Free Tax Return Preparation -- See If You Qualify

Free Tax Return Preparation -- See If You Qualify

If you need help preparing your tax return, learn about the IRS Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.

VITA Program: If you make $52,000 or less, IRS-certified volunteers can inform you about tax credits for which you may qualify, and prepare a basic tax return with electronic filing.

TCE Program: If you are 60 years of age or older, you may qualify for free tax help from IRS-certified volunteers who specialize in issues unique to seniors.

There are thousands of locations across the United States where you can get free tax help through the VITA and TCE programs

The best, and free, way to find out if you are taxable is to use IRS Free File to prepare and e-file your tax return. If you made $58,000 or less, you can use Free File tax software. The software will figure the taxable benefits for you. If your income was more than $58,000 and you feel comfortable doing your own taxes, use Free File Fillable Forms. Free File is available only at IRS.gov/freefile.

A Taxpayer Bill of Rights? The Taxpayer Advocate proposes a list of rights — and responsibilities

A Taxpayer Bill of Rights?

The Taxpayer Advocate proposes a list of rights and responsibilities.

In her January 2014 report to Congress, National Taxpayer Advocate Nina Olson proposed a Taxpayer Bill of Rights, saying that many taxpayers aren’t aware of the rights they already have. A clear-cut expression of those rights, she suggested, would encourage compliance with the tax laws and help restore taxpayers’ faith in the system, which has been shaken by recent scandals at the IRS. 

Taking the Bill of Rights as her model, Olson proposed a list of 10 taxpayer rights that should be formally acknowledged -- and then added a list of five taxpayer responsibilities, including our personal favorite: The Responsibility to Be Courteous (to IRS personnel, that is).

1. The Right to Be Informed
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the law and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

2. The Right to Quality Service

Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.

3. The Right to Pay No More than the Correct Amount of Tax
Taxpayers have the right to pay only the amount of tax legally due and to have the IRS apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard
Taxpayers have the right to raise objections and provide additional documentation in response to IRS actions or proposed actions, to expect that the IRS will consider their objections and documentation promptly and impartially, and to receive a written response if the IRS finds them insufficient.

5. The Right to Appeal an IRS Decision in an Independent Forum
Taxpayers are entitled to a prompt and impartial administrative appeal of IRS actions and have the right to receive a written response explaining the Appeals Division’s decision. Taxpayers generally have the right to take their cases to court to challenge an adverse final determination.

6. The Right to Finality
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year. Taxpayers have the right to know when the IRS has finished an audit.

7. The Right to Privacy
Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and a collection due process hearing where applicable.

8. The Right to Confidentiality
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect the IRS to investigate and take appropriate action against its employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

9. The Right to Retain Representation
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to be told that if they cannot afford to hire a representative they may be eligible for assistance from a Low Income Taxpayer Clinic.

10. The Right to a Fair and Just Tax System, Including Access to the Taxpayer Advocate Service
Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Five Taxpayer Responsibilities
1. The Responsibility to Be Honest
Taxpayers have the responsibility to be truthful in preparing their tax returns and in all other dealings with the IRS.

2. The Responsibility to Provide Accurate Information
Taxpayers have the responsibility to answer all relevant questions completely and honestly, to provide all required information on a timely basis, and to explain all relevant facts and circumstances when seeking guidance from the IRS.

3. The Responsibility to Keep Records
Taxpayers have the responsibility to maintain adequate books and records to fulfill their tax obligations, preserve them during the time they may be subject to IRS inspection, and provide the IRS with access to those books and records when asked so the IRS can examine their tax liabilities to the extent required by law.

4. The Responsibility to Pay Taxes on Time
Taxpayers have the responsibility to pay the full amount of taxes they owe by the due date and to pay any legally correct additional assessments in full. If they cannot pay in full, they have the responsibility to comply with all terms of any full or partial payment plans the IRS agrees to accept.

5. The Responsibility to Be Courteous
Taxpayers have the responsibility to treat IRS personnel politely and with respect.

IRS Releases Get Transcript App This Week For All Taxpayers

IRS Releases Get Transcript App This Week For All Taxpayers
IRS has released the Get Transcript app allowing any taxpayer to view, print or download their own transcripts on-line in real-time using a computer or smart phone.

Taxpayers can visit the IRS web site (Get-Transcript), create a user profile using SSN and DOB and answer a number of security questions. After the questions are answered the taxpayer can create an account with a username and password.

There are various types of transcripts that can be viewed through the app. The account transcript provides a history of each tax year from 2013 to 2006. The return transcript shows most line items from your tax return from 2013 back to 2010. The record of account combines the information from tax account and tax return transcripts from 2012 back to 2010. Wage and income transcripts show data from information returns, such as W-2s, 1099s and 1098s from 2013 back to 2004. A verification of nonfiling letter is proof from the IRS that you did not file a return.

