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IRS Tax Tips
04/22/2013
Issue Number: 2013-60
Inside This Issue
Six Facts on Tax Refunds and Offsets
IRS Tax Tip 2013-60
Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other
federal or state debts that you owe.
Here are six facts from the IRS that you should know about tax refund offsets.’
04/22/2013
Issue Number: 2013-60
Inside This Issue
Six Facts on Tax Refunds and Offsets
IRS Tax Tip 2013-60
Certain financial debts from your past may affect your current federal tax refund. The law allows the use of part or all of your federal tax refund to pay other
federal or state debts that you owe.
Here are six facts from the IRS that you should know about tax refund offsets.’
- A tax refund offset generally means the U.S. Treasury has reduced your federal tax refund to pay for certain unpaid debts.
- The Treasury Department’s Financial Management Service is the agency that issues tax refunds and conducts the Treasury Offset Program.
- If you have unpaid debts, such as overdue child support, state income tax or student loans, FMS may apply part or all of your tax refund to pay that debt.
- You will receive a notice from FMS if an offset occurs. The notice will include the original tax refund amount and your offset amount. It will also include the agency receiving the offset payment and that agency’s contact information.
- If you believe you do not owe the debt or you want to dispute the amount taken from your refund, you should contact the agency that received the offset amount, not the IRS or FMS.
- If you filed a joint tax return, you may be entitled to part or all of the refund offset. This rule applies if your spouse is solely responsible for the debt. To request your part of the refund, file Form 8379, Injured Spouse Allocation. Form 8379 is available on IRS.gov or by calling 1-800-829-3676.
Starting a NEW BUSINESS!
Issue Number: IRS Summertime Tax Tip 2013-02 Inside This Issue "Tax Tips if You’re Starting a Business"
If you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the
IRS that can help you get started.
1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form.
2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
4. Recordkeeping. Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is true even if you receive the income or pay the expenses in a future year.
If you plan to start a new business, or you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five basic tips from the
IRS that can help you get started.
1. Type of Business. Early on, you will need to decide the type of business you are going to establish. The most common types are sole proprietorship, partnership, corporation, S corporation and Limited Liability Company. Each type reports its business activity on a different federal tax form.
2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, employment tax and excise tax.
3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check IRS.gov to find out whether you need this number. If you do, you can apply for an EIN online.
4. Recordkeeping. Keeping good records will help you when it’s time to file your business tax forms at the end of the year. They help track deductible expenses and support all the items you report on your tax return. Good records will also help you monitor your business’ progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses.
5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is true even if you receive the income or pay the expenses in a future year.
The Latest News from the IRS 03/14/2013
IRS Has $917 Million for People Who Have Not Filed a 2009 Income Tax
IRS-2013-29, March 14, 2013 WASHINGTON —
Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the Internal Revenue Service announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.
The IRS estimates that half the potential refunds for 2009 are more than $500. Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury. For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. The IRS reminds taxpayers seeking a 2009 refund that their checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans. By failing to file a return, people stand to lose more than refund of taxes withheld or paid during 2009. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2009, the credit is worth as much as $5,657. The EITC helps individuals and families whose <br> incomes are below certain thresholds. The thresholds for 2009 $43,279 ($48,279 if married filing jointly) for those with three or more qualifying children, $40,295 ($45,295 if married filing jointly) for people with two qualifying children, $35,463 ($40,463 if married filing jointly) for those with one qualifying child, and $13,440 ($18,440 if married filing jointly) for people without qualifying children. For more information, visit the http://www.irs.gov/Individuals/EITC-Home-Page--It%E2%80%99s-easier-than-ever-to-find-out-if-you-qualify-for-EITC"><u>EITC Home Page. Current and prior year tax forms and instructions are available on the http://www.irs.gov/Forms-&-Pubs page of IRS.gov or by calling toll-free 800-TAX-FORM 800-TAX-FORM FREE end_of_the_skype_highlighting <br> (800-829-3676 begin_of_the_skype_highlighting 800-829-8676 FREE. Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2009, 2010 or 2011 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by filing http://www.irs.gov/file_source/pub/irs-pdf/f4506t.pdf
Form 4506-T. Request for Transcript of Tax Return, with the IRS or by calling 800-829-1040 FREE
IRS-2013-29, March 14, 2013 WASHINGTON —
Refunds totaling just over $917 million may be waiting for an estimated 984,400 taxpayers who did not file a federal income tax return for 2009, the Internal Revenue Service announced today. However, to collect the money, a return for 2009 must be filed with the IRS no later than Monday, April 15, 2013.
