
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</section>Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-33601114314497279332015-01-21T15:25:00.000-08:002015-01-21T15:25:17.321-08:003 Costly and Common Tax Scams to Avoid<div id="yui_3_16_0_1_1421882074595_1460" style="background-color: white; font-family: 'Helvetica Neue', HelveticaNeue, helvetica, arial, sans-serif; font-size: 15px; line-height: 24.0000019073486px; margin-bottom: 1.1em;">
The following article reposted from Yahoo Finance is a timely reminder of the most common scams currently facing taxpayers.</div>
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<span style="line-height: 24.0000019073486px;">Tax season officially opened Tuesday, meaning that the Internal Revenue Service is now accepting 2014 returns — and that taxpayers should officially go on alert for scams that could cost them dearly.</span></div>
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From identity thieves to imposters posing as the IRS on the phone, con artists have become masters at obtaining sensitive personal information from taxpayers to make a quick buck. Many of these scams happen all year long, but are especially common during tax season.</div>
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Below are three common tax scams to watch out for this year. You can find other <a data-rapid_p="10" href="http://www.irs.gov/uac/Newsroom/IRS-Releases-the-%E2%80%9CDirty-Dozen%E2%80%9D-Tax-Scams-for-2014;-Identity-Theft,-Phone-Scams-Lead-List" rel="nofollow" style="color: #324fe1; text-decoration: none;">tax scams that were popular during last year’s tax season</a> on the IRS website.</div>
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<b>Tax Identity Theft</b><br />Scammers have bilked the IRS out of billions by stealing Social Security numbers and using them to obtain fraudulent tax refunds. Most victims don’t find out until after they’ve filed their real tax return.</div>
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You can prevent yourself from becoming a victim of tax ID theft by protecting your Social Security number — don’t carry around your Social Security card, for example, and be careful when giving out the number. Also, check your credit report annually to make sure your Social Security number isn’t attached to unfamiliar credit accounts.</div>
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If you’ve already become the victim of an ID theft scam, you should file a police report and a complaint with the Federal Trade Commission. You should also contact one of the three major credit bureaus to place a fraud alert on your credit record.</div>
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<b>IRS Imposters</b><br />Someone from the IRS calls you and tells you that you owe Uncle Sam money and need to pay immediately through a wire transfer or a prepaid debit card. They may ask for your credit card information. Only they’re not with the IRS. </div>
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Some con artists may also call you and say you’re owed a refund to try to trick you into sharing private information. If you refuse to share information, they may threaten to report you to the police or to revoke your driver’s license.</div>
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“They might know all or part of your Social Security number, and can fake caller ID information to make it look like it really is the IRS calling,” <a data-rapid_p="11" href="http://www.consumer.ftc.gov/blog/dont-let-tax-scammers-get-away-it?utm_source=govdelivery" rel="nofollow" style="color: #324fe1; text-decoration: none;">the FTC warned</a> in a release last week.</div>
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<b style="line-height: 24.0000019073486px;">Email Phishing Scams</b></div>
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Every year con artists come up with new email phishing scams during tax season. Often, the bogus emails appear to be coming from the IRS Taxpayer Advocate Service and to include a fake case number. Recipients are typically asked to click on a link to resolve some kind of mistake, such as a document processing error.</div>
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The links may take taxpayers to a web page asking for personal information. If you receive such an email, it’s best to refrain from replying to it and from clicking on any link in the email. Taxpayers can forward the email to <a data-rapid_p="13" href="mailto:phishing@irs.gov" rel="nofollow" style="color: #324fe1; text-decoration: none;">phishing@irs.gov</a>.</div>
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Even if you aren't the victim of a tax scam, you may still be impacted. Some states including Ohio and Illinois have already warned taxpayers that their tax refunds may be delayed due to their revenue department implementing new security measures to catch fraudulent returns.</div>
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<b>The Good News</b>It’s actually not that difficult to spot a tax scam, as long as you keep in mind that:</div>
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<li style="list-style: disc inside none; margin-left: 15px;">The IRS never calls taxpayers about money owed without first mailing a bill.</li>
<li style="list-style: disc inside none; margin-left: 15px;">The IRS always gives taxpayers the opportunity to question or appeal the amount supposedly owed.</li>
<li style="list-style: disc inside none; margin-left: 15px;">The IRS never requires that taxpayers use a specific payment method for taxes.</li>
<li style="list-style: disc inside none; margin-left: 15px;">The IRS never asks for credit or debt card numbers over the phone.</li>
<li style="list-style: disc inside none; margin-left: 15px;">The IRS never threatens to bring in local police or other law enforcement group for not paying.</li>
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<span style="line-height: 24.0000019073486px;">As part of Tax Identity Theft Awareness Week, the FTC, along with the AARP and the Treasury Inspector General for Tax Administration are also hosting a webinar on Jan. 27 at 2 p.m. EST to explain common tax scams and teach taxpayers how to protect themselves.</span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-90381684624839332522015-01-19T15:33:00.001-08:002015-01-19T15:33:12.827-08:00IRS ENTERS FILING SEASON WITH REDUCED ENFORCEMENT AND SERVICE DUE TO BUDGET CUTS<div style="background-color: white; border: 0px; font-family: Arial, Verdana, sans-serif; font-size: 16px; font-stretch: inherit; line-height: 20px; padding: 5px 0px 15px; vertical-align: baseline;">
The IRS will open the 2015 filing season on January 20th and both the agency and taxpayers are preparing for some turbulence. The IRS is going into the filing season with a reduced budget, which could translate into fewer audits. Legislation passed by Congress in late 2014 could delay the start of the filing season, although to date, the IRS has not announced a delay. Taxpayers and the IRS are on alert for identity theft, a pervasive problem during filing season. Additionally, new requirements under the Patient Protection and Affordable Care Act kick-in. </div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 600; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Budget cuts impact audits and service</span></div>
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The IRS must do more with less after Congress voted in December to cut the agency’s budget by some $345 million. In fact, the IRS has been doing more with less for the past several years as its budget has been reduced nearly every year. In December, IRS Commissioner John Koskinen told the agency’s employees that he was instituting a hiring freeze, with only a few mission-critical exceptions.</div>
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Koskinen also acknowledged that the number of taxpayer audits will likely decline because of staffing cutbacks and budgetary pressures. The audit coverage rate for individuals hovers around one percent and that rate could go down. Between 2012 and 2013, the audit rate experienced a decline, largely due to budgetary constraints at that time, according to the IRS.</div>
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Going into the filing season, the IRS has cautioned that its customer service functions will be challenged by the budget cuts. With limited budgetary resources, the agency will likely need to shift personnel from other functions to customer service during the filing season. This could slow the processing of refunds, Koskinen said. As a last resort, Koskinen indicated that the agency could consider furloughing employees for one or more days. Koskinen said the IRS spends $29 million every day to keep operating. </div>
<div style="background-color: white; border: 0px; font-family: Arial, Verdana, sans-serif; font-size: 16px; font-stretch: inherit; line-height: 20px; padding: 5px 0px 15px; vertical-align: baseline;">
<span style="border: 0px; font-family: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 600; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Late legislation</span></div>
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When Congress make changes to the Tax Code late in the year, the IRS must scramble to incorporate these changes into its return processing systems. This year is no different. The Tax Increase Prevention Act of 2014, signed into law by President Obama in December, makes some 500 changes to the Tax Code through language extending the tax extenders, technical corrections and the removal of so-called “deadwood.”</div>
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The IRS has been upgrading its return processing systems for the new law. At this time, the agency has not delayed the start of the filing season. In past years, the IRS has opened the filing system generally but asked filers of certain returns and schedules, impacted by legislation, to hold off. Our office will keep you posted of developments.</div>
<div style="background-color: white; border: 0px; font-family: Arial, Verdana, sans-serif; font-size: 16px; font-stretch: inherit; line-height: 20px; padding: 5px 0px 15px; vertical-align: baseline;">
<span style="border: 0px; font-family: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 600; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Identity theft</span></div>
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Tax return identity theft is a growing problem. Identity thieves gather information financial information through phishing scams, discarded tax returns, and other records containing personal and financial information. Identity thieves typically file false returns early in the filing season with hopes to get a refund. Often, taxpayers discover for the first time that they are victims of identity theft when they file their returns.</div>
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The IRS has devoted significant resources to identifying false returns. The agency has developed special filters for its return processing systems. Special identity protection numbers have been assigned to victims of identity theft. The IRS receives some 150 million individual returns and issues around 110 million refunds, so the challenge is daunting.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-stretch: inherit; font-style: inherit; font-variant: inherit; font-weight: 600; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Affordable Care Act</span></div>
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Unless exempt, taxpayers will need to report on their 2014 returns if they are covered by minimum essential health coverage. Individuals without minimum essential coverage – unless exempt – will make a shared responsibility payment. The IRS is bracing for a flood of questions about what is minimum essential coverage, how to calculate the shared responsibility payment and who is exempt. The IRS has revised Form 1040, U.S. Individual Income Tax Return, and created new forms, such as Form 8965, Health Coverage Exemptions.</div>
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Individuals who obtained health insurance through the ACA Marketplace in 2014 may be eligible for the Code Sec. 36B premium assistance tax credit. If they are, they will need to file a new form, Form 8962, Premium Tax Credit, with their 2014 return. If taxpayers received advance payments of the credit, they will need to reconcile the difference between the advance credit payments and the allowable amount of the credit. Taxpayers could discover that their advance payments exceeded their allowable amount. In that case, they will need to repay the excess, subject to certain limitations.</div>
