TIPS FOR RECENTLY MARRIED OR DIVORCED TAXPAYERS WITH A NAME CHANGE

The IRS just issued a reminder to people with name changes.  Processing of your return will be slowed down if you do not properly follow their steps. 

Five Tips for Recently Married or Divorced Taxpayers with a Name Change

If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. f you took your spouse’s last name -- or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.

2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you'll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

DOES THE IRS OWE YOU MONEY

The IRS has announced that it has $153.3 million in undelivered tax refund checks because of mailing address errors. There are 99,123 taxpayers who are due refund checks, making the average check a whopping $1,547.

If you think you might be owed some cash, you can check with the IRS by using the online “Where’s My Refund?” tool. You’ll need to provide your Social Security number, filing status as reported on your last return and the amount of your refund. If you don’t have access to the internet (which is curious since you’re reading this), you can also call 1-800-829-1954.Tax forms and other correspondences from the IRS are mailed to the last address clearly and concisely provided by the taxpayer, so be sure to update your address on your tax return. You can also update your address at any time using federal form 8822.

HERE’S SOME GOOD NEWS

Law School Applications Fall 15%

The total number of applications and applicants for the Class of 2015 at ABA-approved law schools as of January 13, 2012 were:

· Applicants: 31,815, down 16.7% from last year
· Applications: 233,361, down 15.3% from last year

QUESTION FROM A MISCLASSIFIED WORKER

Q. I am definitely an employee at my job but, my employer did not withhold anything and instead of giving me a W-2 like he should have he gave me a 1099. Last year he gave me a W-2. Now not only do I owe a bunch of tax I also have to pay both halves of the Social Security and Medicare tax. This is not fair. Is there anything I can do?

A. Yes there is something you can do to cut your Social Security and Medicare in half. Since 2007, you are allowed to file a Form 8919M Uncollected Social Security and Medicare Tax on wages instead of filing Schedule SE. The form SE charges you tax at 15.3% versus the 7.65%.

There are some codes on the form that you will need to review and if you meet one of the criteria, walla you qualify.

By the way, this IRS may be visiting your employer. He will at least be getting a bill from the IRS for his 1/2.

CONGRESS AGAIN PLAYS POLITICS

MAJOR FLAW IN THE VOW TO HIRE VETERANS ACT LOST IN POLITICAL POPLARITY

The VOW to Hire Heroes Act includes tax incentives intended to lower the unemployment rate of this country's veterans which, according to the Bureau of Labor Statistics, stands at 7.7 percent (860,000 workers). Not surprisingly, the House Committee on Veterans' Affairs is already singing the act's praises (see Comprehensive Legislation to End Veteran Unemployment.

However, the VOW to Hire Heroes Act has one major problem: The design does not prevent abuse by employers which could result in no net reduction in veteran unemployment whatsoever. As the Tax Foundation reported after the President's proposal of the American Jobs Act, tax credit programs-without proper checks put into place-given to businesses who hire unemployed workers can easily be gamed. Unfortunately, this bill includes such credits.

These incentives include:
• A tax credit of up to $5,600 for hiring veterans who have been looking for a job for more than six months
• A $2,400 credit for veterans who are unemployed for more than four weeks, but less than six months
• A tax credit of up to $9,600 for hiring veterans with service-connected disabilities who have been looking for a job for more than six months

Targeted incentives are poor policy in general, but are especially wasteful in this case. Why? Legislators failed to include a provision saying that business must increase net employment in order to receive the credit. Given the lack of such a provision, a business could hire a veteran and fire one on the same day, eventually collect a government check of up to $9,600, and not reduce veteran unemployment by a single job.

Though unemployment is high (9% nationally, 12% among young veterans), politically popular legislation which has not been properly thought through is not the answer. After serving their country, veterans should benefit from a sustainable growing economy rather than political gimmicks that will do little to serve anyone.

SPENDING

Please take a moment to watch this video about spending: WATCH ME

DON’T BE SCAMMED BY CYBER CRIMINALS

The Internal Revenue Service receives thousands of reports each year from taxpayers who receive suspicious emails, phone calls, faxes or notices claiming to be from the IRS. Many of these scams fraudulently use the IRS name or logo as a lure to make the communication appear more authentic and enticing. The goal of these scams – known as phishing – is to trick you into revealing your personal and financial information. The scammers can then use your information – like your Social Security number, bank account or credit card numbers – to commit identity theft or steal your money.

Here are five things the IRS wants you to know about phishing scams.
1. The IRS never asks for detailed personal and financial information like PIN numbers, passwords or similar secret access information for credit card, bank or other financial accounts.

2. The IRS does not initiate contact with taxpayers by email to request personal or financial information. If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site:
• Do not reply to the message.
• Do not open any attachments. Attachments may contain malicious code that will infect your computer.
• Do not click on any links. If you clicked on links in a suspicious e-mail or phishing website and entered confidential information, visit the IRS website and enter the search term 'identity theft' for more information and resources to help.