The IRS estimates that half the potential refunds for 2009 are more than $500. Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury. For 2009 returns, the window closes on April 15, 2013. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. The IRS reminds taxpayers seeking a 2009 refund that their checks may be held if they have not filed tax returns for 2010 and 2011. In addition, the refund will be applied to any amounts still owed to the IRS or their state tax agency, and may be used to offset unpaid child support or past due federal debts such as student loans. By failing to file a return, people stand to lose more than refund of taxes withheld or paid during 2009. In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). For 2009, the credit is worth as much as $5,657. The EITC helps individuals and families whose <br> incomes are below certain thresholds. The thresholds for 2009 $43,279 ($48,279 if married filing jointly) for those with three or more qualifying children, $40,295 ($45,295 if married filing jointly) for people with two qualifying children, $35,463 ($40,463 if married filing jointly) for those with one qualifying child, and $13,440 ($18,440 if married filing jointly) for people without qualifying children. For more information, visit the http://www.irs.gov/Individuals/EITC-Home-Page--It%E2%80%99s-easier-than-ever-to-find-out-if-you-qualify-for-EITC"><u>EITC Home Page. Current and prior year tax forms and instructions are available on the http://www.irs.gov/Forms-&-Pubs page of IRS.gov or by calling toll-free 800-TAX-FORM 800-TAX-FORM FREE end_of_the_skype_highlighting <br> (800-829-3676 begin_of_the_skype_highlighting 800-829-8676 FREE. Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2009, 2010 or 2011 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by filing http://www.irs.gov/file_source/pub/irs-pdf/f4506t.pdf
Form 4506-T. Request for Transcript of Tax Return, with the IRS or by calling 800-829-1040 FREE
Smart Ways to Spend Your Tax Refund
Despite the late start to the this year’s tax season, refund checks are
already rolling in. About 75% of taxpayers are expected to receive refunds this
year, according to estimates from the Internal Revenue Service, with the average
check coming out to about $3,000. And as this winter windfall arrives, Americans
wrestle with competing desires to spend, save, or invest the cash. Many people say they are being responsible with their refunds: 42% plan to use the money to pay down debt and cover bills and 25% plan to save it, according to a 2012 survey by TurboTax. Others are splurging: 15% of taxpayers plan to treat themselves to a vacation or shopping. But advisers say that even if you’ve done everything right—you have an emergency fund, no debt and are
maxing out your retirement account contributions—you might want to reconsider spending the refund on a 70-inch TV or a cruise. Here are some of their suggestions.
Rebalance your portfolio
With the stock market hovering near five-year highs, advisers normally would recommend investors rebalance their portfolios by selling stocks and using the
proceeds to buy bonds or whatever assets they need to get back to their target allocations. But some investors might be able to rebalance without selling their
stocks — if they use their refund money to build up their exposure in those areas, says Steve Billimack, managing director at the HighTower Chicago Advisory
Group. “And it’s a very tax efficient way to do it because they’re not selling anything to rebalance,” says Billimack. (Investors typically need to pay taxes
when they sell assets that have risen in value.)
Prepay your bills
Even if you’re not living paycheck to paycheck and could afford to spend your refund on a new iPad without falling behind on your bills, there may be better
uses for the cash. Though it’s not nearly as exciting, one can use the money to pay off future bills, says Jon Beyrer, a financial planner in San Diego with
Blankinship & Foster. “Why not use this money to put yourself ahead of the game?” says Beyrer. Prepay six months of car insurance bills or car loan
payments. Write the phone company a large check, or save the money for the home insurance bill you know is coming up in a few months, he says. But don’t forget
to check monthly statements to be sure you aren’t paying for something you didn’t request, experts say.