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Please contact our office at (630) 986-0540 if you have any questions about the filing season.</h2>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-58860313020196187062014-02-10T17:05:00.000-08:002014-02-10T17:05:06.252-08:00IRS 2013 Audit Rates Vary Significantly Among Taxpayers<div style="background-color: white; border: 0px; font-family: Arial, Verdana, sans-serif; font-size: 16px; line-height: 20px; padding: 5px 0px 15px; vertical-align: baseline;">
Recently-released statistics from the IRS show a drop in audits among all income groups for fiscal year (FY) 2013 with the overall individual audit coverage rate at its lowest level since FY 2006. At the same time, the number of IRS employees working audits has decreased. However, enforcement revenue increased.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Taxpayer groups</b></span></div>
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For statistical purposes, the IRS groups taxpayers into particular categories. The IRS generally defines higher income taxpayers as taxpayers with incomes over $200,000. The IRS also identifies taxpayers with incomes above $1 million for statistical purposes. Similarly, the IRS groups businesses into various categories; for example, corporations with assets under $10 million and corporations with assets above $10 million, $50 million, or $100 million. The IRS also identifies S corporations and partnerships for statistical purposes.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Audit types</b></span></div>
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As it does with taxpayers, the IRS groups different types of audits into various categories. Field audits are generally full audits. Correspondence audits are, as the name suggests, generally audits conducted by correspondence with the taxpayer. Keep in mind that these categories are very broad and a particular taxpayer’s audit experience may be different.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Individuals</b></span></div>
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In FY 2013 (October 1, 2012 to September 30, 2013), the overall individual audit rate; that is audits of all individuals in all income groups, was less than one percent: 0.96 percent. That compares to an overall individual audit rate of 1.03 percent for 2012 and 1.11 percent for 2011. The last time the overall individual audit rate was below one percent was in 2006.</div>
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To put the overall percentage in perspective, the IRS received 145,819,388 individual returns in 2013. The agency selected 1,404,931 individual returns for examination. The vast majority of these audits - 1,060,779 - were correspondence audits. The number of field audits was 344,152.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Higher income individuals</b></span></div>
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As incomes climb, so does the audit coverage rate. The IRS selected 3.26 percent of returns for examination from taxpayers with incomes above $200,000 in 2013 compared to 0.88 percent for taxpayers with incomes under $200,000. Both percentages reflected a drop from 2012, when the IRS selected 3.70 percent of returns for examination from taxpayers with incomes above $200,000 and 0.94 percent of returns for examination from taxpayers with incomes under $200,000.</div>
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The audit rate for taxpayers with incomes over $1 million also fell in 2013. The IRS selected 10.85 percent of returns for examination from taxpayers with incomes above $1 million compared to 12.14 percent in 2012 and 12.48 percent in 2011. In each of these years, the number of returns reporting incomes above $1 million increased but the audit rate declined.</div>
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Within the higher income groups, the number of field examinations actually increased in 2013 compared to 2012. However, the number of correspondence examinations decreased. Some of the increase in field examinations could be attributed to the IRS’s emphasis on curbing tax evasion by hiding assets in unreported foreign accounts. The IRS has encouraged taxpayers with unreported foreign accounts to come forward in its offshore voluntary compliance program.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Businesses</b></span></div>
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Audits of all types of businesses also declined in 2013. The IRS reported that it selected 0.61 percent of all business returns for examination compared to 0.71 percent in 2012. For the first time in three years, the audit rate of both small and large corporations declined. The IRS selected 0.95 percent of returns for examination from corporations with assets under $10 million and 15.84 percent of returns from corporations with assets over $10 million.</div>
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S corporations and partnerships are among the most popular business entities for small and mid-size businesses. The IRS received 4,476,307 S corporation returns in 2013 and 3,550,071 partnership returns in 2013. The audit percentage rate for S corporations and partnerships was the same in 2013 at 0.42 percent compared to 0.48 percent for S corporations in 2012 and 0.47 percent for partnerships in 2012.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>Enforcement revenue</b></span></div>
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Overall, the IRS’ enforcement activities generated $53.35 billion in FY 2013, compared to $50.20 billion in FY 2012. In the previous year (2011), enforcement brought in $55.20 billion. The IRS reported that collections, appeals and document matching all showed increases in revenue. However, the amount collected through examination decreased to $9.83 billion for 2013 compared to $10.20 billion in 2012.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><b>IRS staffing</b></span></div>
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The IRS reported that 19,531 employees - revenue agents, revenue officers and special agents - worked enforcement activities in FY 2013. That compares to 22,710 employees in FY 2010 - a decrease of 3,179 employees. Some of this decrease reflects normal separations from service, such as voluntary terminations of employment and retirements. Others reflect employee buyouts, which the IRS has offered several times in recent years in response to budgetary challenges.</div>
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If you have any questions about the IRS audit coverage rate, examinations or enforcement, please contact our office.</div>
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<span style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">FY 2013 IRS Enforcement Statistics</span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-25398517294805104502014-02-03T17:51:00.000-08:002014-02-03T17:51:03.574-08:002013 Federal Tax Year-In-Review<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="cs566403de">As 2014 begins, it is a valuable
time to look back at some of the important federal tax developments in 2013 and
their impact on the new year and beyond. Some of these developments were
anticipated; others were surprises. In nearly all cases, the developments open
tax planning opportunities.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Tax legislation.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">2014 has commenced in a very
different budgetary and fiscal climate in Washington compared to the same time
last year. At the end of 2012, lawmakers were in tough negotiations over the
fiscal cliff. The result was the American Taxpayer Relief Act of 2012 (ATRA),
which finally passed Congress on January 1, 2013. The new law extended permanently
the Bush-era tax cuts for lower and moderate income taxpayers, including
reduced income tax brackets, marriage penalty relief, some education
incentives, and much more. ATRA also increased taxes on higher income
individuals by restoring the 39.6 percent tax bracket and revising other
provisions. These and other changes made by ATRA are reflected on 2013 returns
filed in 2014.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Extenders.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">Although ATRA resolved uncertainty
about the Bush-era tax cuts, it did not make permanent many other temporary
incentives. After 2013, a host of temporary incentives, known as tax extenders,
expired. In some cases, for example transit benefits, taxpayers feel the
effects immediately. In other cases, the impact of the expiration of these
incentives will not be felt until taxpayers file 2014 returns in 2015. That
effectively gives Congress time to extend the expired incentives, including the
state and local sales tax deduction, research tax credit, higher education
tuition deduction, and many more.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Tax reform.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">Action on the extenders could be
linked to tax reform. During 2013, the leaders of the House and Senate tax
writing committees undertook a nationwide campaign to drum up support for tax
reform. The lawmakers visited a number of cities and highlighted proposals to simplify
the Tax Code. Late in 2013, the Senate Finance Committee released legislative
language proposing changes in depreciation, the international tax rules and tax
administration. However, it is unclear if the Senate, or the House, will give
these proposals serious consideration in 2014. Their chief proponent, SFC Chair
Max Baucus, D-Montana, is retiring from Congress.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
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<br /></div>
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<span class="csdeee268f"><b><i>Affordable Care Act.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">The Affordable Care Act continued to
generate new rules, regulations and controversies in 2013. The Obama administration
surprised many observers with a one-year delay in the so-called employer
mandate. However, the individual mandate, which generally requires individuals
to carry minimum essential health coverage or pay a penalty unless exempt, took
effect as scheduled on January 1, 2014. Some individuals whose existing
policies were cancelled because they did not meet new standards under the
Affordable Care Act may be eligible for a hardship exemption to the penalty.
The Affordable Care Act’s Marketplaces experienced a rocky opening but as of
early 2014, the White House reported that enrollment numbers were climbing.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>New Medicare taxes.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">The IRS released final regulations
on two new Medicare taxes imposed by the Affordable Care Act: the Net
Investment Income (NII) tax and the Additional Medicare Tax. These two taxes
generally impact higher income taxpayers (individuals with incomes over
$200,000 and married couples with incomes over $250,000) but they have some
especially complex features that complicate tax planning. The NII final
regulations are intended to shed light on the many types of income that could
be subject to the tax.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Health FSAs</i></b></span><span class="cs566403de">. The IRS announced in late 2013 a
decidedly pro-taxpayer change to a popular health care benefit. At the plan
sponsor’s option, employees participating in health flexible spending
arrangements (health FSAs) will be allowed to carry over, instead of
forfeiting, up to $500 of unused amounts remaining at year-end. Plan sponsors
now have the choice of either allowing employees a carryover of up to $500 or
giving employees a grace period of up to 2 ½ months. However, plan sponsors
cannot offer both.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Same sex marriage and domestic
partners.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">On June 26, 2013, the U.S. Supreme Court struck down as
unconstitutional Section 3 of the Defense of Marriage Act. The IRS announced
that same-sex couples, legally married in jurisdictions that recognize their
marriages, will be treated as married for federal tax purposes. This impacts
not only a taxpayer’s filing status. It also applies to all federal tax
provisions where marriage is a factor, including claiming personal and
dependency exemptions, taking the standard deduction, employee benefits,
contributing to an IRA and claiming the earned income tax credit or child tax
credit. The IRS also reminded domestic partners and individuals in civil unions
that they are not married for federal tax purposes.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Repair regulations.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">In September, the IRS issued final
regulations on the treatment of amounts paid to acquire, produce, or improve
tangible property. The complex regulations reach nearly every type of taxpayer.
