DO THE RICH PAY TAXES?

New IRS statistics show the burden on taxpayers.  The top 1% of all filers paid 37.4% of all federal income taxes in 2010, the most recent year IRS has analyzed.  That is up from 36.3% the previous year.  They reported 18.9% of total adjusted gross income, also higher than the year before.  However, the average tax rate paid by the top 1% fell slightly to 23.4% of their AGI. 

Filers needed to have AGI of at least $369,691 to qualify for the top 1% of earners.  The highest 5% paid 59.1% of total income tax and accounted for 33.8% of all adjusted gross income.  They each had AGIs of $116,623 or more; bore 70.6% of the total tax burden while bringing in slightly more than 45% of the total adjusted gross income.  The bottom 50% of filers paid 2.36% of the total federal income tax take, mainly because of refundable tax credits.  The average tax rate was 2.4% of their AGI. 

Two things to note about the data:  The average tax rates would be higher if the IRS expressed them as a percentage of taxable income instead of AGI.  Also, the Service excluded returns filed by dependents from the calculations this year.

LEASING ASSETS TO A CORPORATION CAN SOMETIMES PROVIDE A TAX BREAK

The net rental income can offset other passive losses, the Tax Court says, if the corporation uses the property in its own rental activity.  Here, a business owner rented towers to his cellular phone firm, and the company leased space on the towers to other firms.  That lets the owner treat the income from the profitable tower rentals as passive income, which he can use to soak up passive losses (Dirico, 139 TC No. 16).  But net income from leases of land to the company is treated as nonpassive income.

REIMBURSE EMPLOYEE MILEAGE

Q:  Hi Larry, I have a question about how to reimburse an employee for mileage. I just read what the deduction is but I need to know what the rate is for a business to pay back an employee for auto expenses they incur running errands for the business. I am assuming it is an amount per mile and I have asked them to keep a log.

A: You are correct that they should turn in a log (diary) of their miles.  By your question I am assuming that these are routine trips around town such as to the bank etc.  If this is true instead of a daily log the employee can determine the routine miles for the trip and then if they can somehow document the number of trips you can just multiply to determine total business miles.  Having said that in my opinion the IRS likes a detailed log but the other method works.

The mileage rate is 55.5 cents for 2012 and 56.5 cents for 2013.  The amount given to the employee is not added to the W-2 and you do not have to give the employee a 1099.  It is deductible to you and not income to the employee.

SCIENCE GOES WILD #2

Last week I mentioned the Ig Nobels.

Our second winner:

A British-American group won the physics prize for

“Figuring Out How a Ponytail Bounces.”

 

QUICKBOOKS 2013 UPDATE

In response to customer feedback, QB’s has released an update for QB 2013 that will allow you to change the black ribbon at the top to a lighter color which is easier to read and looks similar to the older versions of QB’s. This is under Edit; Preferences; Switch to colored icons/light background. Always run updates because they may contain more options to switch the color scheme back to "normal."

Default

Preference

SELLING SOME LOSERS CAN TRIM YOUR TAX BILL

Capital losses offset your gains, plus up to $3,000 of other income.  Any excess losses are carried over to next year. 

Note the wash-sale rule:  If you buy the identical securities within 30 days before or after the sale, the loss isn't deductible.  Instead the disallowed loss is added to the basis of the new shares.  The rule can bite you if your IRA quickly buys stock that you sold at a loss in a taxable account.  You can innocently run afoul of this rule if you sell a mutual fund at a loss within 30 days of the date a dividend is reinvested.

HERE COME THE 1099K NOTICES

WE HAVE OUR FIRST CLIENT TO RECEIVE A 1099K NOTICE

You may remember that as part of ObamaCare credit and debit card companies are required to send a 1099K to companies reporting the amount of credit and debit card sales.  The IRS receives a copy of the form.  At first we were supposed to reconcile the 1099K to the companies Gross Income.  Common sense prevailed and the IRS decided that that because of sales tax; tips; gift certificate sales; different year ends; cash given back and numerous other reasons this would be impossible to monitor.  Because of this the IRS ruled that you do not have to reconcile on the tax return.  But that is not the end of it.