Make home improvements
“If you’re going to spend it, take a look at your house,” says Mike Blehar, managing director and principal at Fort Pitt Capital Group. “What have you been
putting off?” If your furnace is on its last leg, now may be your chance to replace it, he says. Have you wanted to install new windows? Using the money on
your home could lift your property value and prevent future damage, advisers say. People who make energy-efficient improvements might also qualify for a
residential energy tax credits expiring at the end of this year, says Blehar. To get the maximum credit of $500, taxpayers need to make $5,000 in qualifying
improvements to their stoves, heating or air conditioning systems, insulation, roofs, water heaters and windows and doors. Learn more here:
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Buy a car
If the list of needed car repairs is piling up, some advisers say it might be best to put your check toward a new ride. A $3,000 refund can cover the typical
10% down payment needed on a $30,000 loan for a new car and the 20% down payment needed on a $15,000 used car. It also helps that banks are currently offering record-low rates on car loans, says Greg McBride, a senior analyst at Bankrate.com. The average rate on a five-year loan is hovering near 4% for a
5-year loan on a new car and 4.6% for a 4-year loan on a used car, according to Bankrate.com. And some banks and credit unions will offer rates below 2.5% on
both new and used cars, he says. People with existing car loans may also have a greater shot at refinancing to get a lower rate if they use some of their refund
cash to reduce the size of their loan, says Beyrer.
Original article printed in TaxPro.org
already rolling in. About 75% of taxpayers are expected to receive refunds this
year, according to estimates from the Internal Revenue Service, with the average
check coming out to about $3,000. And as this winter windfall arrives, Americans
wrestle with competing desires to spend, save, or invest the cash. Many people say they are being responsible with their refunds: 42% plan to use the money to pay down debt and cover bills and 25% plan to save it, according to a 2012 survey by TurboTax. Others are splurging: 15% of taxpayers plan to treat themselves to a vacation or shopping. But advisers say that even if you’ve done everything right—you have an emergency fund, no debt and are
maxing out your retirement account contributions—you might want to reconsider spending the refund on a 70-inch TV or a cruise. Here are some of their suggestions.
Rebalance your portfolio
With the stock market hovering near five-year highs, advisers normally would recommend investors rebalance their portfolios by selling stocks and using the
proceeds to buy bonds or whatever assets they need to get back to their target allocations. But some investors might be able to rebalance without selling their
stocks — if they use their refund money to build up their exposure in those areas, says Steve Billimack, managing director at the HighTower Chicago Advisory
Group. “And it’s a very tax efficient way to do it because they’re not selling anything to rebalance,” says Billimack. (Investors typically need to pay taxes
when they sell assets that have risen in value.)
Prepay your bills
Even if you’re not living paycheck to paycheck and could afford to spend your refund on a new iPad without falling behind on your bills, there may be better
uses for the cash. Though it’s not nearly as exciting, one can use the money to pay off future bills, says Jon Beyrer, a financial planner in San Diego with
Blankinship & Foster. “Why not use this money to put yourself ahead of the game?” says Beyrer. Prepay six months of car insurance bills or car loan
payments. Write the phone company a large check, or save the money for the home insurance bill you know is coming up in a few months, he says. But don’t forget
to check monthly statements to be sure you aren’t paying for something you didn’t request, experts say.
Make home improvements
“If you’re going to spend it, take a look at your house,” says Mike Blehar, managing director and principal at Fort Pitt Capital Group. “What have you been
putting off?” If your furnace is on its last leg, now may be your chance to replace it, he says. Have you wanted to install new windows? Using the money on
your home could lift your property value and prevent future damage, advisers say. People who make energy-efficient improvements might also qualify for a
residential energy tax credits expiring at the end of this year, says Blehar. To get the maximum credit of $500, taxpayers need to make $5,000 in qualifying
improvements to their stoves, heating or air conditioning systems, insulation, roofs, water heaters and windows and doors. Learn more here:
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index
Buy a car
If the list of needed car repairs is piling up, some advisers say it might be best to put your check toward a new ride. A $3,000 refund can cover the typical
10% down payment needed on a $30,000 loan for a new car and the 20% down payment needed on a $15,000 used car. It also helps that banks are currently offering record-low rates on car loans, says Greg McBride, a senior analyst at Bankrate.com. The average rate on a five-year loan is hovering near 4% for a
5-year loan on a new car and 4.6% for a 4-year loan on a used car, according to Bankrate.com. And some banks and credit unions will offer rates below 2.5% on
both new and used cars, he says. People with existing car loans may also have a greater shot at refinancing to get a lower rate if they use some of their refund
cash to reduce the size of their loan, says Beyrer.
Original article printed in TaxPro.org
IRS Promises Better
Service as it Kicks off Tax Season
Washington,
D.C. (January 30, 2013)
By Michael Cohn
The Internal Revenue Service is promising more video conferencing assistance for taxpayers, social media tools and an improved Web site as it launched tax season Wednesday, along with stepped-up efforts to protect taxpayers from tax refund fraud and identity theft.