Their complexity should not be a barrier to taking advantage of some of the
taxpayer-friendly provisions. For example, the final regulations include a de
minimis safe harbor, a safe harbor for small taxpayers to assist them in
applying the general rules for improvements to buildings, and more.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Foreign compliance activities.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">In 2014, foreign financial
institutions will have new reporting obligations under the Foreign Account Tax
Compliance Act (FATCA). FATCA, its supporters argue, will significantly boost
taxpayer compliance. Its detractors counter that the law is too complex and
sweeps in its reach taxpayers who have no intention to purposefully evade U.S.
taxation. Along with FATCA, the U.S. has been expanding its tax treaties and
information agreements with foreign jurisdictions to encourage greater
transparency. This trend is likely to continue in 2014.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>Mileage rates.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">The optional business standard
mileage rate drops slightly for 2014 to 56 cents-per-mile (compared to 56.5
cents-per-mile for 2013). The IRS attributed the reduction to generally lower
vehicle maintenance costs, including the price of fuel. For 2014, the
depreciation component of the business standard mileage rate is 22 cents-per
mile. This represents a one-cent decrease from the depreciation component for
the 2013 business standard mileage rate. Similarly, the optional standard
mileage rate for qualified medical and moving expenses will also decrease from
24 cents-per-mile for 2013 to 23.5 cents-per-mile for 2014. However, the 14
cents-per-mile rate for charitable miles driven is set by statute and is
unchanged for 2014.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="csdeee268f"><b><i>IRS operations.</i></b></span><span class="apple-converted-space"> </span><span class="cs566403de">The IRS experienced a turbulent year
in 2013 with reports of improper oversight of some organizations, leadership
changes and a 16-day shutdown in October. In December, the Senate approved the
nomination of John Koskinen to be the new Commissioner of Internal Revenue. One
of Koskinen’s first tasks will be to oversee the smooth processing of returns
and refunds during the 2014 filing season. Koskinen will also have to
prioritize IRS activities in a challenging budgetary environment.</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<br />
<div class="cs2663cc92" style="background: white; margin-bottom: .0001pt; margin: 0in;">
<span class="cs566403de">If you have any questions about
these or any developments in 2013 and their impact on 2014, please contact our
office at (630) 986-0540.<o:p></o:p></span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-1598405608667807622013-04-06T09:07:00.000-07:002013-04-06T09:07:31.931-07:00How will you use your tax refund? Some wise advice.<br />
<h3 class="entry-header" style="background-color: white; background-image: none; color: #3472af; font-family: Arial; font-size: 23px; letter-spacing: -1px; line-height: 1.3; margin: 0px 20px 10px 0px; padding: 0px;">
Reposted from AICPA Insights - </h3>
<h3 class="entry-header" style="background-color: white; background-image: none; color: #3472af; font-family: Arial; font-size: 23px; letter-spacing: -1px; line-height: 1.3; margin: 0px 20px 10px 0px; padding: 0px;">
In the News: Using Tax Refunds Wisely</h3>
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Posted by James Schiavone on Apr 05, 2013 in <a href="http://blog.aicpa.org/in-the-news/" style="color: #999999; text-decoration: none;">CPA Profession in the News</a>, <a href="http://blog.aicpa.org/james-schiavone/" style="color: #999999; text-decoration: none;">James Schiavone</a>, <a href="http://blog.aicpa.org/tax/" style="color: #999999; text-decoration: none;">Tax</a>,<a href="http://blog.aicpa.org/trends-hot-topics/" style="color: #999999; text-decoration: none;">Trends & Hot Topics</a></div>
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<div style="margin-bottom: 12px; margin-top: 10px;">
<a class="asset-img-link" href="http://aicpa.typepad.com/.a/6a0133f5884316970b017d42887a49970c-pi" style="color: #005599; float: left; text-decoration: none;"><img alt="Mailbox-tax-return" class="asset asset-image at-xid-6a0133f5884316970b017d42887a49970c" src="http://aicpa.typepad.com/.a/6a0133f5884316970b017d42887a49970c-320wi" style="border: 0px; margin: 0px 5px 5px 0px;" title="Mailbox-tax-return" /></a>Do you see your neighbor waiting by the mailbox for their tax refund? Chances are it’s not so they can use it on a fancy vacation or a new spring wardrobe.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
This year, workers are most likely to save their refund or use the money for day-to-day expenses, <a href="http://www.aicpa.org/Press/PressReleases/2013/Pages/AICPA-Survey-Many-Tax-Refunds-Headed-to-Bank-Grocer-Gas-Station-This-Year.aspx" style="color: #005599; text-decoration: none;">according to a recent survey</a> conducted for the AICPA by Harris Interactive for National Financial Capability Month. And that refund money is substantial. <a href="http://www.accountingweb.com/article/should-you-spend-or-save-your-tax-refund/221504" style="color: #005599; text-decoration: none;" target="_blank">An AccountingWEB article</a> on the survey results states that through March 22, the average refund this tax season is $2,827. That’s trending slightly lower than this time last year, when the average individual refund was $2,860.</div>
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<a href="" id="more" style="color: #005599;"></a><div class="entry-more" style="clear: both;">
“Last year the <a href="http://www.irs.gov/uac/2012-Filing-Season-Statistics" style="color: #005599; text-decoration: none;" target="_blank">IRS sent checks</a> totaling nearly $310 billion to taxpayers, underscoring the significance of tax time to American households,” said Ernie Almonte, CPA, CGMA, chair of the AICPA’s National CPA Financial Literacy Commission.<div style="margin-bottom: 12px; margin-top: 10px;">
Asked to select all the ways they will use their tax refund, nearly half of U.S. adult respondents, 46 percent, said they expect to save some portion this year; 37 percent will use it to pay for day-to-day expenses; and one-third, 33 percent, report that they intend to use it to pay down debt.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
A likely cause for this responsible financial behavior is that a substantial portion, 43 percent, of those who are expecting a refund consider it more important to their finances this year than in years past. Part of the reason that refunds are so important in 2013: the expiration of the payroll tax cut. In January, Social Security withholding returned to 6.2 percent from 4.2 percent and effectively reduced take home pay by 2 percent.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
According to the survey results, 71 percent of those employed have felt some impact from their paycheck reduction. And nearly all of those, 96 percent, have made some kind of adjustment. According to the survey, 51 percent are cutting back on cable and digital entertainment; 45 percent are contributing less to retirement accounts; and 17 percent are skipping payments on credit cards, utilities, rent or mortgages.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
“This year, in the wake of a paycheck squeeze, many Americans are counting on those refunds for relief – a way to bolster savings or shore up budgets. It’s critical that they have a well thought out plan for using the funds to maximize the benefit to their financial well-being,” said Almonte.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
In the AccountingWEB article on the survey results, Almonte advises clients who are receiving a refund to:</div>
<ol style="margin-bottom: 10px; margin-top: 10px;">
<li>Set aside money for immediate household expenses.</li>
<li>Build up an emergency fund to cover at least six months of expenses.</li>
<li>Set aside some of the money for a retirement fund.</li>
<li>Pay down credit card debt.</li>
</ol>
<div style="margin-bottom: 12px; margin-top: 10px;">
The CPA profession has a comprehensive financial education program—360 Degrees of Financial Literacy—to help Americans achieve long-term financial success. A robust website (<a href="http://www.360financialliteracy.org/" style="color: #005599; text-decoration: none;" target="_blank">360financialliteracy.org</a>) is the centerpiece of the program with tools, calculators and advice to help Americans understand and manage their financial needs during 10 life stages, from childhood to retirement.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
Since 2007, the AICPA has conducted an annual survey of Americans to determine their top financial concerns and assess their financial well-being. Harris Interactive conducted this year’s telephone survey on behalf of the AICPA within the United States between March 14 and March 17, reaching a nationally representative sample of 1,011 adults aged 18 and older by landline and mobile phone.</div>
<div style="margin-bottom: 12px; margin-top: 10px;">
<a href="http://blog.aicpa.org/james-schiavone/" rel="author" style="color: #005599; text-decoration: none;"><strong><em>James Schiavone</em></strong></a><strong><em>, AICPA Staff</em>.</strong></div>
</div>
</div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-16671021852146405182013-04-05T10:43:00.000-07:002013-04-05T10:43:29.107-07:00Six Tips on Making Estimated Tax Payments - IRS Tax Tip 2013-49<br />
<div style="text-align: center;">
<span style="text-align: left;"><br /></span></div>
<div style="text-align: center;">
<span style="text-align: left;"><br /></span></div>
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<span style="text-align: left;"><br /></span></div>
<div style="text-align: justify;">
<span style="text-align: left;">Some taxpayers may need to make estimated tax payments during the year. The
type of income you receive determines whether you must pay estimated taxes. Here are six tips from the IRS about making estimated tax </span></div>
<div style="text-align: left;">
payments.</div>
<div style="text-align: center;">
<br /></div>
1. If you do not have taxes withheld from your income, you may need to
make estimated tax payments. This may apply if you have income such as
self-employment, interest, dividends or capital gains. It could also apply if
you do not have enough taxes withheld from your wages. If you are required to
pay estimated taxes during the year, you should make these payments to avoid a
penalty.<br />
<br />
2. Generally, you may need to pay estimated taxes in 2013 if you expect
to owe $1,000 or more in taxes when you file your federal tax return. Other
rules apply, and special rules apply to farmers and fishermen.<br />
<br />
3. When figuring the amount of your estimated taxes, you should
estimate the amount of income you expect to receive for the year. You should
also include any tax deductions and credits that you will be eligible to claim.