Since the IRS gets a copy of the 1099K it's computer compares the form to the tax return and if the amounts are not within some unknown percent the taxpayer gets a notice and has to reconcile.  Of course the IRS developed a form to file out explaining the difference.  This is a lot of work.

www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/New-Notices-Related-to-Form-1099-K .

Here is the notice that the IRS just released:
The IRS compared 1099-Ks filed by credit card companies and third-party networks such as PayPal with income shown on returns by taxpayers who received the forms.  It is now mailing notices to firms it believes may have unreported gross receipts.  But the 1099-K matching program is imprecise.  The form reports receipts for a calendar year, which doesn't jive for firms with fiscal years.  And businesses don't have to separately report amounts shown on 1099-Ks.  So the form's usefulness as a tool to spot under reporting is lessened.  Nevertheless, IRS still ask businesses to explain discrepancies and will follow up with firms that don't respond to the notices.

DON'T FORGET ABOUT THE 0% RATE ON LONG-TERM CAPITAL GAINS AND DIVIDENDS

If your income other than gains and dividends is in the 10% or 15% bracket, profits on sales of assets owned for over a year and dividends are tax free until they push you into the 25% bracket.  That bracket starts at $70,700 of taxable income for couples and $35,350 for singles.  The balance of your long-term gains and dividends is taxed at 15%.  But short-term capital gains are taxed as ordinary income ...  up to a 35% rate.

MAIL CHECKS FOR DEDUCTIBLE ITEMS BEFORE YEAR-END TO ENSURE A 2012 WRITE-OFF

You are able to claim the deduction this year even if the checks do not clear until January.  And make sure you know the tax rules if you are charging deductible items.  For charges that you make with a retail store credit card, you are allowed to claim the deduction for the item only in the tax year in which you pay the bill.  For transactions made with a bank credit card, you take the write-off in the tax year that you charged the goods, even if you pay the bill next year.

CHECK THE BALANCE IN YOUR FLEXIBLE SPENDING ACCOUNT

Just a reminder~
  If your employer still has not implemented the 2½-month grace period that IRS now permits you must clean it out by December 31. If you do not, any money remaining in your account is forfeited.

Remember that in the Patient Protection Act there is a $2,500 annual ceiling on health FSA that takes effect for 2013.

CHRISTMAS CARD FROM THE IRS

The IRS just issued a gift to taxpayers. It is their Tax Tips for the "Season of Giving." Note that they stayed "politically correct."

IRS Offers Tax Tips for “The Season of Giving"

December is traditionally a month for giving generously to charities, friends and family. But it’s also a time that can have a major impact on the tax return you’ll file in the New Year. Here are some “Season of Giving” tips from the IRS covering everything from charity donations to refund planning:

• Contribute to Qualified Charities. If you plan to take an itemized charitable deduction on your 2012 tax return, your donation must go to a qualified charity by Dec. 31. Ask the charity about its tax-exempt status. You can also visit IRS.gov and use the Exempt Organizations Select Check tool to check if your favorite charity is a qualified charity. Donations charged to a credit card by Dec. 31 are deductible for 2012, even if you pay the bill in 2013. A gift by check also counts for 2012 as long as you mail it in December. Gifts given to individuals, whether to friends, family or strangers, are not deductible.
• What You Can Deduct. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified charity. Special rules apply to several types of donated property, including clothing or household items, cars and boats.
• Keep Records of All Donations. You need to keep a record of any donations you deduct, regardless of the amount. You must have a written record of all cash contributions to claim a deduction. This may include a cancelled check, bank or credit card statement or payroll deduction record. You can also ask the charity for a written statement that shows the charity’s name, contribution date and amount.
• Gather Records in a Safe Place. As long as you’re gathering those records for your charitable contributions, it’s a good time to start rounding up documents you will need to file your tax return in 2013. This includes receipts, canceled checks and other documents that support income or deductions you will claim on your tax return. Be sure to store them in a safe place so you can easily access them later when you file your tax return.
• Plan Ahead for Major Purchases. If you are making major purchases during the holiday season, don’t base them solely on the expectation of receiving your tax refund before the bills arrive. Many factors can impact the timing of a tax refund. The IRS issues most refunds in less than 21 days after receiving a tax return. However, if your tax return requires additional review, it may take longer to receive your refund.

