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Tax laws change. Rates, percentages, brackets, limitations, requirements... they are all subject to legislation. Additionally, tax laws are frequently passed with expiry dates, essentially establishing temporary conditions. It makes for a fluid environment.
It's an environment that can pose problems for individuals as they try to plan for an uncertain future. With respect to contingencies and gifting, more than a decade of fluidity in exclusion amounts and tax increases have made contingency planning particularly challenging. But, now we see the chance for stabilization.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 included gift tax exclusion amounts (set now at $5 million) and bracketed tax rates that were the ruling law these last 2 years. Modified versions of those provisions have now been made "permanent".
Of course, "permanent" only means they'll stay in place until altered by future legislation. But, for the first time in more than a decade, there are firm provisions in place, extending into the future, that individuals can rely on when planning contingencies.
Uncertainty over the effects of an expiring act had lead to speculation about tax rate increases and exclusion amount decreases -- perhaps falling to as little as $1 million.
The 2012 tax filing season is, for the most part, behind us. Last minute changes to tax law and delays in the publication of certain IRS forms created anxiety for some tax payers, but overall the 2012 tax filing season went smoothly.
Now that we've gotten through, what's next?
For us, there's not much of a break. We've already begun detailing plans for the 2013 tax season, which means we're working with clients to establish strategies to improve their bottom line for the tax year ahead.
Tax strategies can help you avoid unexpected increases and secure the best possible credits and deductions. But, we can't help you position yourself for an improvement if you don't take the time to sit down with us and plan.
It's never too soon to start preparing for the tax year ahead. And, with the 2012 tax season behind us, now is the best time to get started. Call today and let's work together to make your next tax season your best one yet.
The most common errors are simple calculation mistakes, easily avoided by using e-file software which performs calculations for you. If you aren't using such software, check your figures.
Check your mailing address carefully. Many returns are delayed unnecessarily due to simple addressing mistakes.
Tax tables should be consulted and the results verified. Third most common among common mistake is simply entering the data from the wrong line in the tables.
Another common error is incorrectly entering routing numbers for banking accounts. As with the common errors above, please take the time to verify the data you enter. You'll save time in the long run, compare to returns that are lost or need revision before processing can be completed.
Don't forget to sign and date your return, and keep a copy for your records. You'll also want to be sure you've attached all necessary forms.
As the filing season nears its end, consider filing an extension if you're having trouble. You can learn more about extensions from our post here: http://accountingworldcpas.com/tax-tips-blog/cant-file-time-heres-what-do or from the IRS directly on this page: http://www.irs.gov/uac/Newsroom/Can't-File-By-April-15,-Use-Free-File-to-Get-a-Six-Month-Extension-2013
Extensions are available to those who, for whatever reason, are unable to file on time. Before you file for an extension, you'll want to be aware of how extensions actually work.
One thing to remember is that an extension gives you more time to file, but not more time to pay. If you need more time to pay, the IRS Online Payment Agreement page here http://www.irs.gov/Individuals/Online-Payment-Agreement-Application could offer exactly what you need.
For everyone else, you'll need your W2s, 1099s and last year's return so that you can estimate your adjusted gross income. As we said, an extension gives you more time to file, but not more time to pay. You'll need to estimate you tax obligation and pay any balance due.
If you have a balance due, the Free File pages here http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free will direct you to a number of e-Pay services to help you meet your obligation.
Under the Affordable Care Act, employers are required to report the cost of coverage for employer sponsored health plans. While there has been some confusion about the purpose of the inclusion of this data, there has been even more about what, exactly, has to be reported.
First, the data gathered regarding employer sponsored health programs is not used for tax purposes. Rather, the information is intended to serve as a guide to taxpayers about the value of the health care coverage they now receive.
As for what, exactly, is to be reported, this IRS page breaks it down completely. http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage.
The short take on it is that the following are required as Code DD entries on the employee W2:
Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits.
Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer.
Domestic partner coverage included in gross income.
The following are required ONLY if the employer charges a COBRA premium:
Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage.
On-site medical clinics providing applicable employer-sponsored healthcare coverage.