Be aware that life changes, such as a change in marital status or a child born
during the year can affect your taxes. Try to make your estimates as accurate
as possible.<br />
<br />
4. You normally make estimated tax payments four times a year. The
dates that apply to most people are April 15, June 17 and Sept. 16 in 2013, and
Jan. 15, 2014.<br />
<br />
5. You should use Form 1040-ES, Estimated Tax for Individuals, to
figure your estimated tax.<br />
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6. You may pay online or by phone. You may also pay by check or money
order, or by credit or debit card. You’ll find more information about your
payment options in the Form 1040-ES instructions. Also, check out the
Electronic Payment Options Home Page at IRS.gov. If you mail your payments to
the IRS, you should use the payment vouchers that come with Form 1040-ES.<br />
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If you need help determining if you need to make estimates or the amount of your estimates, please call our office at (630) 986-0540. For more information about estimated taxes, see Publication 505, Tax
Withholding and Estimated Tax. Forms and publications are available on IRS.gov
or by calling 800-TAX-FORM (800-829-3676).<br />
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-11942822595448969972013-03-22T15:33:00.000-07:002013-03-22T15:33:59.865-07:00Retirement plan loans as a source of ready cash—the pros and cons<br />
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Although it is generally not considered prudent to withdraw funds from a retirement savings account until retirement, sometimes it may appear that life leaves no other option. However, <em style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">borrowing </em>from certain qualified retirement savings account rather than taking an outright distribution might prove the best solution to getting you through a difficult period. If borrowing from a 401(k) plan or other retirement savings plan becomes necessary, for example to pay emergency medical expenses or for a replacement vehicle essential to getting to work, you should be aware that there is a right way and a number of wrong ways to go about it.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">When a plan loan is not a taxable distribution</strong></div>
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In general, a loan from a qualified employer plan, such as a 401(a) or 401(k) account, must be treated as a taxable distribution <em style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">unless</em> you can meet certain requirements with respect to amount, repayment period, and repayment method.</div>
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First, however, the terms of the employer-plan must allow for plan loans. Due to administrative costs and other considerations, plan loans are made optional for employer plans. If permitted, however, loans must be made available to all employees.</div>
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A loan to a participant or beneficiary is generally not treated as a taxable distribution if:</div>
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<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: 22px; margin: 0px; padding: 0px 0px 0px 40px; vertical-align: baseline;">The loan is evidenced by a legally enforceable written agreement that specifies the amount and term of the loan and the repayment schedule;</li>
<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: 22px; margin: 0px; padding: 0px 0px 0px 40px; vertical-align: baseline;">The amount of the loan does not exceed $50,000 or half of the participant's vested accrued benefit under the plan (whichever is less);</li>
<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: 22px; margin: 0px; padding: 0px 0px 0px 40px; vertical-align: baseline;">The loan, by its terms, requires repayment within five years, except for certain home loans; and</li>
<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: 22px; margin: 0px; padding: 0px 0px 0px 40px; vertical-align: baseline;">The loan is amortized in level installments over the term of the loan.</li>
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Plan loans may be made only from employer-based plans. Individual retirement accounts (IRAs) cannot be used as collateral for a loan, nor can a direct loan be made from the IRA to the account holder.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Calculating the amount of the plan loan</strong></div>
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In addition to the $50,000 or 50-percent vested benefit rule, several other provisions apply to the amount of the plan loan. First, a plan participant may take out a loan of up to $10,000, even if that $10,000 is more than one-half of the present value of his vested accrued benefit. Second, if a plan participant decides to take out another plan loan, the new maximum amount of the total plan loans will be determined by the following method:</div>
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($50,000 − (highest outstanding loan balance during the preceding 12-month period − outstanding balance on the date of the new loan)) = new plan loan maximum.</div>
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That new plan maximum must be reduced further by any outstanding loan balance.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Repayment period</strong></div>
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Participants must repay a loan within five years. There is one exception, however, for a loan used to make a purchase of a first-time home that is a principal residence. The loan term may then be as long as 30 years.</div>
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If a participant defaults on a loan payment, the entire principal may become due under the terms of the plan. In addition, most plan terms require that you repay the loan within 60 days if you leave or lose your job. If you cannot repay at that time, the balance of the loan is usually considered a taxable distribution deducted from your remaining retirement plan account balance. That deemed distribution may also incur a 10 percent early distribution penalty.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Repayment method</strong></div>
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Loan repayments must be made at least every quarter, and are generally deducted automatically from a participant’s paycheck. Defaulting on a loan causes the IRS to treat the entire outstanding loan balance as a premature (and therefore a taxable) distribution from the employer plan. A deemed distribution occurs at the time of the failure to pay an installment, but the plan administrator can allow a grace period. The deemed distribution then becomes subject to both income tax and the 10-percent early withdrawal penalty.</div>
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<em style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">There are benefits to borrowing from an employer retirement plan, such as providing a ready-made source of credit and the benefit of returning interest paid back into the plan account rather than into the pockets of a third-party lender. There are also many drawbacks to taking out a plan loan. To learn more, please contact our offices.</em></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-28357400883238962962013-03-18T16:07:00.000-07:002013-03-18T16:07:54.806-07:00Careful Planning For Implementation of The Affordable Care Act<br />
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When Congress passed the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act (collectively known as the Affordable Care Act) in 2010, lawmakers staggered the effective dates of various provisions. The most well-known provision, the so-called individual mandate, is scheduled to take effect in 2014. A number of other provisions are scheduled to take effect in 2013. All of these require careful planning.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><u>2013</u></strong></div>
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Two important changes to the Medicare tax are scheduled for 2013. For tax years beginning after December 31, 2012, an additional 0.9 percent Medicare tax is imposed on individuals with wages/self-employment income in excess of $200,000 ($250,000 in the case of a joint return and $125,000 in the case of a married taxpayer filing separately). Moreover, and also effective for tax years beginning after December 31, 2012, a 3.8 percent Medicare tax is imposed on the lesser of an individual's net investment income for the tax year or modified adjusted gross income in excess of $200,000 ($250,000 in the case of a joint return and $125,000 in the case of a married taxpayer filing separately).</div>
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The Affordable Care Act sets out the basic parameters of the new Medicare taxes but the details will be supplied by the IRS in regulations. To date, the IRS has not issued regulations or other official guidance about the new Medicare taxes (although the IRS did post some general frequently asked questions about the Affordable Care Act's changes to Medicare on its web site). As soon as the IRS issues regulations or other official guidance, our office will advise you. In the meantime, please contact our office if you have any questions about the new Medicare taxes.</div>
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Also in 2013, the Affordable Care Act limits annual salary reduction contributions to a health flexible spending arrangement (health FSA) under a cafeteria plan to $2,500. If the plan would allow salary reductions in excess of $2,500, the employee will be subject to tax on distributions from the health FSA. The $2,500 amount will be adjusted for inflation after 2013.</div>
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Additionally, the Affordable Care Act also increases the medical expense deduction threshold in 2013. Under current law, the threshold to claim an itemized deduction for unreimbursed medical expenses is 7.5 percent of adjusted gross income. Effective for tax years beginning after December 31, 2012, the threshold will be 10 percent. However, the Affordable Care Act temporarily exempts individuals age 65 and older from the increase.</div>
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<strong style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;"><u>2014</u></strong></div>
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The Affordable Care Act's individual mandate generally requires individuals to make a shared responsibility payment if they do not carry minimum essential health insurance for themselves and their dependents. The requirement begins in 2014. </div>
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To understand who is covered by the individual mandate, it is easier to describe who is excluded. Generally, individuals who have employer-provided health insurance coverage are excluded, so long as that coverage is deemed minimum essential coverage and is affordable. If the coverage is treated as not affordable, the employee could qualify for a tax credit to help offset the cost of coverage. Individuals covered by Medicare and Medicaid also are excluded from the individual mandate. Additionally, undocumented aliens, incarcerated persons, individuals with a religious conscience exemption, and people who have short lapses of minimum essential coverage are excluded from the individual mandate.</div>
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The individual mandate was at the heart of the legal challenges to the Affordable Care Act after its passage. These legal challenges reached the U.S. Supreme Court, which in June 2012, held that the individual mandate is a valid exercise of Congress' taxing power.</div>
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Like the new Medicare taxes, the Affordable Care Act sets out the parameters of the individual mandate. The IRS is expected to issue regulations and other official guidance before 2014. Our office will keep you posted of developments.</div>
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2014 will also bring a new shared responsibility payment for employers. Large employers (generally employers with 50 or more full-time employees but subject to certain limitations) will be liable for a penalty if they fail to offer employees the opportunity to enroll in minimum essential coverage. Large employers may also be subject to a penalty if they offer coverage but one or more employees receive a premium assistance tax credit.</div>