For more information about contributions, check out Publication 526, Charitable Contributions. The booklet is available on IRS.gov or order by mail at 800-TAX-FORM (800-829-3676).

ACTING IRS COMMISSIONER: CONGRESS' FAILURE TO ACT ON FISCAL CLIFF COULD DELAY FILING SEASON

Taxpayers may face a significantly delayed filing season and a much larger tax bill for 2012 if Congress fails to timely resolve fiscal cliff issues, Acting IRS Commissioner Steven T. Miller said on December 6.

Speaking at the 25th Annual Institute on Current Issues in International Tax sponsored by IRS and the George Washington University School of Law in Washington, Miller said that “I remain optimistic that the fiscal cliff will be resolved by the end of this calendar fiscal year [but] if that turns out not to be true, then what is clear is that many of us will see a delayed filing season.”

Miller said that the uncertainty as to what the tax law will be in 2012 creates a risk for the entire tax system, including a strain on IRS, tax practitioners, and ultimately, taxpayers.

“There is currently a real discussion about the tax rates for the next year and beyond as well as the national debt and that is an incredibly important discussion,” he said. “But taxpayers and the IRS need to know what the tax provisions are for 2012 so you know what you owe and so we know how to process the return beginning in January.”

He noted that the alternative minimum tax (AMT) and other extender provisions had expired at the end of 2011, but that these had been overshadowed by other higher profile fiscal cliff issues. Miller said that in programming its systems, IRS has assumed that Congress will patch the AMT as it has for so many years in the past. However, he warned that if Congress fails to resolve fiscal cliff issues prior to the end of the year and the IRS's assumptions are incorrect, the filing season will be delayed for many taxpayers.

2013 RAPIDLY APPROACHING WHILE MANY PAYROLL TAX ISSUES REMAIN UNRESOLVED

There is a great deal of concern in the tax community generally about unresolved tax issues, including the sunsetting tax provisions, extenders, and lack of an alternative minimum tax (AMT) patch. However, one group in particular—payroll professionals—has an especially pressing need for certain tax issues to be decided in order to compute 2013 withholding. This article details a number of these key issues.

Withholding tables. Income tax rates are scheduled to increase on Jan. 1, 2013, if Congress does not act before then to keep the rates at the current levels. It's unclear whether IRS will release the 2013 withholding tables without congressional action.

Backup withholding. The backup withholding rate will increase from 28% to 31% on Jan. 1, 2013, if Congress does not act to keep the income tax rates at current levels.

Payroll tax cut. The “payroll tax cut” has temporarily lowered the Social Security withholding tax rate on wages earned by employees in 2011 and 2012 from 6.2% to 4.2%. Currently, there is no legislation in Congress that would extend the payroll tax cut beyond Dec. 31, 2012, but there has been some recent talk in Washington about either extending the cut or providing some other payroll tax stimulus.

Commuting benefits. Without congressional action, the annual tax-free exclusion for the combined value of employer-provided transit passes and transportation in a commuter highway vehicle ($125 a month in 2012) will remain unconnected to the tax-free exclusion for qualified parking expenses ($240 a month in 2012).

Employer-provided educational assistance.Through Dec. 31, 2012, employers may provide up to $5,250 annually in educational assistance to an employee on a tax-free basis. This provision will expire on Jan. 1, 2013, without congressional action. If the provision does expire, education expenses will only be able to be excluded from an employee's income if the expenses qualify as a working condition fringe benefit.

