Archive for April, 2011

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President Signs Repeal of Expanded 1099 Reporting Requirements

Friday, April 15th, 2011

The provisions of this law were a part of the Patient Protection and Affordable Care Act (health care reform) which was passed in March of 2010.  Among the provisions were a requirement for businesses which pay more than $600.00 in a calendar year to any single recipient to submit a Federal Form 1099 for each recipient, including corporations.  The provisions included the requirement for those who receive income from rental property to also file these reports.  Corporations have generally been exempt as they are presumed to have their own internal accounting and reporting system to report the information.  The 2010 law included additional provisions, beginning in 2012,  to include these same payments which were made for the acquisition of property.

Among the arguments against this law was the extremely burdensome administrative load that would be placed upon all businesses, especially the small business owner who does not have the administrative staff and software to accurately track and report the data. 

The additional penalties in the 2010 law that related to a failure to file the reports in a timely manner were not repealed.

A recent “Journal of Accountancy” article on this subject summarizes the results of the repealed provisions, and those provisions which remain in effect.

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Always Avoid Errors and Mistakes When Filing Any Tax Return!

Thursday, April 14th, 2011

Perhaps Pogo was years ahead of his time in 1970 when he said, “We have met the enemy and he is us!”   Technology has provided us with a vast array of  improvements in our lives, but it’s also a faster reminder that we are all human when it comes to identifying our mistakes.  The challenge for all of us who are living in the 21st century is to minimize those mistakes, especially when we are preparing and filing any report, especially a tax return.

When you file a tax return the data in the return is matched and compared with the information in a myriad of data bases at the Federal and State levels.  Many other Government agencies have information on your student loan delinquency or default, the Social Security Administration has different information from your account there, etc.   This article provides several tips and recommendations to avoid several common errors or mistakes, and perhaps some very unpleasant consequences.

  1. Your name is Mary Jones on your social security card and your account with the Social Security Administration.  You have been married for 15 years to Ed Smith but have never updated your records with the Social Security Administration.  Don’t use the name Mary Smith on your tax returns.  You’re still Mary Jones to the U.S. Government.
  2. The electronic filing system (e-file) is very accurate and responsive.  If there is an error you’ll be notified immediately.
  3. If you have either a complicated tax issue or one that you are not absolutely sure of the information that is required (or the reports that must be filed), contact the Federal or State agency that requires the report and request assistance. 
  4.  If you’re still not confident of yourself or have additional complexities in the situation, contact a reputable tax preparer or CPA who has knowledge and experience in the specific area of your problems.  Before you engage this person’s services, check their qualifications, reputation, and determine if there are any licensing issues with the state regulatory agencies.  Always ask for references.   (more…)

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When Should You File An Amended Tax Return?

Tuesday, April 12th, 2011

There is a need to consider one of the risks associcated with electronic filing (aka “e-filing”) as Americans move closer to being required to file all of our tax returns electronically.  Once a tax return has been e-filed it can not be retrieved or modified.  The only option that is available is to file an “amended’ (or “corrected” in some cases) tax return.  This situation can certainly occur if you prematurely and hastily launched the “e-file” function in you tax preparation software.  It’s a rather nasty feeling!  In the proverbial sense, as Tom Hanks said in the movie Apollo 13, “Houston, we have a problem!”  This article provides information and guidance for this situation.  From IRS Topic 308:

“If you discover an error after your return has been mailed, you may need to amend your return. The service center may correct errors in math on a return and may accept returns with certain forms or schedules left out. In these instances, do not amend your return! However, do file an amended return if your filing status, your income, your deductions or credits are incorrect.

Use Form 1040X (PDF), Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (PDF), Form 1040A (PDF), Form 1040EZ (PDF), Form 1040NR (PDF), or Form 1040NR-EZ (PDF). If you are filing to claim an additional refund, wait until you have received your original refund (you may cash that check). If you owe additional tax for a tax year, file Form 1040X and pay the tax by April 15 of the following year to avoid penalties and interest. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. The Form 1040X Instructions list the addresses for the service centers.