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The employer shared responsibility payment provisions are among the most complex in the Affordable Care Act. The IRS has requested comments from employers on how to implement the provisions. In good news for employers, the IRS has indicated may develop a safe harbor to help clarify who is a full-time employee for purposes of the employer shared responsibility payment.</div>
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If you have any questions about the provisions in the Affordable Care Act we have discussed, please contact our office.</div>
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Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-26272272368263728282013-03-13T14:39:00.000-07:002013-03-13T14:39:03.920-07:00What Taxpayers Should Know About Identity Theft and Taxes<br />
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www.irs.gov IRS Special Edition Tax Tip 2013-05, February 20, 2013</div>
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Protecting taxpayers and their tax refunds from identity theft is a top priority for the IRS. This year the IRS expanded its efforts to better protect taxpayers and help victims dealing with this difficult issue.</div>
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When your personal information is lost or stolen, it can lead to identity theft. Identity thieves sometimes use your personal information to file a tax return to claim a tax refund. Then, when you file your own tax return, the IRS will not accept it and will notify you that a return was already filed using your name and social security number. Often, learning that your return was not accepted or receiving a contact from the IRS about a problem with your tax return is the first time you become aware that you’re a victim of identity theft.</div>
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<b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">How to avoid becoming an identity theft victim.</b></div>
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<li class="first-child" style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Guard your personal information.</b> Identity thieves can get your personal information in many ways. This includes stealing your wallet or purse, posing as someone who needs information about you, looking through your trash, or stealing information you provide to an unsecured website or in an unencrypted e-mail.<br /></li>
<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Watch out for IRS impersonators.</b> Be aware that the IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information or notify people of an audit, refund or investigation. Scammers may also use phone calls, faxes, websites or even in-person contacts. If you’re suspicious that it’s not really the IRS contacting you, don’t respond. Visit our <a href="http://www.irs.gov/uac/Report-Phishing" style="-webkit-tap-highlight-color: rgb(204, 238, 255); color: #336699;">Report Phishing</a> web page to see what to do.<br /></li>
<li class="last-child" style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">Protect information on your computer.</b> While preparing your tax return, protect it with a strong password. Once you e-file the return, take it off your hard drive and store it on a CD or flash drive in a safe place, like a lock box or safe. If you use a tax preparer, ask how he or she will protect your information.</li>
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<b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">How to know if you are, or might be, a victim of identity theft.</b></div>
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Your identity may have been stolen if the IRS notifies you that:</div>
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<li class="first-child" style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">You filed more than one tax return or someone has already filed using your information;<br /></b></li>
<li style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">You owe taxes for a year when you were not legally required to file and did not file; or<br /></b></li>
<li class="last-child" style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; list-style: disc; margin: 0px 0px 0px 20px; padding: 0px; vertical-align: baseline;"><b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">You were paid wages from an employer where you did not work.</b></li>
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Respond quickly using the contact information in the letter you received from the IRS so that we can begin to correct and secure your tax account.</div>
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If you think you may be at risk for identity theft due to a lost or stolen purse or wallet, questionable credit card activity, an unexpected bad credit report or any other way, contact the IRS Identity Protection Specialized Unit toll-free at 1-800-908-4490. The IRS will then take steps to secure your tax account. The <a href="http://apps.irs.gov/app/scripts/exit.jsp?dest=http://www.consumer.ftc.gov/topics/repairing-identity-theft" style="-webkit-tap-highlight-color: rgb(204, 238, 255); color: #336699;">Federal Trade Commission</a> also has helpful information about reporting identity theft.</div>
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If you have information about the identity thief who used or tried to use your information, file a complaint with the <a href="http://apps.irs.gov/app/scripts/exit.jsp?dest=http://www.ic3.gov/default.aspx" style="-webkit-tap-highlight-color: rgb(204, 238, 255); color: #336699;">Internet Crime Complaint Center</a>.</div>
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For more information – including how to report identity theft, phishing and related fraudulent activity – visit the <a href="http://www.irs.gov/uac/Identity-Protection" style="-webkit-tap-highlight-color: rgb(204, 238, 255); color: #336699;">Identity Protection</a> home page on IRS.gov and click on the Identity Theft link at the bottom of the page.</div>
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<b style="border: 0px; font-family: inherit; font-size: inherit; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; padding: 0px; vertical-align: baseline;">IRS Works to Protect Taxpayer Refunds, Detect and Resolve Identity Theft Cases</b></div>
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The IRS takes identity theft-related tax fraud very seriously and realizes that identity theft is a frustrating process for victims. By late 2012, the IRS assigned more than 3,000 employees — more than double from 2011 — to work on identity theft-related issues.</div>
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The IRS continues to enhance its screening process to stop fraudulent returns. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.</div>
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The IRS recently announced that a year-long nationwide focus on tax refund fraud and identity theft has resulted in more than 100 arrests in 32 states and Puerto Rico. In January 2013 alone, the IRS targeted 389 identity theft suspects resulting in 734 enforcement actions. To learn more, see <a href="http://www.irs.gov/uac/Newsroom/IRS-Intensifies-National-Crackdown-on-Identity-Theft-January-2013" style="-webkit-tap-highlight-color: rgb(204, 238, 255); color: #336699;">IRS Intensifies National Crackdown on Identity Theft</a> on IRS.gov.</div>
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<span style="font-family: sans-serif; font-size: x-small;"><span style="line-height: 16px;">http://www.irs.gov/uac/Newsroom/What-Taxpayers-Should-Know-about-Identity-Theft-and-Taxes</span></span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-51005196725911488522013-03-11T11:27:00.000-07:002013-03-11T11:27:09.267-07:002012 American Taxpayer Relief Act (Individuals)<br />
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<span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; text-align: justify;">After much debate and anticipation, Congress has passed the American Taxpayer Relief Act of 2012 which averts the tax side of the fiscal cliff, provides numerous extenders and avoids the automatic sunset provisions that were scheduled to take effect after 2012 under the “Bush-era” tax cuts in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The impact on individuals is significant. Without the American Taxpayer Relief Act, individual tax rates on all income groups would have increased, taxpayer-friendly treatment of capital gains and dividends would have completely disappeared, the child tax credit would have plummeted to $500, enhancements to education tax incentives would have ended, the federal estate tax would have reverted to a maximum 55 percent, and many other popular but temporary incentives would no longer be available.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">PERMANENT ALTERNATIVE MINIMUM TAX RELIEF</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The alternative minimum tax (AMT) exemption amounts for individuals have been increased for tax years beginning in 2012 and made permanent. The exemption amounts for the 2012 tax year are $78,750 for a joint return or surviving spouse, $50,600 for an unmarried individual not a surviving spouse, $39,375 for married individuals filing separately. The exemption amounts will be indexed for inflation for calendar years beginning after 2012.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Although the AMT exemption amounts for individuals have increased for 2012, the threshold levels for calculating the exemption phaseout remain unchanged, except as to an estate, trust or corporation. Thus, the exemption amount for tax years beginning in 2012 is still reduced by 25 percent for each $1 of alternative minimum taxable income (AMTI) in excess of: (1) $112,500 in the case of unmarried individuals, (2) $150,000 in the case of married individuals filing a joint return and surviving spouses, and (3) 50 percent of the dollar amount applicable to married taxpayers filing jointly in the case of married individuals filing separate returns. However, because the calculation of the phaseout amount is affected by the amount of AMTI exempted, an increase in the exemption amount will also increase the maximum amount of AMTI a person can have before the exemption amount is phased out.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">INDIVIDUAL INCOME TAX RATES</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act makes permanent for 2013 and beyond the lower Bush-era income tax rates for all individuals, except those taxpayers with taxable income above $400,000 ($450,000 for married taxpayers, $425,000 for heads of households).</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Income above these levels will be taxed at a 39.6 percent rate. Therefore, the 10, 15, 25, 28 and 33 percent marginal rates remain the same after 2012, as does the 35 percent rate for income between the top of the 33 percent rate (projected to be at $398,350 for most taxpayers) and the $400,000/$450,000 threshold at which the 39.6 percent bracket now begins. Taxpayers who find themselves within the 39.6 percent marginal income tax bracket nevertheless also benefit from extension of all Bush-era rates below that level.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The majority of U.S. businesses are pass-through entities, such as partnerships and S corporations. This means that profits are passed through to their individual owners and therefore are taxed at individual income tax rates. A "C" corporation, with its current corporate level tax rate of 35 percent (which may drop if recent corporate tax reform proposals are adopted), may become more attractive with rates rising to 39.6 percent for some individuals.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Marriage Penalty Relief</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends all existing marriage penalty relief provisions. Before EGTRRA, married couples experienced the so-called marriage penalty in several areas. EGTRRA gradually increased the basic standard deduction for a married couple filing a joint return to twice the basic standard deduction for an unmarried individual filing a single return. Without marriage penalty relief, the standard deduction for married couples would be 167 percent of the deduction for single individuals rather than 200 percent. For joint filers in 2013, that would have meant a drop of $1,950, from $12,200 to $10,150.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">EGTRRA also gradually increased the size of the 15 percent income tax bracket for a married couple filing a joint return to twice the size of the corresponding rate bracket for an unmarried individual filing a single return. Without that relief, the top of the 15 percent rate bracket in 2013 for married taxpayers filing jointly would be set at a projected $60,550 rather than $72,500.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></div>