Adoption assistance. In 2012, employees may exclude from gross income up to $12,650 paid or reimbursed by an employer for qualifying adoption expenses under an adoption assistance program. This fringe benefit will not be available in 2013 without congressional action.

koa observation: Until some of the issues above are resolved, it is unclear whether IRS will release the 2013 Circular E (IRS Publication 15), 2013 Form W-4, and 2013 Form 941.

SCIENCE GOES WILD

Apparently, researchers can be as goofy as anyone else. The Ig Nobel Prizes the American parody of the Nobel Prizes, gives out yearly prizes for the strangest, weirdest and most incomprehensible research pursued by actual scientists.

Perhaps the greatest question raised by the Ig Nobles is: How do these people get funding for this, um, research?

This year's crop of winners is as daft as ever. We will "reveal" them over several weeks.

Our first winner:

Three psychology researchers from the Netherlands won for their study

       "Leaning to the Left Makes the Eiffel Tower Seem Smaller."

“IT’S LATER!”

We’ve been telling you since the start of the year that tax planning is the key to paying the minimum tax possible. We’ve urged you to come in for your free tax analysis, but we’ve been disappointed that you haven’t accepted our offer.

Most of you agree that tax planning is a good idea that can save you money. But you’ve procrastinated, and made excuses to avoid taking advantage of the opportunity. You told yourself “I’ll wait ‘til later, after April 15.” Then after April 15, you said “I’ll wait ‘til later, when it’s closer to the end of the year.” Then, as the year drew to a close, you said “I’ll wait ‘til later, after the election results are in.”

Well, guess what. It’s later.

December 31 is just a few short weeks away. If you we don’t sit down to talk before then, your best planning opportunities will vanish, just like Cinderella’s carriage turning back to a pumpkin. And trust us here — you do not want to be left without a ride home that night!

December 31 is even more important this year than usual, because there’s so much uncertainty in the air. Will the Bush tax cuts be extended? How much will the new Obamacare taxes cost you? What opportunities are you missing to save? We can’t give you the answers if we don’t sit down to plan.

Do it before it’s too late. We’ll find the mistakes and missed opportunities that may be costing you thousands today, and show you how smart planning can save thousands more tomorrow. So call now to schedule your Analysis!

SOCIAL SECURITY BENEFITS

There's good news for those who collect Social Security benefits and those who want to contribute to pension plans in 2013.

The Social Security Administration recently announced benefit increases for 2013 of 1.7 percent for millions of Americans. For eight million recipients of Supplemental Security Income, the cost-of-living increase will begin on December 31, 2012, while 56 million Social Security beneficiaries will see payment increases beginning in January 2013.

Other changes include a higher wage base on which those who remain in the workforce will pay Social Security tax. In 2012, that maximum is $110,100 and it will rise in 2013 to $113,700.

PERENNAIL AUDIT RED FLAGS

• Not reporting all income. The IRS is adept at "matching" income reported about you by employers, banks, and brokerage firms against what is reported on your tax return.
• Self-employment. If you work for yourself and file Schedule C, you have a greater chance of an audit. The IRS is especially suspicious of businesses that look like hobbies.
• Dealing in cash. IRS auditors are trained to search every nook and cranny of the cash-based financial world to detect cheating.
• Out-of-line figures. IRS computers compare returns with those filed by taxpayers with similar incomes. If deductions are significantly higher, you may be asked why. Of course, this doesn't mean you shouldn't claim every deduction you are entitled to. You just need to be aware of how audits work and hang onto the proper records.
• Large travel and entertainment deductions.
• Being a "tax protestor."Some people refuse to pay because they claim taxes are unconstitutional. The IRS has little patience for these arguments.

THIS IS WHAT EXPERTS ARE SAYING ABOUT THE FUTURE OF THE AFFORDABLE CARE ACT

I just spent 2 days attending the National Tax Conference.  One of the speakers was a specialist in health care reform.  The more I learn about the act the more confusing it is.  Here are a few of his comments of the unexpected outcome of the act that he thinks will come about as employers and taxpayers become more aware of the act. 