In order for an EA or other tax professional to access information, he/she must first submit a Power of Attorney and then go to e-Services to pull the information.

Maximize Your 2013 Tax Refund with these Tax Deductions & Credits

Maximize Your 2013 Tax Refund with these Tax Deductions & Credits

Credits & deductions available on your 2013 federal returns due April 15, 2014 include:

• Child Tax Credit (CTC) (Form 8812 to Form 1040, line 51) - CTC has been made permanent at $1,000 per child under age 17 at the end of the year.  This credit may be claimed in addition to the Child & Dependent Care Credit.
• Child & Dependent Care Credit (Form 2441 to Form 1040, line 48) - Maximum amount of child and dependent care expenses eligible for the credit is now $3,000 if you have one child and $6,000 if you have two or more children.  These amounts are permanent.
• Tuition & Fees Deduction (Form 1098-T to Form 8917 to Form 1040, line 34) - If you, your spouse or dependent is enrolled in a post secondary institution (college), you may be able to deduct tuition (up to $4,000) expenses as an adjustment to income, even if you don't itemize deductions. You generally take this deduction if you don't qualify for an education credit. (No double benefit allowed).
• American Opportunity Tax Credit (Form 8863 to Form 1040, line 49) - Maximum credit for the first four years of post secondary education (college) costs in a degree or certificate program is $2,500 per student. Costs may include tuition, fees and course materials (books).  If you owe no tax, you may also be eligible to receive up to 40% of the credit ($1,000) as a refund.
• Lifetime Learning Credit (Form 8863 to Form 1040, line 49) - Tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.
• Educator Expenses Elementary and secondary educators can deduct up to $250 in related job expenses as an adjustment to income, even if not itemizing.  Educator expenses are not reduced by 2% of AGI, contrasting to most other employee expenses.
• Deduction for mortgage insurance premiums (PMI) (Form 1040, Sch A) If you pay mortgage insurance premiums, aka (PMI), you may be able to deduct these premiums as mortgage interest.
• Alternative Minimum Tax (AMT) (Form 6251) AMT was enacted by Congress (TRA1969) imposing a nearly "flat rate" (26%/28%) on an adjusted amount of taxable income above a certain threshold (exemption) to ensure wealthy taxpayers receiving large tax benefits pay "some" tax. AMT will now be adjusted for inflation each year so fewer people are subject to the AMT. The exemption amount for 2013 is $51,900 single, $80,800 married and $40,400 married filing separate.
• Adoption credit (Form 8839) you may qualify for a credit up to $12,970 of your adoption expenses including fees, court costs, attorney fees, traveling expense and other expenses directly related to and for the principal purpose of the legal adoption of a child. If your employer provides adoption benefits, you may be able to exclude up to the same amount from your income. Both a credit and exclusion may be claimed for the same adoption (child) by not for the same expense (child).
• State & Local sales tax deduction (Form 1040, Sch A) For 2013, you may deduct state & local sales tax in lieu of state income tax. You can take a deduction for state & local sales tax, or a deduction for state income tax, but not both.
• Learn more about these deductions and credits at irs.gov and file your income taxes!

Anatomy of a Federal Tax Controversy

Anatomy of a Federal Tax Controversy

Step one: The IRS conducts a tax audit. A tax audit is an examination of your income and expenses to ensure that you correctly reported your tax liability. All types of tax returns are subject to audit, including income, business, estate, and gift tax returns. 

Step two: The 30-day letter.

• If a revenue agent determines that a deficiency exists and the taxpayer does not agree, the agent prepares a "Revenue Agent Report" (RAR). Included with the RAR is a cover letter and a settlement agreement. 
• The cover letter is known as a "30-day letter" because it informs the taxpayer of the right to request a conference with the IRS Appeals Division within 30 days. 
• A taxpayer who receives a 30-day letter faces a strategic decision between requesting a conference with the IRS Appeals Division or doing nothing.

Step three: If a taxpayer requests an Appeals conference but the parties do not come to an agreement, or if the taxpayer simply ignores the 30-day letter, the IRS will send the taxpayer a notice of deficiency (i.e., a "90-day letter").

• The notice of deficiency provides the taxpayer with two options: (1) pay the asserted deficiency and follow the refund procedures or (2) petition the tax court to contest the claimed deficiency within 90 days of the date the notice was mailed. 
• The mailing of the notice of deficiency begins a period during which the IRS is prohibited from assessing tax. If the taxpayer petitions the tax court, the "prohibited period" continues until the tax court's decision is final.

Step four: Taxpayer petitions the Tax Court. 

• Issues that can be raised in Tax Court: The taxpayer can challenge the deficiency claimed by the IRS and any overpayment claimed by the taxpayer. 
• The taxpayer can appeal the resulting decision to the Court of Appeals for the circuit in which the taxpayer resided at the time he filed the petition.