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<a href="" name="2770eadc7b7a1000b223002264f3fce8010"></a><span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">CAPITAL GAINS/DIVIDENDS</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act raises the top rate for capital gains and dividends to 20 percent, up from the Bush-era maximum 15 percent rate. That top rate will apply to the extent that a taxpayer's income exceeds the thresholds set for the 39.6 percent rate.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">All other taxpayers will continue to enjoy a capital gains and dividends tax at a maximum rate of 15 percent. A zero percent rate will also continue to apply to capital gains and dividends to the extent income falls below the top of the 15 percent income tax bracket—projected for 2013 to be $72,500 for joint filers and $36,250 for singles. Qualified dividends for all taxpayers continue to be taxed at capital gains rates, rather than ordinary income tax rates as prior to 2003.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Without the American Taxpayer Relief Act, the maximum tax rate on net capital gain of all noncorporate taxpayers would have reverted to 20 percent (10 percent for taxpayers in the 15 percent bracket) starting January 1, 2013.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">It should be noted that starting in 2013, under the Patient Protection and Affordable Care Act (PPACA), higher income taxpayers must also start paying a 3.8 percent additional tax on Net Investment Income (NII) to the extent certain threshold amounts of income are exceeded ($200,000 for single filers, $250,000 for joint returns and surviving spouses, $125,000 for married taxpayers filing separately). Those threshold amounts stand, despite higher thresholds now set for the 20 percent capital gain rate that previously had been proposed by President Obama to start at the same levels. The NII surtax thresholds are not affected by the American Taxpayer Relief Act. Starting in 2013, therefore, taxpayers within the NII surtax range must pay the additional 3.8 percent on capital gain, whether long-term or short-term. The effective top rate for net capital gains for many "higher-income" taxpayers thus becomes 23.8 percent for long term gain and 43.4 percent for short-term capital gains starting in 2013.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">PEASE LIMITATION</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act officially revives the "Pease" limitation on itemized deductions, which was eliminated by EGTRRA. The Pease limitation, named after the member of Congress who sponsored the original provision, reduces the total amount of a higher-income taxpayer's otherwise allowable itemized deductions by three percent of the amount by which the taxpayer's adjusted gross income exceeds an applicable threshold. However, the amount of itemized deductions is not reduced by more than 80 percent. Certain items, such as medical expenses, investment interest, and casualty, theft or wagering losses, are excluded.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">However, higher "applicable threshold" levels apply under the new law:</span></div>
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<li class="csB621A07D" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="2"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$275,000 for heads of households;</span></li>
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<li class="csB621A07D" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="3"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$250,000 for unmarried taxpayers; and</span></li>
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<li class="csB621A07D" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="4"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$150,000 for married taxpayers filing separately.</span></li>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The applicable threshold for the Pease limitation for 2013, as adjusted for inflation and as computed under the sunset rules, would have been $178,150 ($89,075 for individuals married filing separately). Thus, the American Taxpayer Relief Act does not call for a full revival of the Pease limitation at former levels.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act also officially revives the personal exemption phaseout rules, but at applicable income threshold levels slightly higher than in the past:</span></div>
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<li class="cs8D502CDB" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 6pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="2"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$275,000 for heads of households;</span></li>
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<li class="cs8D502CDB" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 6pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="3"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$250,000 for unmarried taxpayers; and</span></li>
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<li class="cs8D502CDB" style="font-size: 10px; line-height: 12pt; list-style-type: disc; margin: 0pt 0pt 6pt 36pt; padding: 0pt; text-align: justify; text-indent: 0pt;" value="4"><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">$150,000 for married taxpayers filing separately.</span></li>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Under the phaseout, the total amount of exemptions that may be claimed by a taxpayer is reduced by two percent for each $2,500, or portion thereof (two percent for each $1,250 for married couples filing separate returns) by which the taxpayer's adjusted gross income exceeds the applicable threshold level.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">CHILD TAX CREDIT</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends permanently the $1,000 child tax credit. Certain enhancements to the credit under Bush-era legislation and subsequent legislation are also made permanent.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">EARNED INCOME CREDIT</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act makes permanent or extends through 2017 enhancements to the earned income credit (EIC) in Bush-era and subsequent legislation. The enhancements to the EIC made by Bush-era and subsequent legislation include (not an exhaustive list) a simplified definition of earned income, reform of the relationship test and modification of the tie-breaking rule.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">OTHER CHILD-RELATED TAX RELIEF</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Adoption Credit/Assistance</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends permanently Bush-era enhancements to the adoption credit and the income exclusion for employer-paid or reimbursed adoption expenses up to $10,000 (indexed for inflation) both for non-special needs adoptions and special needs adoptions. The adoption credit phases out for taxpayers above specified inflation-adjusted levels of modified adjusted gross income. The phase-out level for 2012 started at $189,710. For 2013, the beginning point for phasing out the adoption credit is projected to be $191,530. The limit on the adoption credit is projected to be $12,770 for 2013.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Child and Dependent Care Credit</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends permanently Bush-era enhancements to the child and dependent care credit. The current 35 percent credit rate is made permanent along with the $3,000 cap on expenses for one qualifying individual and the $6,000 cap on expenses for two or more qualifying individuals. Expenses qualifying for the child and dependent care credit must be reduced by the amount of any dependent care benefits provided by the taxpayer's employer that are excluded from the taxpayer's gross income.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Employer-Provided Child Care Credit</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends permanently the Bush-era credit for employer-provided child care facilities and services.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">EDUCATION INCENTIVES</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act makes permanent or extends a number of enhancements to tax incentives designed to promote education. Many of these enhancements were made in Bush-era legislation, extended by subsequent legislation and were scheduled to expire after 2012. Some enhancements, notably the American Opportunity Tax Credit, were made in President Obama's first term.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">American Opportunity Tax Credit</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Opportunity Tax Credit (AOTC) is extended through 2017. The AOTC is an enhanced, but temporary, version of the permanent HOPE education tax credit. The AOTC gives qualified taxpayers a tax credit of 100 percent of the first $2,000 of qualified tuition and related expenses and 25 percent of the next $2,000, for a total maximum credit of $2,500 per eligible student. Additionally, the AOTC applies to the first four years of a student’s post-secondary education. The HOPE credit is less and applies only to the first two years of post-secondary education.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Deduction for Qualified Tuition and Related Expenses</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act extends until December 31, 2013 the above-the-line deduction for qualified tuition and related expenses. The bill also extends the deduction retroactively for the 2012 tax year.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Student Loan Interest Deduction</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act permanently extends suspension of the 60-month rule for the $2,500 above-the-line student loan interest deduction. The American Taxpayer Relief Act also permanently expands the modified adjusted gross income range for phaseout of the deduction and repeals the restriction that makes voluntary payments of interest nondeductible.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Coverdell Education Savings Accounts</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act permanently extends Bush-era enhancements to Coverdell education savings accounts (Coverdell ESAs). These enhancements include a $2,000 maximum contribution amount and treatment of elementary and secondary school expenses as well as postsecondary expenses as qualified expenditures.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Employer-Provided Education Assistance</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act permanently extends the exclusion from income and employment taxes of employer-provided education assistance up to $5,250. The employer may also deduct up to $5,250 annually for qualified education expenses paid on behalf of an employee.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Federal Scholarships</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act makes permanent the exclusion from income for the National Health Service Corps Scholarship Program and the Armed Forces Scholarship Program.</span></div>
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<span class="csB86C8CFE" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-weight: bold;">MORE INDIVIDUAL TAX EXTENDERS</span></div>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">Teachers' Classroom Expense Deduction.</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> The American Taxpayer Relief Act extends through 2013 the teacher's classroom expense deduction. The deduction, which expired after 2011, allows primary and secondary education professionals to deduct (above-the-line) qualified expenses up to $250 paid out-of-pocket during the year.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;"> </span></li>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">Exclusion of Cancellation of Indebtedness on Principal Residence</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">. Cancellation of indebtedness income is includible in income, unless a particular exclusion applies. This provision excludes from income cancellation of mortgage debt on a principal residence of up $2 million. The American Taxpayer Relief Act extends the provision for one year, through 2013.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></li>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">Transit Benefits.</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> The American Taxpayer Relief Act extends parity in transit benefits through December 31, 2013. These benefits are a tax-free fringe benefit to employees. Parity in the exclusion limit expired after 2011.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></li>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">Mortgage Insurance Premiums.</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> This provision treats mortgage insurance premiums as deductible interest that is qualified residence interest. The American Taxpayer Relief Act extends this provision through December 31, 2013. The provision originally expired after 2011.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></li>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">Contribution of Capital Gains Real Property for Conservation.</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> The Act extends for two years, through December 31, 2013, the special rule for contributions of capital gain real property for conservation purposes. The special rule allows the contribution to be taken against 50 percent of the contribution base. The Act also extends for two years the special rules for contributions by certain corporate farmers and ranchers.</span><span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> </span></li>