3. The address of the official IRS website is http://www.irs.gov/. Do not be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the suspicious site and report it to the IRS.

4. If you receive a phone call, fax or letter in the mail from an individual claiming to be from the IRS but you suspect they are not an IRS employee, contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you. Report any bogus correspondence. You can forward a suspicious email to phishing@irs.gov.

5. You can help shut down these schemes and prevent others from being victimized. Details on how to report specific types of scams and what to do if you’ve been victimized are available at http://www.irs.gov/. Click on "phishing" on the home page.

DO I NEED TO FILE A TAX RETURN THIS YEAR?

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld: You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit: You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit: This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students: in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit: You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit Certain: individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits give us a call or email today.

JUST FOR FUN - MY HIGH SCOOL ENGLISH TEACHER WOULD LOVE THIS

Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo

Believe it or not, this sentence is grammatically correct and has meaning: “Buffalo buffalo Buffalo buffalo buffalo buffalo Buffalo buffalo.” First devised by professor William J. Rapaport in 1972, the sentence uses various meanings and parts of speech for the term “buffalo” (and its related proper noun “Buffalo”) to make an extremely hard-to-parse sentence. Although most people know “buffalo” as both a singular and plural term for bison, and “Buffalo” as a city in New York, “buffalo” is also a verb meaning “to bully, confuse, deceive, or intimidate.”

Using these definitions, Wikipedia suggests the sentence can be read: [Those] (Buffalo buffalo) [whom] (Buffalo buffalo buffalo) buffalo (Buffalo buffalo).

Still too hard to follow for those of us who don’t know “buffalo” as a verb. Refine once more: [Those] buffalo(es) from Buffalo [that are intimidated by] buffalo(es) from Buffalo intimidate buffalo(es) from Buffalo.

And once more: Bison from Buffalo, New York who are intimidated by other bison in their community also happen to intimidate other bison in their community.

Wikipedia has further explanation, including the slightly frightening note: Buffalo is not the only word in English for which this kind of sentence can be constructed; any word which is both a plural noun and a plural form of a transitive verb will do.

Other examples include dice, fish, right and smelt.

Beware of Buffalo buffalo, buffalo, for they may buffalo you.

MARTIN LUTHER KING DAY

Be inspired!

Martin Luther King - I HAVE A DREAM

CREDIT FOR HIRING MILITARY VETERANS

For many years, the tax system has incented businesses to hire specific categories of disadvantaged workers, such as welfare recipients, retrained workers, and the like. In legislation enacted in late November, Congress has significantly expanded the tax credits available for hiring various categories of military veterans. These credits are generally based on 40% of the wages paid to the new worker, and require at least 120 hours of employment in the first year to gain any portion of the credit, and at least 400 hours to gain the maximum credit. There are five specific categories of veterans that qualify the employer for a tax credit, including several very broad definitions (i.e., those unemployed for as little as 4 weeks in the 12 months preceding hire, a veteran who was a member of a food stamp household, or a veteran unemployed at least 6 months in the preceding year). Each category of eligible veteran has a maximum credit amount, running from a low of $2,400 to a maximum of $9,600.

Most of these categories do not require recent military service. In other words, a Vietnam-era vet can be an eligible new hire for most categories of the credit. To determine eligibility, the employer uses IRS Form 8850, a pre-screening notice, which is sent by the employer to the state workforce agency for the verification process. This pre-screening form must be submitted within 28 days of the commencement of employment.

TAX PLANNING OPPORTUNITY - 2% PAYROLL TAX WAIVER

Throughout 2011, as a method of stimulating consumer spending, Congress had reduced the employee share of the Social Security tax, as well as the self-employment tax rate, by 2%. But when it came time to extend this cut for 2012, Congress could not agree on how to pay for a full one-year extension. As a result, the 2% cut is only officially in the law at this point through February 29, 2012.

If Congress does not agree on an extension for the full year, there is a small planning point for those who are employees of their own corporation, or who issue occasional salary checks to family members for their services in the business.

In order to receive the 2% waiver, payroll must be issued in the first two months of 2012. And to maximize the savings, the worker must receive at least $18,350 of compensation in the first two months of the year ($18,350 is 1/6th of the $110,100 maximum amount subject to Social Security tax in 2012). So for those who only draw an occasional paycheck from their business, such as an S corporation or a C corporation, there is a tax savings (albeit under $400) if roughly $18,000 of that payroll is drawn within the first two months of 2012.

But note: If Congress extends the 2% cut for all of 2012, this becomes a moot point.

HOBBY FOLLOW UP

Recently I posted about a golfer that had hobby winnings. I have had several people email me asking what the difference was between a hobby and a true business.