File a separate Form 1040X for each year you are amending. Mail each form in a separate envelope. Be sure to enter the year of the return you are amending at the top of Form 1040X. The form has three columns. Column A shows original or adjusted figures from the original return. Column C shows the corrected figures. The difference between Columns A and C is shown in Column B. There is an area on the back of the form to explain the specific changes being made and the reason for each change. Attach any forms or schedules that are affected by the change. Generally, to claim a refund, Form 1040X must be filed within 3 years from the date of your original return or within 2 years from the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date.

  • Attach copies of any forms or schedules that are being changed as a result of the amendment, including any Form(s) W-2 received after the original return was filed.
  • Tax forms can be obtained by calling 800-829-3676 or visiting www.irs.gov
  • An amended tax return cannot be filed electronically under the e-file system.
  • Normal processing time for Forms 1040X is 8 to 12 weeks from the IRS receipt date.

 Please Note: Your state tax liability may be affected by a change made on your federal return. For information on how to correct your state tax return, contact your state tax agency.”  (more…)

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Federal Tax Payment Procedures

Wednesday, April 6th, 2011

There are several options which are available to you if you will be required to send an addtional tax payment to the U.S. Treasury.  However, do NOT send cash!  Among the choices which you have are:

  • Use the Electronic Federal Tax Payment System (EFTPS) at http://eftps.com;
  • File your tax return electronically (e-file) and use the free electronic payment system (direct withdrawal) from your checking or savings account;
  • Pay via a telephone call using your credit or debit card (there is a “convenience charge” if you use this method);
  •  Enclose your payment (check, money order etc) with your tax return.  If it is available, include the payment voucher (Form 1040-V) which provides all of the essential information for your payment;
  • If necessary, pay all that is possible and request that you be approved for installment payments using Form 9465 (“Installment Agreement Request”) for the unpaid balance. (more…)

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Tax Refund Tips

Monday, April 4th, 2011

If you provided either your Federal or State government with an “interest free loan” in 2010, it may be time to submit your claim for your income tax refund.  However, there are some important tips and facts that you should know before you file your 2010 tax returns:

  1. Consider e-filing your tax returns -  It will soon become mandatory.  Get on board now.   If you paper-file there will be a delay in the time that your tax return reaches the taxing authorities while it is in the U.S. Postal System.  After it arrives and is sorted, your tax return data will probably be manually keyed in to the IRS system by a seasonal employee and your refund check will be mailed to you six to eight weeks after your tax returns were received.  Add three to seven more days in-transit time while your check  is in the U.S. Postal System and it could be almost nine to ten weeks before your refund check arrives in your mailbox.
  2. Consider using the direct deposit alternative for your tax refunds –  it’s fast, and easy.  Enter your bank name, routing number, and full account number in the appropriate blocks for your paper tax return or tax software (recommended).  If you file your tax return electronically your tax refund will normally be issued within three weeks after you receive an “Accepted” acknowledgement notification from the IRS.  These times will vary with State tax returns.  Ther IRS publishes a refund cycle every year.  Click on this link for the 2011 tax refund cycle information in Publication 2043. 
  3. Revise your Federal and State tax withholding – depending on your tax bracket and total income, an annual income tax refund of  $200-$500 may be acceptable to you to avoid underpayment penalties and interest.  However, if your annual income tax refund is many times this amount, contact your payroll department or revise the amounts for your quarterly estimated tax deposits, or adjust a combination of both factors.
  4. Tax withholding planning tip – if you owe the U.S. Treasury taxes from prior years, an active installment payment plan, partial satisfaction of a tax levy etc the IRS will probably apply your income tax refund to these outstanding balances before determining if any amounts are actually due to you.  A similar practice may be followed by your State taxing authorities.  Read tax planning tip #3 above again!!!  You may need to cancel your reservations for that trip down to St. Barts! (more…)

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