Taxes are generally held by employers and sent to the IRS as payroll taxes. For the self-employed, you have to make installment payments every quarter based on your estimated taxes. All taxpayers have to file a tax return by April 15^th, unless they file an extension. If they paid too little in taxes throughout the year, they will owe the IRS the balance at tax time and will have to pay those taxes when they file their taxes. If your payment is late, you will have to pay penalties and interest on what you owe. If you can’t afford to pay what you owe, you need to contact the IRS before they are due and make arrangements to make payments.

There are several ways you can arrange payment options with the IRS. Here are four options to pay your tax bill:

1. Mail a Check

Many taxpayers still send their tax payments by this method. You check must be sent before April 15^th. In reality, it must be postmarked by April 15^th. Your tax booklet will tell you where to send your check, or you can check the IRS website for the address in your region. The IRS recommends priority mail via U.S.P.S.

2. Use Your Credit Card/Debit Card

You can use your credit card to pay your taxes, however, it may end up costing you more in the long run with the interest rates your credit card company may charge. If you decide to go this route, you should know that the IRS has partnered with three companies that provide credit card services to help taxpayers make payments. The IRS website provides information about these companies.

3. Direct Deposit

You also have the option of agreeing to a direct deposit. This allows the IRS to take the taxes you owe from your bank account. This service is easy and free. If you are expecting a refund, choosing direct deposit could also get your refund to you much more quickly than if your refund check is mailed to you.

4. Electronic Federal Tax Payment System (EFTPS)

You may also use the EFTPS service when paying the taxes you owe. The IRS offers this service by allowing taxpayers to make regularly scheduled payments. It’s a free service and all individual taxpayers may use it. You can enroll for this service at www.irs.gov.

Daniel Stoica Accounting Professional

The IRS has started a program that allows employers to fix past worker classification issues, and, for very little money, lets them reclassify their workers.

The program lets employers be compliant in making the minimum payments on past payroll taxes instead of waiting to be audited by the IRS.

This program is part of the IRS’s “Fresh Start” program, which helps taxpayers and businesses take care of their taxes.
IRS Commissioner, Doug Shulman said, “This program gives assurance and relief to employers in an important area. This is part of a bigger effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”

The Voluntary Classification Settlement Program, or VCSP, has been implemented to get employers to be in compliance with their tax obligations and reduce tax burdens for employers, employees and the government. Eligible employers can get help with their payroll taxes that they owe if they treat workers as employees. The VCSP is accessible for many businesses, tax-exempt companies and government agencies that treat their employees as non-employees or independent contractors. It has been implemented so employers can address and correct this issue.

To be eligible, an applicant must:
-Have regularly treated their workers as non-employees,
-Have filed all required 1099 Forms for their workers for the last three years
-Not be in the process of an audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers

Employers may apply for this program by filing an 8952 Form, Application for Voluntary Classification Settlement Program, for 60 days before they begin treating their workers as employees.

Employers who are accepted will pay a fee that equals a little over 1% of the wages that are paid to their reclassified employees for the last year. There will be no interest or penalties, nor will the employer be audited on their payroll taxes for these employees. For the first three years, employers will be subject to a six year statute of limitations instead of the normal three years on payroll taxes.

For full details and answers to any questions can be found on the Employment Tax Pages and Announcement 2011-64 at www.irs.gov.

Daniel Stoica Accounting Professional

Claiming credits on your taxes will save you more money than taking tax deductions. A credit is a decrease in the amount you owe the IRS. A deduction is a only a decrease in gross revenue (income) before you figure how much tax you owe.

Here are some of the most common credits taxpayers may be able to take.

1. Education Tax Credits: There is the Hope Credit and the Lifetime Learning Credit. The Hope credit is for college tuition payments for you, your spouse or dependent. You can claim this credit for the first two years of college, for up to $1,650. On the Lifetime Learning Credit, you can claim up to $2,000 every year you, your spouse or dependent are in college.  For more info on these credits, read this post.

2. Adoption Tax Credit: Adopting a child can be very expensive, but you can claim a credit of up to $10,690 for the costs associated with adoption. There are certain rules you must follow in order to qualify for this credit, so you may want to contact a tax professional about your options. There is an income cap of $164,410 to be able to claim this credit.

3. Going Green: For several years now, the government has encouraged taxpayers to use more energy efficient products in in their homes, as well as hybrid vehicles. Energy efficient appliances, windows, water heaters, and solar panels can be a huge credit on your taxes.