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<li class="cs76EAFBF7" style="font-size: 10px; list-style-type: disc; margin: 0pt 0pt 0pt 36pt; padding: 0pt; text-align: justify; text-indent: -18pt;" value="1"><span class="csA62DFD6A" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt; font-style: italic;">IRA Distributions to Charity.</span><span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;"> The American Tax Relief Act extends for two years, through December 31, 2013, the provision allowing tax-free distributions from individual retirement accounts to public charities, by individuals age 701/2 or older, up to a maximum of $100,000 per taxpayer per year.</span></li>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Obviously, the American Tax Relief Act is significant and impacts all taxpayers, including you. This letter provides some of the highlights. If you would like more information on the impact to your tax liability, please call our office for an appointment at (630) 986-0540. We will be happy to discuss the details of the American Tax Relief Act.</span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-25081646081489582772013-03-07T14:27:00.000-08:002013-03-07T14:30:59.706-08:00MORTGAGE DEBT FORGIVENESS<br />
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<span style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">The American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act) provides a one-year extension of the exclusion from income for the forgiveness of debt on a principal residence. The exclusion now applies to discharges of qualified principal residence indebtedness occurring on or after January 1, 2007, and before January 1, 2014. During the exclusion period, taxpayers who are caught in the current subprime mortgage crisis do not have to pay taxes for debt forgiveness on their troubled home loans.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">Debt forgiveness relief was originally granted to taxpayers through the Mortgage Forgiveness Debt Relief Act of 2007, effective for debts discharged after January 1, 2007 and before January 1, 2010. The 2008 Stabilization Act extended this relief to debts discharged before January 1, 2013.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">In general, the amount of the forgiveness of debt on a principal residence that is included in income is equal to the difference between the amount of the debt being cancelled and the amount used to satisfy the debt. The tax on this income creates an additional burden to taxpayers already struggling financially. The 2012 Taxpayer Relief Act provides relief from this burden so that taxpayers can recover faster. These rules generally apply to foreclosure or the exchange of an old obligation for a new obligation.</span></div>
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<span class="cs5EFED22F" style="background-color: transparent; font-family: 'Times New Roman'; font-size: 12pt;">If you have any questions regarding this provision or if you have concerns regarding a home foreclosure, we can answer any questions and discuss your options in greater detail. Please call our office at (630) 986-0540 at your earliest convenience to arrange an appointment.</span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-31950626799479567342013-03-06T13:55:00.001-08:002013-03-06T14:10:42.967-08:00<br />
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<span class="cs5efed22f1"><b><u>VEHICLE DEPRECIATION AND DEDUCTIONS</u></b></span></div>
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<span class="cs5efed22f1">In general, if you use your vehicle
in pursuit of a trade or business, you are allowed to deduct the ordinary and
necessary expenses incurred while operating the vehicle. However, any expenses
associated with the personal use of the vehicle are not deductible. For
purposes of these deductions, "car" includes a passenger vehicle,
van, pickup or panel truck. </span></div>
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<span class="cs8f3868831"><b>Personal vs. business miles</b>.</span><span class="cs5efed22f1"> Business use of your car can include traveling from one work
location to another work location within your tax home area; visiting
customers; attending a business meeting away from the regular workplace; and
traveling from home to a temporary workplace if you have one or more regular
places of work. The costs of travel between home and a regular place of work,
however, are nondeductible commuting expenses.</span></div>
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<span class="cs8f3868831"><b>Standard mileage rate vs. actual
cost method</b></span><span class="cs5efed22f1"><b>.</b> In lieu of proving the actual costs
of operating an automobile owned by them, employees and self-employed
individuals may compute the deductible costs for their business use of an auto
using a standard mileage rate. The 2012 standard mileage rate is 55.5 cents per
mile. You may not depreciate your car or deduct lease payments if you use the
standard mileage rate method. If you use the actual cost method, you may take
deductions for depreciation, lease payments, registration fees, licenses, gas,
insurance, oil, repairs, garage rent, tolls, tires and parking fees. Regardless
of the method used, if the vehicle is driven for personal as well as business
purposes, only expenses or mileage attributable to the percentage of business
use are deductible. There are separate considerations involved in leasing a car
for business. </span></div>
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<span class="cs8f3868831"><b>Substantiation.</b></span><span class="cs5efed22f1"> If you are using your car for business purposes, whether
owned or leased, proper recordkeeping is critical. The recordkeeping
requirements vary depending upon which method you use. If you use the standard
mileage rate, you should keep a daily log showing the miles traveled,
destination and business purpose. Recordkeeping under the actual cost method is
somewhat more onerous. You should also keep a mileage log if you use the
actual cost method in order to establish business use percentage. In addition,
you must keep receipts, invoices and other documentation to verify expenses.
Finally, you must be able to prove the original cost of the vehicle and the
date it was placed in service for business use in order to claim depreciation.</span></div>
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<span class="cs8f3868831"><b>Vehicle fringe benefits.</b></span><span class="cs5efed22f1"> The fact that an employer allows an employee to use an
employer-provided car for personal purposes generally does not deprive the
employer of a vehicle expense deduction. An employer who provides a vehicle to
an employee as a fringe benefit may use one of the special valuation rules,
rather than the fair market value (FMV) of leasing a comparable car, to
calculate the amount of the benefit that is attributable to the employee’s
personal use of the car. These special rules include the lease, cents-per-mile,
commuting, and fleet-average valuation rules. An employer is not required to
use the same valuation rule for all of the vehicles that are provided to
employees. However, once a valuation method for a particular vehicle is
elected, it must be used for income tax, employment tax, and reporting purposes
for all employees who share the vehicle, as well as those who use it in
subsequent periods. </span></div>
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<span class="cs5efed22f1">Employers must report their
employees’ personal use of the car on their W-2, Wage and Tax Statement. They
are not required to withhold income taxes on this income, although social
security and railroad retirement taxes must be withheld. An election not to
withhold income taxes may be made on an employee-by-employee basis. However,
affected employees must be notified in writing by the later of January 31</span><span class="cs36e2aa4c1"><sup><span style="font-size: 8.0pt;">st</span></sup></span><span class="cs5efed22f1"> of the applicable year, or 30 days after the day on which
the employee receives a car.</span></div>
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<span class="cs5efed22f1">An employee with an
employer-provided car must substantiate the business use of the car with
adequate records or evidence in order to claim a fringe benefit exclusion from
income for personal use of the car. An employee who uses a personal car in the
performance of services for his or her employer is entitled to deduct the car
expenses if the car is used for the convenience of the employer, and is
required as a condition of employment. Any unreimbursed employee expenses attributable
to such use are deductible only to the extent that they exceed two percent of
the employee’s adjusted gross income (AGI).</span></div>
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<span class="cs5efed22f1">Whether you are an employer, an
employee, or a self-employed individual, we would like to evaluate the business
use of your vehicle(s) in order to provide guidance in claiming and
substantiating these expenses. Please call us at your earliest convenience to
arrange an appointment at (630) 986-0540. We look forward to talking with you soon.</span></div>
Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-22087199840316529072011-06-04T07:59:00.000-07:002011-06-04T08:01:12.238-07:003 Ways Your Social Security Payments Are Already Being CutAt Brummet & Olsen LLP, we are being contacted by an increasing number of clients worried about whether or not they will have enough money in their future retirement years to live comfortably. This concern is appropriate, and certainly timely as Congress is toying with this issue in regards to deficit reduction. The troubling thing we see at our firm, however, is that the only clients that are informing themselves are those approaching retirement. As illustrated in the following article, it is critical that EVERYONE, young and old, become informed as to the current status of Social Security and Medicare, and keep up with the latest developments in pending legislation whose final laws will certainly impact today's workers, their elderly parents, and their children's retirment security. These issues affect everyone, and it is critical to take the time to educate yourself as to what the current law is, what is being proposed, and the long-term effect of any changes. The following Yahoo Finance article summarizes some lesser-known realities of the current Social Security laws.<br />
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<b>3 Ways Your Social Security Payments Are Already Being Cut</b><br />
by Alicia Munnel<br />
Provided by SmartMoney<br />
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Policy experts have focused on alternative ways of eliminating Social Security's 75-year financing gap, but lost in the debate is the fact that even under current law Social Security will provide less retirement income relative to previous earnings than it does today. Combine the already legislated reductions with potential cuts to close the financing gap, and Social Security may no longer be the mainstay of the retirement system for many people.<br />
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In 2002, the frequently quoted replacement rate for the "medium earner" who earned about $42,000 in today's dollars and retired at age 65 was 41%; that is, Social Security benefits were equal to 41% of the individual's previous earnings. Under current law, three factors will reduce this replacement rate: 1) the extension of the full retirement age; 2) the increase in Medicare premiums; and 3) the taxation of Social Security benefits.<br />