New and expanded services for taxpayers this year include a redesigned IRS.gov web site that the IRS said would be easier to navigate. Improved service
options include more two-way video-conferencing assistance sites around the country. Social media tools are available on sites such as Tumblr, Twitter,
Facebook, YouTube and LinkedIn (see IRS Opens a Tumblr Blog).
The IRS began accepting and processing most individual tax returns Wednesday after updating forms and completing programming and testing of its
processing systems to reflect the American Taxpayer Relief Act (ATRA) that Congress enacted on Jan. 2 (see IRS Opens Tax Filing Season for Individuals).
The vast majority of taxpayers can file now, but the IRS cautioned that it is continuing to update its systems for some tax filers. The IRS will begin accepting tax returns from people claiming education credits in mid-February while taxpayers claiming depreciation deductions, energy credits and many business credits will be able to file in late February or early March. A full list of the affected forms is available on IRS.gov. This year, taxpayers have until Monday, April 15, to file their 2012
tax returns and pay any tax due. The IRS expects to receive more than 147 million individual tax returns this year, with about 75 percent projected to receive a refund. Last year for the first time, 80 percent of all individual returns were filed electronically. E-file, when combined with direct deposit, is the fastest way to get a refund. Last year, about three out of four refund filers selected direct deposit.
The best way for taxpayers to get answers to their questions is by visiting IRS.gov, the IRS noted. Last year, the site received a record 340 million visits, a 17 percent increase over 2011. This year, the redesigned Web site makes it easier for taxpayers to find key forms and vital information. The front page also includes links to redesigned pages to help with everything from refunds to specific tax issues. It also provides access to videos on the IRS YouTube channel. Through IRS.gov, taxpayers can access Free File, which provides options for free brand-name tax software or online Fillable Forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $57,000 or less can choose from approximately 15 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms.
People earning $51,000 or less usually qualify for the Volunteer Income Tax Assistance program for free tax preparation and electronic filing, the IRS noted. Tax Counseling for the Elderly, a similar community-based volunteer program, offers free tax help with priority assistance to people age 60 and older, specializing in questions about pensions and retirement issues. Information on these programs can be found at IRS.gov.
This year, the IRS is doubling the number of sites where taxpayers can get assistance through two-way video conferencing. During 2012, the program’s first year, about 14,000 taxpayers received assistance at 13 locations. Following a strong response to the virtual assistance program, the IRS plans to
roll out 14 new sites. A list of the 27 available locations is on IRS.gov. For tax law questions or account inquiries, taxpayers can also call the IRS toll-free number
800-829-1040 begin_of_the_skype_highlighting 800-829-1040 FREE end_of_the_skype_highlighting (7 a.m. to 7 p.m. local time) or visit a taxpayer assistance center. Taxpayers should check IRS.gov for the hours and services offered at the location they intend to visit.
Apps and Social Media
For the third year, the IRS will offer IRS2Go, its smartphone application, which enables taxpayers to check on the status of their tax refund and obtain helpful tax information. The IRS2Go app, available for Apple and Android users, has been downloaded more than 800,000 times and used by taxpayers millions of times. More helpful information is available through IRS social media platforms, including:
• YouTube, where viewers can watch more than 100 short, informative videos. They are available in English, Spanish,American Sign Language and other languages.
• The IRS also has several twitter feeds available for taxpayers in English and Spanish at @IRSnewsor @IRSenEspanol. And @IRStaxproscovers news for tax
professionals.
• For the 2013 filing season, the IRS has added Tumblr to its list of social media platforms.
People who want tax information now have another way of accessing and sharing helpful tax tips, videos, podcasts and other information at www.internalrevenueservice.tumblr.com The IRS only uses social media tools to share public information, not to answer personal tax or account questions. And the IRS reminds taxpayers to never post confidential information, such as a Social Security Number, on social media sites.
Check for a Refund
Even with the Jan. 30 opening of the tax season, the IRS expects to issue refunds within the usual timeframes. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013. After taxpayers file a return, they can track the status of the refund with the “Where’s My Refund?” tool available on the IRS.gov website. New this year, instead of an estimated date, “Where’s My Refund?” will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.
Here are some tips for using "Where's My Refund?":
• Initial information will generally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after mailing a paper return.