Step five: If the taxpayer does not respond to a notice of deficiency either by petitioning the Tax Court in the time provided or by paying the tax outright, the IRS will make an assessment. 

Once an assessment is made, it becomes a debt of the taxpayer. The IRS must give notice and demand for payment to the taxpayer as soon as practical and within sixty days of making an assessment. If the taxpayer refuses or neglects to pay the tax after notice and demand for payment, the amount of the tax liability becomes a lien on all of the taxpayer's real and personal property until it is paid.
Courtesy:

DeBlis Law | 1012 Broad Street | Bloomfield, NJ 07003 | 973-783-7000 (office) | 973-337-9473 (cell)

Click here to visit my site.
Michael DeBlis III, Esq., LL.M.

Early 2014 IRS Released New Revisions of the Four Most Important Tax Resolution Forms

Early 2014 IRS Released New Revisions of the Four Most Important Tax Resolution Forms 

IRS releases updates to the four fundamental IRS Forms regularly used in resolving delinquent taxpayers’ accounts. These are: Form 433-A (OIC), Form 433-B (OIC), Form 656 and Form 9465.

1. Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, Rev. January 2014:

• For employed individuals it is now required to indicate if taxpayer(s) have an interest in their employers’ business. 
• The form now clearly allows the $1,000 adjustment to the individual bank accounts equity. However, there is no mention of reduction of bank account equity by allowable monthly living expenses.  
• On the form, it is now required to indicate the purchase date and date of final payment for real estate properties. 
• In the Vehicles section, disclosing the creditor's name, purchase date and date of final payment is required. 
• The form now clearly allows a $3,450 deduction from the vehicle value, and if a joint offer is filed, an additional $3,450 for a second vehicle. Vehicles don't have to be used for work, the production of income or the welfare of the taxpayer's family in order to qualify for the deduction. 
• Under the Personal Assets Information, it is now required to include interest in a company or business that is not publicly traded. 
• Self-Employed sections are to be completed not only for Schedule C filers, but for Schedule E and F filers as well. 

2. Form 433-B (OIC), Collection Information Statement for Businesses, Rev. January 2014:

• The Quick Sale Value of 80% is now clearly indicated for business investments, real estate assets and business vehicles. In prior revisions those calculated values were subject to guesswork. 
• The name of creditor and date of final payment are now required for real estate assets and business vehicles. 
• The IRS exemption amount for professional books and tools of trade increased from $4,290 to $4,470. 

3. Form 656, Offer in Compromise, Rev. January 2014

• The application fee for Offer in Compromise increased from $150 to $186, effective January 1, 2014. 
• The form added a question as to whether or not the taxpayer used the Pre-Qualifier tool located on OIC Pre-Qualifier prior to filling out the form. 
• Low Income Certification guidelines have increased slightly for all states and D.C. 
• Offer amount should now be rounded to whole dollars only; no cents please. 
• The loophole for Lump Sum Cash offers has been closed, as it is now clearly states that Lump Sum Cash offers must be paid within 5 or fewer months from the date of acceptance. In prior revisions the verbiage was in 5 or fewer payments, which allowed it to be paid over a period of 24 months. 
• Payment schedule for Lump Sum Cash offers no longer require specifying the ‘day of the month’ payments will be made; just the month suffices. 
• A Correction Agreement has been added to the Offer Terms section which indicates that the taxpayer authorizes the IRS to correct any typographical or clerical errors or make minor modifications to Form 656. 

4. Form 9465, Installment Agreement Request, Rev. December 2013:

• The Installment Agreement fee for non-direct-debit agreements and payroll deduction agreements increased from $105 to $120, effective January 1, 2014. 
• Form 9465 can now be filed by individuals who owe employment or unemployment taxes for businesses that are no longer operating. In such cases the name of business and EIN is required. 
• Foreign address fields have been added for those taxpayers who currently reside outside of the US. 
• The total amount owed is now to be divided by 72 months to see if the proposed installment amount is greater than or equal to this value. If it's less, Form 433-F is required for submission. If the amount is equal or greater, but the total amount owed is between $25,000 and $50,000, then direct debit from checking account or payroll deduction is required, unless submitted with Form 433-F. If the amount owed is over $50,000, then Form 433-F is always required. 
• Part II has been added to the newly revised form which is required to be completed by taxpayers who have either defaulted on an installment agreement within the past 12 months, or who owe (in total IRS debt) more than $25,000 but less than $50,000 and can pay the debt in full within 72 months. Part II questions mimic those on Form 9465-FS, which probably will drop out of circulation with the introduction of this newly revised Form 9465.