·         Many owners may consider transferring enough ownership to prevent combination of entities into one “employer” for tax purposes.  This will help keep the employee number under 50 to avoid providing expensive insurance for full time employees. 

·         Many employers will increase  the amount of self coverage that they pay for, but may eliminate or substantially reduce family coverage.

·         Because employers will be encouraged to keep employees under 30 hours, lower income workers will most likely need to work at least two jobs to make a living.   Therefore, these employees will need two jobs to have a chance at making a living.

·         Many employers may eliminate health insurance coverage completely.  This will place these employees into the “public” exchange plan.  Employers will consider this since it may be substantially cheaper to simply pay the penalty and adjust pay for upper level employees.

·         It is cheaper for employers to have younger employees to keep their average premiums downs, so there will be an advantage to reduce the number of older employees.

 

“BLACK FRIDAY” TAX PLANNING PUTS TAXES ON SALE

The holidays are here, and millions of Americans kicked off the season with “Black Friday” shopping. Braving the crowds and the cold, facing scorn from family they’ve left behind, they line up at obscenely early hours (or duck out of Thanksgiving dinner before the pumpkin pie is even served) to save $20 on a DVD player or $40 on a flat-screen television.

It’s sad, but true, that most Americans spend more time planning their “Black Friday” shopping than they spend planning their taxes. But that can be an expensive mistake!

What if the IRS had a sale? What if the IRS let you discount your taxes by thousands of dollars, this year and every year to come? And what if they let you do it from the comfort of your home or your office, without lining up in the pre-dawn hours of a chilly November morning? Would you give thanks for a sale like that?

You’re probably not holding your breath for the scrooges at the IRS to hold a “sale.” The good news is, you don’t have to wait for that to happen. You just need a plan. Tax planning is the key to paying the legal minimum, especially with the “fiscal cliff” looming on the horizon. And a good tax plan can pay for a holiday season full of gifts and fun.

Have we showed you how “Black Friday” tax planning can save thousands?

OUTRAGEOUS MARKUPS YOU PAY EVERY DAY

I saw this in the December Reader's Digest. I thought you might find interesting.

Learn smart ways to avoid the hidden costs of convenience.

6,000% - Text Messages - Phone users commonly pay 10 cents per text message, but sending it might cost the carrier only a sixth of a cent. If the same markup applied to a short phone call, the call would cost $120.

4,000% - Bottled Water - A $2 bottle of water costs only about 5 cents to produce.

1,275% - Movie Theater Popcorn - Theaters know that viewers will pay more for movie snacks, so they hike up the prices: A bag of popcorn that costs 37 cents to make can easily sell for $5. One Michigan man found the price so outrageous that he is suing his local theater.

300% - Wine at a Restaurant - Restaurants routinely charge as much as $30 for bottles of wine that retail online for $7 or $8. Check in advance whether the restaurant allows BYOB, or opt for a nonalcoholic beverage.

40% - Precut Produce - Precut fruits and vegetables may save you time, but they definitely won't save you money: Grocery stores charge almost 1.5 times more for precut than for uncut produce.

AS THIS PERSON FOUND OUT, THE RULES ON INHERITED IRAS CAN BE COMPLICATED

The 60-day rollover rule won’t apply if an inherited IRA is first paid to you, as a woman who was the beneficiary of her deceased mom’s IRA learned the hard way.

The custodian paid the death benefits to the daughter. Within the usual 60-day period, she set up a new IRA and deposited into the account the check she had received. Because she didn’t arrange to have the money transferred directly into her IRA, the Tax Court says she’s taxed on the distribution.

 (Beech, TC Summ. Op. 2012-74)

2013 STANDARD MILEAGE RATES UP

The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56.5 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate.  The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

GET THEM NOW BEFORE IT IS TO LATE

WHAT IS THE STANDARD MILEAGE RATE?