• The system updates every 24 hours, usually overnight. There’s no need to check more than once a day.
• “Where’s My Refund?” provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the
IRS unless the web tool says to do so.
• To use the “Where’s My Refund?” tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their Social Security Number, filing status and the exact dollar amount of the refund they are expecting.
Taxpayers should remember that while most tax refunds are issued within 21 days, some tax returns need additional time to be reviewed. As part of that effort, the IRS has put in place stronger security filters this filing season to protect against refund fraud and identity theft.
Identity Theft
The IRS said that stopping identity theft and refund fraud would be a top priority, and the agency’s work on identity theft and refund fraud continues to grow. For the 2013 filing season, the IRS has expanded its efforts to better protect taxpayers, help victims and detect refund fraud before it occurs. The effort includes stronger screening filters for incoming tax returns, increased IRS Criminal Investigation activity and expanded partnerships with local law-enforcement officials and financial institutions. More information is available in IRS Fact Sheet 2013-2.
By late 2012, the IRS assigned more than 3,000 IRS employees—more than double the number from 2011—to work on identity theft-related issues. IRS
employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with
taxpayers to recognize identity theft indicators and help people victimized by
identity theft.
D.C. (January 30, 2013)
By Michael Cohn
The Internal Revenue Service is promising more video conferencing assistance for taxpayers, social media tools and an improved Web site as it launched tax season Wednesday, along with stepped-up efforts to protect taxpayers from tax refund fraud and identity theft.
New and expanded services for taxpayers this year include a redesigned IRS.gov web site that the IRS said would be easier to navigate. Improved service
options include more two-way video-conferencing assistance sites around the country. Social media tools are available on sites such as Tumblr, Twitter,
Facebook, YouTube and LinkedIn (see IRS Opens a Tumblr Blog).
The IRS began accepting and processing most individual tax returns Wednesday after updating forms and completing programming and testing of its
processing systems to reflect the American Taxpayer Relief Act (ATRA) that Congress enacted on Jan. 2 (see IRS Opens Tax Filing Season for Individuals).
The vast majority of taxpayers can file now, but the IRS cautioned that it is continuing to update its systems for some tax filers. The IRS will begin accepting tax returns from people claiming education credits in mid-February while taxpayers claiming depreciation deductions, energy credits and many business credits will be able to file in late February or early March. A full list of the affected forms is available on IRS.gov. This year, taxpayers have until Monday, April 15, to file their 2012
tax returns and pay any tax due. The IRS expects to receive more than 147 million individual tax returns this year, with about 75 percent projected to receive a refund. Last year for the first time, 80 percent of all individual returns were filed electronically. E-file, when combined with direct deposit, is the fastest way to get a refund. Last year, about three out of four refund filers selected direct deposit.
The best way for taxpayers to get answers to their questions is by visiting IRS.gov, the IRS noted. Last year, the site received a record 340 million visits, a 17 percent increase over 2011. This year, the redesigned Web site makes it easier for taxpayers to find key forms and vital information. The front page also includes links to redesigned pages to help with everything from refunds to specific tax issues. It also provides access to videos on the IRS YouTube channel. Through IRS.gov, taxpayers can access Free File, which provides options for free brand-name tax software or online Fillable Forms plus free electronic filing. Everyone can use Free File to prepare a federal tax return. Taxpayers who make $57,000 or less can choose from approximately 15 commercial software providers. There’s no income limit for Free File Fillable Forms, the electronic version of IRS paper forms.
People earning $51,000 or less usually qualify for the Volunteer Income Tax Assistance program for free tax preparation and electronic filing, the IRS noted. Tax Counseling for the Elderly, a similar community-based volunteer program, offers free tax help with priority assistance to people age 60 and older, specializing in questions about pensions and retirement issues. Information on these programs can be found at IRS.gov.
This year, the IRS is doubling the number of sites where taxpayers can get assistance through two-way video conferencing. During 2012, the program’s first year, about 14,000 taxpayers received assistance at 13 locations. Following a strong response to the virtual assistance program, the IRS plans to
roll out 14 new sites. A list of the 27 available locations is on IRS.gov. For tax law questions or account inquiries, taxpayers can also call the IRS toll-free number
800-829-1040
Apps and Social Media
For the third year, the IRS will offer IRS2Go, its smartphone application, which enables taxpayers to check on the status of their tax refund and obtain helpful tax information. The IRS2Go app, available for Apple and Android users, has been downloaded more than 800,000 times and used by taxpayers millions of times. More helpful information is available through IRS social media platforms, including:
• YouTube, where viewers can watch more than 100 short, informative videos. They are available in English, Spanish,American Sign Language and other languages.