Reference: Lawrence M. Lawler, CPA, CTRS, EA - National Director - American Society of Tax Problem Solvers (ASTPS) thanks to PitBullTax Software

2012 - 2013 Key Tax Facts

2012 - 2013 Key Tax Facts
New taxes for top earners
The year 2013 will have several new wrinkles for individuals with incomes above $200,000 for single or $250,000 for couples; specifically, higher Medicare payroll taxes and the new Medicare surtax on net investment income.  People with MAGI greater than $200,000 for single or $250,000 for couples, may be impacted by a new Medicare surtax (3.8%) on net investment income. Taxpayers with earned income above $200,000 for single or $250,000 for couples, will pay a higher Medicare payroll tax (0.9%).

Year	2012	2013
Top marginal long-term capital gains and qualified dividend rate	15%	23.8%*
Top marginal ordinary income tax rate	35%	39.6%
Top rate on short-term capital gains and non-qualified dividends	35%	43.4%*
Personal exemption phaseout (PEP). (MAGI above $250,000 for single or $300,000 for married couple filing jointly)	None	Completely eliminates value of personal exemption for single earners with an AGI over $372,501 and couples filing jointly with an AGI greater than $422,501.
Pease itemized deduction phaseout.	None	All itemized deductions reduced by 3% of MAGI over $300,000 for married couples filing jointly ($250,000 for single filers)  to a maximum reduction of 80% in value.
*includes 3.8% Medicare surtax

Taxable income above $400,000 or $450,000 for couples
In addition to the higher taxes described in the table below, upper-income Americans may be subject to a new 39.6% marginal rate on taxable income over $400,000 for single or $450,000 for married couples filing jointly. Taxpayers may be subject to tax on capital gains and qualified dividends at a rate as high 20% to 23.8% if the Medicare surtax on net investment income applies. 

Source:  A taxpayer's guide to 2013
"The 2013 tax changes you can expect, and what you can do about them."
FIDELITY VIEWPOINTS – 02/27/2013

Internal Controls Review

Internal Controls Review

Companies should start by identifying the weaknesses in their financial processes and structures that make fraud easy, such as a lack of internal controls, loopholes in business processes, or the easy availability of check stock on-site.

Management should consider implementing some or all of the following:

• Separation of duties -- so that no one employee has sole control of the entire process.
• Manual controls -- so that fraud can’t slip by as part of an unmonitored process.
• Limited access to accounts and the ability to make payments -- so that staff can’t manipulate systems they’re not supposed to, and so that you’ll know exactly who could have made potentially fraudulent entries or changes.
• Require double signatures -- so checks can’t go out on the fraudsters say-so alone.
• Get daily check reports -- so that frauds can be caught quickly.
• Securely store check stock.

“Everything someone needs to steal money from your company or a client is right there on the check,” Lacerte noted, before adding that, while securing check stock was important, it would be far better to move beyond paper checks entirely. “Paper is one of the biggest problems when it comes to fraud. You have to go paperless.”

Electronic invoicing and payment solutions like Bill.com and others not only eliminate the weak spot of having check stock in the office -- they also offer many opportunities for limiting access, monitoring payment activity, enforcing payment controls and separation of duties.

Source: accountingTODAY

Rene Lacerte, Las Vegas (November 05, 2013)

Is Social Security Exempt from IRS Levy? No!

Is Social Security Exempt from IRS Levy? No!
IRS can take up to 15% of Social Security Disability payments.  
○ The types of Social Security payments that the IRS levies under the Federal Payment Levy Program (FPLP) include:
   • Retirement, Survivors, and Disability Insurance program payments. 
○ The types of Social Security payments that the IRS does not levy under the FPLP include:
   • Children’s benefits; 
   • Supplemental Security Income payments; and 
   • Lump sum death benefits
See IRS Pub 4418

No Levy is allowed to impose Economic Hardship
Though the statutes permit IRS to take away up to 15% of disability payments, the law does not permit IRS to take anything if doing so would impose an economic hardship. “Economic hardship” is defined as the inability to pay basic living expenses. The United States Tax Court has stated that no levy is permitted to impose economic hardship. See Vinatieri v. Comm., 136 T.C. No. 16 (Dec. 21, 2009).

Treasury and IRS recognize same-sex marriages

Treasury and IRS recognize same-sex marriages

• Washington, D.C. — The Treasury Department and the Internal Revenue Service have ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes, regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. The ruling implements the federal tax aspects of the June 26, 2013 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act (DOMA). 

• Same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, 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. Same-sex marriages legally entered into in one of the 50 states, the District of Columbia, a US territory, or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law. 

• Married same-sex couples generally must file their 2013 federal income tax return using either the “married filing jointly” or “married filing separately” filing status. Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. The statute of limitations for filing a tax refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. Refund claims can still be filed for tax years 2010, 2011 and 2012. In addition, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.