4. Retirement Savings Tax Credit: The government gives tax credits to taxpayers who earn less than $25,000 as a single filer and $50,000 as joint filers while they put money in a retirement credit. The credit can be up to $1,000 depending on how you filed.

There are many other credits for which you may qualify. Talk to a tax professional to find out which credits you can claim.

Daniel Stoica Accounting Professional

For many taxpayers, tax time can be daunting and tedious. Most of us don’t really like doing our taxes, but there can be a silver lining when we find out we’re getting a big refund. Many taxpayers aren’t aware of the deductions they can take to save themselves a lot of money. Read on for a list of deductions that you can take.

Common Tax Deductions

1. Deductible Taxes: You can take deductions on your state and local income taxes, foreign income taxes, real estate taxes, and property taxes. For taxpayers who sold their home and purchased a new one last year, they can deduct the property taxes on both homes for a larger deduction. They can also claim pre-paid property taxes.

2. Deductible Interest and Points: Mortgage interest, home equity loans and student loan interest can be deducted. Any discount points that resulted in a smaller interest rate on your mortgage can be deducted, as well. Certain refinancing fees may be deducted, as well. Pre-payment penalties, pro-rated interest and pre-paid interest on your mortgage can be deducted.

3. Charitable Contributions: Included in these deductions are cash and non-cash donation to non-profits. You will need to keep your receipts. For non-cash donations, you can deduct the “fair market value” of the item you donated.

4.  Business Use of Home and Car: For the self-employed, you can take a deduction on anything that is used exclusively for your business. Office supplies, any memberships, gas, and mileage can be deducted. Part of your mortgage, property tax, and certain utility bills, such as internet and telephone, can also be deducted. You will have to keep your receipts and keep records of your travel expenses if it is part of your business.

5. Other Deductions: The following deductions can’t be placed in the above categories, but they can save you money. You can claim the child tax credit if you have qualifying dependents. You may also claim retirement savings and medical costs that were paid out-of-pocket. You can claim some educational costs like tuition and books. If you have property loss that wasn’t covered by your insurance that was due to fire or weather damage, you can claim those expenses. If you move more than 50 miles from home for a new job, you can deduct those expenses. The entire move isn’t deductible, but some expenses are.

Although this isn’t a complete list of deductions you take or credits you can claim, it’s a good starting point. Consult with a tax professional for more deductions and credits to get the maximum amount you’re entitled to.

Daniel Stoica Accounting Professional

Special tax rules apply to members of the military.  For instance, individuals who are serving in a combat zone do not need to worry about filing a tax return until at least 180 days after they return. They can certainly file before, but they do not have to.

This video from the IRS explains the rule:  YouTube video.

For more complete information, you can download Publication 3 from the IRS website. www.irs.gov

If you are a business owner, you probably make tough choices about your business every day. There may be one decision, however, that you haven’t taken the time to think about; transferring your business to a new owner.

Once you consider selling your business, you have to take several details into account. Some of those details may be estate and gift tax rules as well as current interest rates.

Here are some options you need to think about as a business owner:

Gifting: Your plan to sell your business may not be a sale at all. You may wish to “gift” your business or set up a trust for your family. The lifetime exclusion for estate, gift and generation skipping transfer taxes for 2011 and 2012 is $5 million. This is the amount you can gift to anyone, and it’s tax-free.

Selling: You may be thinking that the sale of your business must be conducted with someone who is not in your family. This isn’t so. You can always sell your business to any relative you choose.

Employee Stock Ownership: You may also opt for an Employee Stock Ownership Plan. This is a plan that benefits your employees by allowing them to purchase your company’s stock while giving your business a huge tax break.

There are tax, legal and financial details to be considered when gifting or selling your business, no matter if the transfer is to family or to others. Talk to a financial professional about the type of transfer that will benefit you and your family the most.

Daniel Stoica Accounting Professional

The IRS is making major progress in their effort to battle international tax evasion. New information was recently released regarding the IRS’s amnesty program for taxpayers with offshore accounts shows that nearly 30,000 people have voluntarily disclosed their hidden money since 2009. Over 12,000 new disclosures have come come in the last few weeks.

The IRS stated that it has taken in $2.2 billion from taxpayers who have come forward since the program began in 2009. That is nearly 80% of all offshore account-holders. The IRS has also taken in nearly $500 million in taxes and interest. This amount will increase because they have not yet included the penalty amounts.