Since July 1, 2011 the standard mileage rate has been 55.5 cents per mile. 

If you own a vehicle, you can use this deduction beginning with the first year that you place your vehicle in service. If you are leasing your vehicle, and use this deduction, you must use it for the entire period that you lease the vehicle for. This means that you cannot switch between the standard mileage deduction and the actual expenses deduction. 

With the standard rate, you can deduct miles driven as well as toll expenses and parking fees. You cannot deduct depreciation expenses, fees for leasing and renting or vehicle operating expenses.

IRS APPROVES LEAVE-SHARING PROGRAMS TO HELP HURRICANE SANDY VICTIMS

IRS has announced that employees won't be taxed when they forgo vacation, sick, or personal leave in exchange for employer contributions of amounts to charitable organizations providing relief to Hurricane Sandy victims. Employers may deduct the amounts as business expenses.

Treatment of leave based-programs.

Some employers have set up programs where employees can donate their vacation, sick or personal leave in exchange for the employer making cash payments to qualified tax-exempt organizations that provide relief for the victims of Hurricane Sandy. The IRS has announced that it will not assert that cash payments an employer makes to organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are:

(1) made to the qualified organizations for the relief of victims of Hurricane Sandy; and

(2) paid to qualified organizations before Jan. 1, 2014.

Nor will giving employees the choice to participate cause employees to be considered in constructive receipt of income. However, employees who participate in a leave-sharing donation program won't be allowed to claim a charitable contribution deduction for the value of forgone leave excluded from compensation and wages.

As for employers, IRS won't assert that payments made under a leave-sharing donation program are deductible as charitable contributions.

Thus, the employer will be able to deduct the payments without being subject to the various charitable contribution limits to C corporations.

Treatment of Form W-2. Amounts representing leave-sharing donations need not be included in Box 1 (wages, tips, or other compensation), Box 3 (Social Security wages, if applicable), or Box 5 (Medicare wages and tips) of Form W-2.

In other words, these amounts also will be free of income- and payroll-tax withholding.

Participation in these programs can help both employees who itemize and those who don't. For example, a non-itemizer who forgoes $2,000 worth of leave will get the equivalent of a $2,000 deduction that would not be available if he took the leave and contributed $2,000 in cash himself.

The lower adjusted gross income (AGI) from participating in the program may make it possible for the employee to achieve a greater tax benefit from any of the numerous deductions and credits that are reduced as AGI increases. For example, participation may yield a higher deduction for a contribution to a traditional IRA. Itemizers can also benefit from the lower AGI. Both itemizers and non-itemizers can save Social Security taxes on the amount foregone. On the downside, participation could result in smaller retirement plan contributions depending on how compensation is defined under the employer's retirement plan.

IRS WARNS CONSUMERS OF POSSIBLE SCAMS RELATING TO HURRICANE SANDY RELIEF

WASHINGTON – The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Hurricane Sandy.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Such fraudulent schemes may involve contact by telephone, social media, email or in-person solicitations.

The IRS cautions both hurricane victims and people wishing to make disaster-related charitable donations to avoid scam artists by following these tips:

• To help disaster victims, donate to recognized charities.  
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
• Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
• Call the IRS toll-free disaster assistance telephone number, 1-866-562-5227, if you are a hurricane victim with specific questions about tax relief or disaster related tax issues.

Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds. They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources.

Bogus websites may solicit funds for disaster victims. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities, in order to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources.   Additionally, scammers often send e-mail that steers the recipient to bogus websites that sound as though they are affiliated with legitimate charitable causes.

Taxpayers suspecting disaster-related frauds should go to IRS.gov and search for the keywords  “Report Phishing.”

More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.”  

EMPLOYERS HIRING VETERANS BY YEAR'S END MAY GET EXPANDED TAX CREDIT

Employers planning to claim an expanded tax credit for hiring certain veterans should act soon, according to the IRS. Many businesses may qualify to receive thousands of dollars through the Work Opportunity Tax Credit, but only if the veteran begins work before the new year.