Wellness programs providing applicable employer-sponsored healthcare coverage.
Last week we posted that Identity Theft was at the top of the IRS list of "Dirty Dozen" scams and frauds for 2013. Now, the IRS has expanded its program assisting law enforcement in the investigation and prosecution of such crimes.
A very successful coast-to-coast sweep in January resulted in over 700 enforcement actions, including some 298 indictments. As IRS assistance of law enforcement improves, identity theft looks less and less attractive to potential perpetrators.
If you feel you've been a victim, the IRS offers these pages for help:
As we posted yesterday, the IRS has released its "Dirty Dozen" Tax scams and frauds for 2013. You can find the complete list here: IRS Dirty Dozen.
Regarding the use of offshore accounts, the IRS says, "While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution."
The IRS is concerned with the numerous individuals who evade U.S. taxes by "hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds". Additionally, the IRS works very closely with the Department of Justice. They remain vigilant in their investigations, fully intending to collect all taxes owed.
At the beginning of 2012, the IRS re-opened its program offering relief to those individuals who voluntarily disclose their offshore income. Participation in the voluntary program has significant advantages over continuing to evade taxes until caught.
We urge all individuals with income hidden offshore to step forward and make use of the voluntary disclosure program. You'll avoid the steepest penalties, avoid possible prosecution and you'll be pleased to find yourself compliant and in good standing with the IRS.
Yesterday, March 26, 2013, the IRS issued its annual "Dirty Dozen" list of tax related scams. Identity Theft tops the list again this year, and the closely related group of Phishing scams is a close second.
While tax scams can and do occur throughout the year, these crimes typically increase in frequency during the tax filing season. The IRS wants all taxpayers to be aware and to protect themselves.
Identity theft includes the use of another person's name, Social Security number and/or other personal information to commit fraud -- such as filing fraudulent tax returns. Victims of fraudulent tax filings often face long delays in getting any refund do them, as they seek to prove their own returns are accurate and legitimate.
Phishing scams are those clever emails, phone calls and pamphlets you see from time to time that are meant to appear as official IRS communications. These scams are attempts to get personal information from you; information that is then used to commit a variety of criminal acts in your name.
The IRS does not communicate with taxpayers via email, through printed handouts or by phone for the purpose of getting or updating your personal information. You should never give your personal information to anyone but your tax preparer. Any email you receive that appears to be from the IRS is simply fake -- a phishing attempt -- and should be reported. Do not respond to any such email.
If you have become a victim of Identity Theft, or suspect an attempt has been made to steal your personal information, the best course of action is to report it at once. The IRS has a special page, here: http://www.irs.gov/uac/Identity-Protection where you'll find resources for learning about Identity Theft.
For victims, this page: http://www.irs.gov/uac/Have-you-become-the-victim-of-identity-theft-outside-the-tax-administration-system%3F offers links and resources where victims can get help immediately.
To report phishing, use the following email address: firstname.lastname@example.org
You may recall that our nation moved forward into 2013 without tax legislation in place to address the numerous expiring provisions in the tax code. The late date of the enactment of the American Taxpayer Relief Act has made it difficult for some to meet the tax filing deadline this year.
Simply put, some IRS forms weren't ready for use until February or March of 2013. The IRS responded to that issue by providing late-payment penalty relief to taxpayers who properly file an extension and who claim deductions using any of the forms that were delayed.
The complete list of forms for use that qualify for the extension can be found here: http://www.irs.gov/pub/irs-drop/n-13-24.pdf
The IRS statement regarding this penalty relief can be found here: http://www.irs.gov/uac/Newsroom/Relief-Available-To-Many-Extension-Requesters-Claiming-Tax-Benefits
The Winter 2013 issue, available since March 6, provides early statistics and data from more than 145 million individual income tax returns for the 2011 tax year.
The Statistics of Income (SOI) Division is produced quarterly and provides the most recent data available from various tax and information returns filed by U.S. taxpayers.
Tax Preparation, Tax Planning and Accounting Services for Phoenix, Scottsdale & Surrounding Areas