• The IRS also has several twitter feeds available for taxpayers in English and Spanish at @IRSnewsor @IRSenEspanol. And @IRStaxproscovers news for tax
professionals.
• For the 2013 filing season, the IRS has added Tumblr to its list of social media platforms.
People who want tax information now have another way of accessing and sharing helpful tax tips, videos, podcasts and other information at www.internalrevenueservice.tumblr.com The IRS only uses social media tools to share public information, not to answer personal tax or account questions. And the IRS reminds taxpayers to never post confidential information, such as a Social Security Number, on social media sites.
Check for a Refund
Even with the Jan. 30 opening of the tax season, the IRS expects to issue refunds within the usual timeframes. Last year, the IRS issued more than nine out of 10 refunds to taxpayers in less than 21 days, and it expects the same results in 2013. After taxpayers file a return, they can track the status of the refund with the “Where’s My Refund?” tool available on the IRS.gov website. New this year, instead of an estimated date, “Where’s My Refund?” will give people an actual personalized refund date after the IRS processes the tax return and approves the refund.
Here are some tips for using "Where's My Refund?":
• Initial information will generally be available within 24 hours after the IRS receives the taxpayer’s e-filed return or four weeks after mailing a paper return.
• The system updates every 24 hours, usually overnight. There’s no need to check more than once a day.
• “Where’s My Refund?” provides the most accurate and complete information that the IRS has about the refund, so there is no need to call the
IRS unless the web tool says to do so.
• To use the “Where’s My Refund?” tool, taxpayers need to have a copy of their tax return for reference. Taxpayers will need their Social Security Number, filing status and the exact dollar amount of the refund they are expecting.
Taxpayers should remember that while most tax refunds are issued within 21 days, some tax returns need additional time to be reviewed. As part of that effort, the IRS has put in place stronger security filters this filing season to protect against refund fraud and identity theft.
Identity Theft
The IRS said that stopping identity theft and refund fraud would be a top priority, and the agency’s work on identity theft and refund fraud continues to grow. For the 2013 filing season, the IRS has expanded its efforts to better protect taxpayers, help victims and detect refund fraud before it occurs. The effort includes stronger screening filters for incoming tax returns, increased IRS Criminal Investigation activity and expanded partnerships with local law-enforcement officials and financial institutions. More information is available in IRS Fact Sheet 2013-2.
By late 2012, the IRS assigned more than 3,000 IRS employees—more than double the number from 2011—to work on identity theft-related issues. IRS
employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with
taxpayers to recognize identity theft indicators and help people victimized by
identity theft.
IRS Increases Standard Mileage Rates a Penny in 2013
11/28/2012
Washington, D.C. (November 21, 2012)
By Michael Cohn
The Internal Revenue Service has raised the standard mileage rates by 1 cent per mile for next year when calculating 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, as well as vans, pickups and panel trucks, will be 56.5 cents per mile for
business miles driven, 24 cents per mile driven for medical or moving purposes, and 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.
Washington, D.C. (November 21, 2012)
By Michael Cohn
The Internal Revenue Service has raised the standard mileage rates by 1 cent per mile for next year when calculating 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, as well as vans, pickups and panel trucks, will be 56.5 cents per mile for
business miles driven, 24 cents per mile driven for medical or moving purposes, and 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.
10/09/2012
I.R.S Q & A
Q: Should I hire an accountant? Also, how can I make the most of this business relationship?
A: One aspect of running a small business that few people give a lot of thought to is the way they deal with
professional vendors such as bankers, lawyers, accountants and so on. Most entrepreneurs just dive right into their businesses without giving a second thought to how these professionals should be treated, what they can do for you and what they in turn look for in clients. With a little thought and effort, you can ensure that you get the most from these relationships.
The main thing to remember is that you need a personal relationship with each of these people. They have the ability-sometimes direct, sometimes indirect-to drastically influence the success of your business. Your goal should be to develop a long-term, personal relationship with each of them. If you do that, when you hit a bump in the road, they'll be there to help you get over it.