Here are the factors that the IRS and courts look at:

1. The manner in which the taxpayer carried on the activity
2. The expertise of the taxpayer or his or her advisers
3. The time and effort expended by the taxpayer in carrying on the activity
4. The expectation that the assets will appreciate in value
5. The success of the taxpayer in carrying on activities
6. The history of profits or losses
7. The amount of occasional profits
8. The financial status of the taxpayer
9. The elements of personal pleasure or recreation

No single factor controls and other factors may be considered. If you make profit in 3 of the 5 years the IRS thinks you are okay. This is 2 of 7 years for breeding, showing, training or racing horses.

Keep good records. DOCUMENTATION! DOCUMENTATION! DOCUMENTATION!

NEW HSA AMOUNTS FOR 2012

Here are the new contribution limits for 2012 HSA

Contribution limit ~ Family: $6,250 Self: $3,100
Catch up if over 55 ~ Family: $1,000 Self: $1,000
Minimum deductible ~ Family: $2,400 Self: $1,200
Max out of pocket ~ Family: $12,000 Self: $6,050

The catch up contribution can only be made by individuals who are at least 55 and are not yet enrolled in Medicare.

Remember that starting in 2011 because of Obama Care over-the-counter medicines may not be reimbursed thru HSA.

IRA CONTRIBUTION AND YOUR AGE

Q: For someone 60 what is the maximum IRA contribution? What about if you are 50?

A: If you are 50 years of age or older before the end of 2012, the maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 ($5,000 plus $1,000 catch up) or the amount of your taxable compensation. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending on your modified adjusted gross income. There can be further limitations for individuals who also participate in an employer provided plan.

If you are age 50 or older and have a SIMPLE IRA, the maximum contribution is different. The base amount is 100% of your compensation up to $11,500 and the catch up amount is $2,500, for a maximum contribution of $14,000. There is no phase out.

Of course to complicate matters there are some exceptions. If you are covered by a retirement plan at work here are the phase outs. CLICK HERE

If your spouse is covered by a pension plan then there are some different phase outs. CLICK HERE

COMPARING THE PRESIDENTIAL CANDIDATES' TAX PLANS

How does Mitt Romney compare to Ron Paul on taxes? Does Newt Gingrich have a savvier plan than Michele Bachmann?

The Tax Foundation just published a comparison of the presidential candidates tax plans. I always find candidates talk about taxes interesting. They proclaim that once they get into office they can flip a switch from the White House and policy will change. In actuality tax law changes start in the Ways and Means Committee of the House of Representatives. Looking at the last two major changes in the tax laws, history tells us that it takes 2 to 3 years to accomplish change. Check out their campaign promises.

With the upcoming 2012 presidential election, tax policy is on voters’ minds more than ever. Taxes are one of the central issues in any national election, and it is important for the public to understand candidates’ general views toward tax policy as well as their positions on specific issues. The online Presidential Candidate Tax Plan Comparison outlines the candidates’ positions on the most important tax questions of this election. Ten presidential candidates were evaluated on six different parameters of tax policy: individual income tax rates, the corporate income tax, the estate tax, payroll taxes, the alternative minimum tax, and taxes on capital gains and dividends.
CLICK HERE

HAPPY NEW YEAR

We wish all of our readers a very happy New Year. We started this blog over two years ago and every month without fail we have ever increasing readership. From just having a couple of comments and questions per month to probably having at least 5 a week, we have enjoyed every day of interacting with the readers. We hope the information has been useful and look forward to providing even more in 2012.

We wish everyone a prosperous New Year and we shall see what surprises 2012 bring.

WHAT'S YOUR BUSINESS NEW YEAR'S RESOLUTION?

Here are a few helpful end of year steps to help get your 2012 year off to a good start.

1. Examine your Financials - The first step is you must get your financials in order. In order to set new financial goal you must have real life numbers from 2011. Without these it will be impossible to set 2012 bench marks. By analyzing your Profit & Loss Statement you can review your total net sales (revenues), cost of sales, gross profit, profit margin, controllable expenses, as well as fixed expenses. Understand what your numbers are telling you.

2. Review last year's Goals - Don't just jump and begin creating your 2012 goals. Begin this process by reviewing your 2011 goals and compare your financial successes. A key question to ask yourself is "Did your business accomplish what you set out to do?" "Did it meet your 2011 finical goals?" Even though these questions can be painful, these important questions will assist you in creating a new action plan for 2012. Goal’s are a great ‘road map’ to reflect where you’re planning to go, however, if you throw the map in the glove box & drive by the seat of your pants you may or may not end up at the anticipated destination.

3. Planning for the coming year - Now that you have a clear picture of your successes and perhaps areas of opportunities, you can begin to do some business planning for the New Year. Set clearly defined 2012 year's goals. Implement an action plan for each goal and create deadlines for each action step.

With a little planning and organization, your Business New Year's Resolutions for 2012 will be a huge success.

Do you need help on how to make 2012 goals for your business? Isn't this what you want from your Trusted Business Advisor? Email us today and start your year off on the right foot!