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<b>1. The Extension of the Full Retirement Age</b><br />
Under current law, the full retirement age is scheduled to increase from 65 for those reaching 62 in 2000 to 67 for people reaching age 62 in 2022. This increase is equivalent to an across-the-board benefit cut. For those who continue to retire at age 65, this cut takes the form of lower monthly benefits; for those who extend their work lives, it takes the form of fewer years of benefits. Thus, as reported in the Social Security Trustees Report, the replacement rate for the medium earner will drop from 41% to 36% for people who retire at age 65 in 2030.<br />
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<b>2. The Increase in Medicare Premiums</b><br />
The rising cost of Medicare will also affect future replacement rates. For the medium earner, Medicare premiums, which are automatically deducted from Social Security benefits, are scheduled to increase from 5% of benefits for someone retiring in 2002 to 12% for someone retiring in 2030.<br />
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<b>3. The Taxation of Social Security Benefits</b><br />
The third factor that will reduce Social Security benefits is the extent to which they are taxed under the personal income tax. Under current law, individuals with less than $25,000 and married couples with less than $32,000 of "combined income" do not have to pay taxes on their Social Security benefits. (Combined income is adjusted gross income as reported on tax forms in addition to nontaxable interest income and half of your Social Security benefits.) Above those thresholds, recipients must pay taxes on either 50% or 85% of their benefits. In 2002, only 20% of people receiving Social Security had to pay taxes on their benefits, so median earners typically did not pay any taxes. But the thresholds are not indexed for growth in average wages or even for inflation so, by 2030, as real benefits and other income increases, many medium earners will pay tax on half of their benefits.<br />
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The bottom line is that the net Social Security replacement rate for the medium earner will decline from 39% in 2002 to 29% in 2030 under current law. Policymakers need to be aware of this fact when they consider how much of the 75-year financing gap should be closed by benefit cuts and how much by tax increases.<br />
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Alicia Munnell is the Director for the Center for Retirement Research at Boston College.<br />
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Contact Brummet & Olsen, LLP at (630) 986-0540, we'd be glad to answer any questions you may have.<br />
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Circular 230 notification - Any U.S. federal tax advice that is contained in this document was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-49143131536578170032011-04-09T19:18:00.000-07:002011-04-09T19:24:20.792-07:00What to Do If You Owe TaxesMany of us already have gotten the bad news -- Uncle Sam is going to hand us a bill. About one in four tax returns have a balance due, according to the Internal Revenue Service. And that could be painful. In 2008, the average bill was a whopping $5,000.<br />
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The good news is that there's still time to plan, and you have a number of options before taxes are due on April 18.<br />
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Federal taxpayers can choose between swiping and putting the balance on a credit card, starting a payment plan with the IRS, and of course, just paying the bill in full.<br />
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If you have the money, your best options include writing a check, making an electronic payment when you e-file your return, or enrolling in the U.S. Treasury's free service for paying federal taxes electronically, the Electronic Federal Tax Payment System.<br />
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But even if you can't pay the balance now, make sure to file your tax return by April 18, or request an extension in order to avoid late filing penalties, says Melissa Labant of the American Institute of Certified Public Accountants. Late filing penalties are normally 5% of the tax owed for each month your return is late, for up to five months, according to the IRS. And that's in addition to late payment interest and penalties on taxes owed.<br />
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Be sure to let the IRS know you can't afford the bill and then "pay whatever you can," says Labant. "Paying something is better than paying nothing." That cuts down on late payment penalties and interest charges since the IRS generally charges interest on any unpaid tax from the day the tax is due to the date it is paid.The interest rate, currently at 4%, is determined quarterly, and is normally set at 3 percentage points over the federal short term rate. And that doesn't include late payment penalties, which are normally 0.5% of taxes owed a month.<br />
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Taxpayers who need less than four months to pay off a balance may be able to set up an informal payment plan with the IRS, says Elaine Smith, an enrolled agent and tax professional with H&R Block. Those who need more time can set up an installment agreement with the IRS, where the late payment penalty is reduced to .25% a month. If the agreement is approved, taxpayers are charged a one-time fee of up to $105, but that fee is slashed to $52 for people who agree to have payments deducted directly from their bank accounts. Certain low-income individuals can qualify for a $43 fee.<br />
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You can also buy yourself a 30-day extension by putting the balance on a credit card, but you have to go through an IRS approved service provider that will charge a convenience fee of roughly 2% to 2.4%, plus there is the interest charge you might get from your credit card company. (Crunch the numbers because the interest charges on your card may be less than the late payment penalties charged by the IRS).And a "zero percent credit card could buy you even more time," says Smith.<br />
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Your options are different if you owe state taxes because some states offer payment plans or let you pay with a credit card and others do not. Contact your state department of revenue to figure out what your options are.<br />
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One other important step is to make sure this doesn't happen again, tax experts warn. Use the withholding calculator on the IRS website to figure out if you need to adjust your income tax with holdings on your W4 form. You might find yourself with a tax bill after a big life change -- getting married or divorced, having a baby, moving out of home for the first time, changing jobs and selling a house, to name a few. So make sure to contact a tax professional or consult the IRS if you have any questions. <br />
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Jonnelle Marte <br />
Friday, March 18, 2011<br />
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Excerpted from Yahoo!Finance, provided by SmartMoney<br />
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Contact our office at (630) 986-0540, we'd be glad to answer any questions you may have.<br />
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Circular 230 notification - Any U.S. federal tax advice that is contained in this document was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-88412364418590152372011-04-04T20:04:00.000-07:002011-04-04T20:07:49.123-07:00Ten Things to Know About Tax RefundsAre you expecting a tax refund this year? Here are 10 things the IRS wants you to know about your refund. <br />
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1. <b>Refund Options </b>You have three options for receiving your individual federal income tax refund: direct deposit, U.S. Savings Bonds or a paper check. You can now use your refund to buy up to $5,000 in U.S. Series I Savings Bonds in multiples of $50. <br />
2. <b>Separate Accounts </b>You may use Form 8888, Allocation of Refund (Including Savings Bond Purchases), to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds. <br />
3. <b>Tax Return Processing Times </b>If you file a complete and accurate paper tax return, your refund will usually be issued within six to eight weeks from the date it is received. If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date. <br />
4. <b>Check the Status Online </b>The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return. <br />
5. <b>Check the Status By Phone </b>You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return. <br />
6. <b>Check the Status with IRS2Go</b> IRS2Go is a smartphone application that lets you interact with the IRS using your mobile device. Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app. Simply enter your Social Security number, which will be masked and encrypted for security purposes, then select your filing status and the exact whole dollar amount of your refund shown on your return. <br />
7. <b>Delayed Refund</b> There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 available on the IRS website at http://www.irs.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return. <br />
8. <b>Larger than Expected Refund </b>If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice. <br />
9. <b>Smaller than Expected Refund </b>If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040. <br />
10. <b>Missing Refund </b>The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check. <br />
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For more information, visit the IRS website at http://www.irs.gov or call 800-829-1040.<br />
Please feel free to contact our office with any questions you may have.<br />
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Circular 230 notification - Any U.S. federal tax advice that is contained in this document was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0tag:blogger.com,1999:blog-8018964491763154232.post-12685857675306881402011-03-22T09:34:00.000-07:002011-03-22T09:45:50.240-07:00Eight Tips for Deducting Charitable ContributionsCharitable contributions made to qualified organizations may help lower your tax bill. The IRS has put together the following eight tips to help ensure your contributions pay off on your tax return. <br />
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<b>1.</b> If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization. <br />
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<b>2.</b> To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. <br />
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<b>3.</b> If you receive a benefit because of your contribution such as merchandise, tickets to a ball game or other goods and services, then you can deduct only the amount that exceeds the fair market value of the benefit received.<br />
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<b>4.</b> Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good used condition or better to be deductible. Special rules apply to vehicle donations. <br />
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<b>5.</b> Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. <br />
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<b>6.</b> Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the record-keeping requirement if it shows the name of the receiving organization, the date of the contribution, and the amount given.<br />
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<b>7.</b> To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more. If your total deduction for all noncash contributions for the year is over $500, you must complete and attach IRS Form 8283, Noncash Charitable Contributions, to your return. <br />
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<b>8.</b> Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser. <br />
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For more information on charitable contributions, refer to Form 8283 and its instructions, as well as Publication 526, Charitable Contributions. Please contact our office with any questions you may have.<br />
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Circular 230 notification - Any U.S. federal tax advice that is contained in this document was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.Brummet and Olsen, LLPhttp://www.blogger.com/profile/11777965660125312553noreply@blogger.com0