Here are six key facts about the WOTC as expanded by VOW to Hire Heroes Act of 2011.

1. Hiring Deadline: Employers may be able to claim the expanded WOTC for qualified veterans who begin work on or after Nov. 22, 2011 but before Jan. 1, 2013.

2. Maximum Credit: The maximum tax credit is $9,600 per worker for employers that operate for-profit businesses, or $6,240 per worker for tax-exempt organizations.

3. Credit Factors: The amount of credit will depend on a number of factors. Such factors include the length of the veteran’s unemployment before being hired, the number of hours the veteran works and the amount of the wages the veteran receives during the first-year of employment.

4. Disabled Veterans: Employers hiring veterans with service-related disabilities may be eligible for the maximum tax credit.

5. State Certification: Employers must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency. The form must be filed within 28 days after the qualified veteran starts work. For additional information about your SWA visit the U.S. Department of Labor’s WOTC website.

6. E-file: Some states accept Form 8850 electronically.

SECTION 179 FOR 2013

As we are doing yearend tax planning, the question has come up several times on how to plan for the fast write off of equipment called section 179 will change in 2013. It is confusing. The current law is a limit of $25,000 for 2013, but will Congress change this low number. Who knows?

Both the President and Congress have discussed increasing the deduction up to $500,000 with a phase-out starting at $2 million. It appears at the moment that the Democrats are pushing this more than the Republicans, but they have other incentives that may provide small business tax relief similar to the Section 179 deduction.

There is even a chance that it may go to $500,000 from the current $139,000 in 2012. Maybe now that the election is over we will get some movement.

We will keep you posted.

RELIEF FOR EMPLOYERS OWING BACK PAYROLL TAXES

During the Sept. 12, 2012 IRS webinar titled “Payment Alternatives – When You Owe the IRS,” Traci Suiter, lead public affairs specialist with IRS's Small Business/Self-Employed Division, explained the criteria that must be met for a business owing payroll taxes to qualify for an In-Business Trust Fund Express Installment Agreement (IBTF-Express IA). These plans don't require detailed financial information and may help the owner to avoid a responsible person penalty.

Background on installment agreements.

IRS may enter into written agreements with any taxpayer under which that taxpayer may make payment on any tax in installment payments if IRS determines that the installment agreement will facilitate full or partial collection of the tax liability.

Before entering into such an agreement, IRS determines if it's appropriate for the circumstances and then sets up the agreement, processes the payments and monitors the taxpayer's compliance with the agreement. If a taxpayer fails to comply with any of the installment agreement's terms, the agreement is deemed to be in default and IRS has the right to terminate the agreement.

Guidance on IBTF-Express IAs.

In order to qualify for an IBTF-Express IA, a business owing payroll taxes must satisfy the following requirements:

• They must owe $25,000 or less at the time the agreement is established. If they owe more than $25,000, they may pay down the liability before entering into the agreement in order to qualify.
• The debt must be paid in full within 24 months or prior to the Collection Statute Expiration Date (CSED), whichever is earlier.
• They must enroll in a Direct Debit installment agreement (DDIA) if the amount they owe is between $10,000 and $25,000.
• They must be compliant with all filing and payment requirements.

One of the advantages of applying for an IBTF-Express IA is that a business is generally not required to provide a financial statement or financial verification as part of the application process, so the agreement is likely to be approved more quickly than other payment alternatives. The Internal Revenue Manual (IRM) also notes that it is IRS policy not to pursue the trust fund recovery penalty against an individual in a business that has set up an IBTF-Express IA.

To request an IBTF-Express IA, a business may call the number on the tax bill, or (800) 829-4933. A business could also complete Form 9465, Installment Agreement Request, and send it to the address on the tax bill (or the address on page 2 of the instructions for Form 9465). Suiter noted that applications for the payroll tax installment agreement are not currently available online, but said that may change in the future.