As you become more experienced, you'll find that your accountant and attorney will overlap a bit in their services and expertise. I've found that mine often work together to achieve what I'm trying to do. That being said, here are a few examples of services your accountant should provide:
You will also need an accountant if you have questions about what kinds of business expenses are deductible. Most of these rules and regulations are moving targets-they change frequently and often vary from state to state. A good accountant will always be on top of the changing laws and regulations and, more importantly, will know what applies to you.
It's also important to ask your accountant's advice before you take action. It's almost always easier (and cheaper) to structure things properly upfront, as opposed to trying to fix something later.
I've noted in previous columns concerning your banker and attorney how important it is to develop close relationships with them, make sure they completely understand your business and your goals for it, and trust them to help you attain those goals. This advice applies to your accountant as well-if you take that advice, he or she will be a valuable long-term partner.
I.R.S Q & A
Q: Should I hire an accountant? Also, how can I make the most of this business relationship?
A: One aspect of running a small business that few people give a lot of thought to is the way they deal with
professional vendors such as bankers, lawyers, accountants and so on. Most entrepreneurs just dive right into their businesses without giving a second thought to how these professionals should be treated, what they can do for you and what they in turn look for in clients. With a little thought and effort, you can ensure that you get the most from these relationships.
The main thing to remember is that you need a personal relationship with each of these people. They have the ability-sometimes direct, sometimes indirect-to drastically influence the success of your business. Your goal should be to develop a long-term, personal relationship with each of them. If you do that, when you hit a bump in the road, they'll be there to help you get over it.
As you become more experienced, you'll find that your accountant and attorney will overlap a bit in their services and expertise. I've found that mine often work together to achieve what I'm trying to do. That being said, here are a few examples of services your accountant should provide:
- Help you decide what type of entity (such as S-Corp or LLC) and ownership structure to have when you first get started; your accountant should work with your attorney on this.
- Design and set up your accounting system so that year-end financial reporting will be easier.
- Ensure that you pay the correct types of taxes in the correct amounts.
- Ensure that you send out W2 and 1099 forms to the proper people at the proper times, and also make sure that if you send out 1099s, the IRS will agree with you that those individuals are independent contractors and not employees. This is a common mistake that can cost you a lot of money and stress.
- Advise you on deductions and how to separate your personal and business expenses.
- Advise and guide you through an audit if you ever have one.
- Advise you on specific transactions, such as whether it's better to lease or buy.
- Compile your financial records for the past period.
- Help you understand your financial statements. You should use your accountant's expertise to help you analyze your financial statements so you can understand what he or she is telling you. If you
neglect to do this, you won't know as much as you should about how your company is doing.
You will also need an accountant if you have questions about what kinds of business expenses are deductible. Most of these rules and regulations are moving targets-they change frequently and often vary from state to state. A good accountant will always be on top of the changing laws and regulations and, more importantly, will know what applies to you.
It's also important to ask your accountant's advice before you take action. It's almost always easier (and cheaper) to structure things properly upfront, as opposed to trying to fix something later.
I've noted in previous columns concerning your banker and attorney how important it is to develop close relationships with them, make sure they completely understand your business and your goals for it, and trust them to help you attain those goals. This advice applies to your accountant as well-if you take that advice, he or she will be a valuable long-term partner.
Fresh Start
IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater
Number of Struggling Taxpayers Make a Fresh Start
IR-2012-53, May 21, 2012
WASHINGTON — The Internal Revenue Service today announced another expansion of its "Fresh Start" initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.
"This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years," said IRS Commissioner Doug Shulman. "It is part of our multiyear effort to help taxpayers who are struggling to make ends meet."
Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some
taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past. In certain circumstances, the changes announced today include:
In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the
changes.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
Allowable Living Expenses
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses
such as credit card payments and bank fees and charges.
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer's post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.
Rrefer to the IRS website for more detais about FRESH START program.
Number of Struggling Taxpayers Make a Fresh Start
IR-2012-53, May 21, 2012
WASHINGTON — The Internal Revenue Service today announced another expansion of its "Fresh Start" initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.
"This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years," said IRS Commissioner Doug Shulman. "It is part of our multiyear effort to help taxpayers who are struggling to make ends meet."
Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some
taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past. In certain circumstances, the changes announced today include:
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to repay their student loans.
- Allowing taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the
changes.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
Allowable Living Expenses
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses
such as credit card payments and bank fees and charges.
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer's post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.
Rrefer to the IRS website for more detais about FRESH START program.