IRS Commissioner, Doug Shulman, said, “By any measure, we are in the middle of an unprecedented period for our global international tax enforcement efforts. We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”

Enforcing the tax laws on a global level is the IRS’s priority. Doug Shulman stated that there has been progress from several places. There have been international agreements and cooperation with foreign governments. The IRS and the Justice Department have boosted efforts to investigate international tax evaders.

The cooperation from other countries has helped advance the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The initiative ended on September 9th, but has had a tremendous response from taxpayers who hold offshore accounts. The IRS continued this initiative from the 2009 program to give offshore account holders another opportunity to come forward and avoid criminal charges while putting money back into the U.S. tax system.

In 2009 alone, nearly 15,000 taxpayers came forward and 3,000 more came in after the deadline. They were allowed to participate in the 2011 program. With that, 12,000 more people came forward and even more are being accounted for. All total, over 30,000 taxpayers have voluntarily disclosed their accounts.

Since the 2011 program began, approximately $500 million has been collected by the IRS, which brings the total amount taken in at $2.7 billion.

The financial outcome is evident in other areas besides the 2009 and 2011 programs.
-Criminal prosecutions: Taxpayers who hide money in offshore accounts have had criminal charges placed on them and have been given jail time for several months and up to several years. They have also been required to pay back hundreds of thousands of dollars in taxes, interest and penalties.
-UBS: In 2009, UBS AG, Switzerland’s largest bank, agreed to pay $780 million in fines, interest and penalties from American taxpayers who held accounts in their banks.

These disclosures give the IRS more information about the banks that have allowed U.S. taxpayers to hide money in their institutions. The IRS plans to use this new information to increase efforts of locating offshore accounts.

Daniel Stoica Accounting Professional

The IRS has recently announced instructions that simplify tax treatment of employer provided cell phones.

The IRS now says that employers no longer need to include any use of a company-provided cell phone in an employee’s wages if the phone was provided for “non-compensatory business reasons.”

“Non-compensatory business reasons” include:

-An employee’s need to speak with clients located in other time zones outside of the employee’s normal work hours
-An employer’s need to contact an employee at all times for work-related emergencies
-An employee’s need to be able to speak with clients at times when the employee is out of the office

The IRS has also said that it will consider the value of any personal use of a cell phone as a nontaxable fringe benefit, as long as the phone is used primarily for non-compensatory business purposes. This means that employers no longer have to determine which calls by employees are personal and which aren’t — and then include the value of personal calls in the employees’ taxable income.

However, cell phones provided for any of the following reasons will be considered for compensatory business purposes — and require employers to track and tax their use:

-As a means of providing additional compensation
-To promote the morale or goodwill of an employee
-To attract a prospective employee

The new rules are effective for all taxable years beginning Jan. 1, 2010. They apply to both employer-provided cells and the reimbursement of employee-owned cells.

For detailed information on this IRS memo, you can find Notice 2011-72 on www.irs.gov.

Daniel Stoica Accounting Professional

Did you know that the IRS has an entire website devoted to videos and audio that educate individuals, small businesses, tax professionals and governments about the U.S. tax code and related topics?

Of particular help and interest to my clients and me are the videos for Small Business Taxpayers. These videos and audio recordings can be found here: http://www.irsvideos.gov/SmallBusinessTaxpayer

The Small Business Taxpayer section has topics ranging from Home Office Deductions to Small Business Workshops and IRS Audits.

Daniel Stoica Accounting Professional

The IRS has announced that interest rates for over and under-payments will be decreased beginning on October 1^st. The new rates will be as follows:

-3% for overpayments and 2% for corporations;

-3% for underpayments;

-5% for large corporate underpayments; and

-0% and 0.5% for the portion of a corporate overpayment that exceeds $10,000.

In the Internal Revenue Code, the interest rate is figured quarterly. For individual taxpayers the rate for overpayment and underpayment is the federal short-term rate plus 3%. For corporations, the rate for underpayment is the federal short-term rate plus 3% and the rate for overpayment is the federal short-term rate plus 2%.

For underpayments in large corporations, it is the federal short-term rate plus 5%. A portion of the corporations overpayment that exceeds $10,000 is the federal short-term rate plus 0.5%.

These interest rates were calculated for the federal short-term rate in July and they were implemented on August 1^st. The rates are compounded daily.

Revenue Ruling 2011-18 states the interest rates and will appear in the Internal Revenue Bulletin No. 2011-39 on September 26^th.

Daniel Stoica Accounting Professional