Further information on the program is available on the Small Business/Self-Employed section of the IRS website on the webpage called“Fresh Start Installment Agreements.”

AREN'T YOU GLAD YOU DON'T LIVE IN OHIO?

More than 58,000 television ads on the presidential race were broadcast over the last month in Ohio. To view them all, you’d have to watch ads 24 hours a day for 80 days. Bloomberg.com

LAST WEEK’S BLOG

Last week I decided that I was going to tell people who I was supporting for president and why. I knew there would be some ramifications for this and I was right.

I was called a “Right Ring Radical”, a “stooge for the Republican Party” and some other names that I probably shouldn’t say. . I was disappointed that none of the people that criticized my blog told me what was wrong with my rationale.  They just called me names.  People, the countries deficit problem is huge and it needs to be dealt with. We can’t close our eyes and leave things as they are. I looked forward to receiving some comments of people telling me why I was wrong which I did not get.

I think that everybody should be able to have their opinion. That’s why we have a free country.  Because of my comments, we had several people unsubscribe to my blog. It’s interesting. I try to give information that hopefully can help people in their business but, apparently, the information I give is not enough to offset the anger they felt because I dare to express my opinion.

I apologize if I offended you.

WHAT I’VE BEEN UP TO

On October 31, I was honored to make a presentation to the Nebraska CPA Annual Meeting on income tax updates.  As part of my presentation I reviewed all the cases, rulings and the future of income taxes with the 190 CPA’s that were in attendance.

It is always an honor to make this presentation but it is also stressful.  This is not only stressful on me; it is stressful to the firm.   It takes me a considerable amount of time to put the Tax Update together and our staff does a terrific job of making sure everything gets done while I am engrossed in putting this project.

The good thing about the program is that it does make me look at all the court cases, revenue rulings, procedures and happenings over the last twelve months so that I am completely up to date.

Knowledge is Power!

TIPS FOR FILING HURRICANE SANDY DAMAGE CLAIMS

Because so many consumers experienced claims problems in the wake of Hurricane Katrina and Irene, the CFA urges homeowners dealing with losses caused by Hurricane Sandy to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement.

As consumers prepare to contact their insurance companies in the wake of the storm, the CFA offers the following tips:

AFTER THE STORM

1.     Report your claim as promptly as possible as insurance companies generally handle them first come, first serve.

2.     Once your claim is reported, be sure to get your claim number and write it down. Insurance company claims departments can locate your file easiest by your claim number.

3.     When the insurance company sends out an adjuster to survey your damage, ask if he/she is an employee of the insurance company or an independent adjuster (I.A.) hired by them. If an independent adjuster, try to secure the name of the actual company adjuster that the I.A. is sending your information to or are they authorized to make claim decisions and payments on behalf of your insurance company.

KEEP GOOD RECORDS—Documentation, Documentation

1. Start a notebook documenting contacts with your insurance company. List the date, time and a brief description of the exchange.

2. Inventory your damaged possessions.

3. Obtain a repair estimate from a trusted local contractor. Keep receipts from emergency repairs and any costs you incur in temporary housing. This may be reimbursable under the "Additional Living Expense" portion of your homeowners' policy. 

IF THE CLAIM IS DENIED OR THE OFFER IS TOO LOW

     Demand that the company identify the language in your homeowners' policy that served as the basis        for denying your claim or offering so little.

HOW/WHERE DO I COMPLAIN

1.       Complain to more senior staff in the insurance company

2.       Complain to your state insurance department.

3.       See a lawyer.

WHAT ISN'T COVERED IN THE HOMEOWNERS' POLICY?

Homeowners' policies do not cover flood, earthquake, tree removal (except when the tree damages the house) or food spoilage from power failures. Some insurers use an "anti-concurrent-causation" clause in their policies that, insurers allege, removes coverage for wind damage if a flood happens at about the same time.

For more information contact the Consumer Federation of America.