No, that’s not a mistake. The IRS announced on November 30, 2011, that it wants to return $153 million in undelivered tax refund checks. Over 99,000 refund checks were not delivered because of mailing address errors, and the average undelivered check was about $1,500 this year.

If you are missing your refund check, you should visit the “ Where’s My Refund?” tool on IRS.gov. The tool will provide the status of your refund and, in some cases, provide you with instructions on how to resolve delivery problems.

Choosing direct deposit could eliminate this undelivered check problem, as well as checks that are lost or stolen. Taxpayers who elect to receive their refunds via direct deposit have access to their funds as soon as they are deposited.

In addition to choosing direct deposit, the IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. Nearly 8 out of 10 taxpayers chose e-file last year. E-file combined with direct deposit is the best option for taxpayers to avoid refund problems; it’s easy, fast and safe.

Daniel Stoica Accounting Professional

Many people give to charities toward the end of the calendar year because they are in the giving spirit AND because they realize that they don’t have much more time to take advantage of tax deductions.

The following are some reminders about year-end giving.

• Make sure that the organization is qualified. Only donations to qualified organizations are tax-deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions. The searchable online version can be found at IRS.gov under Search for Charities. In addition, churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations, even if they are not listed in Publication 78.
• If at all possible, get a receipt from the charity when you are donating property such as clothing and household items. Ideally, the receipt should include the name of the charity, date of the contribution, and a reasonably-detailed description of the donated property. If a donation is left at a charity’s unattended drop site, keep a written record of the donation that includes this information, as well as the fair market value of the property at the time of the donation and the method used to determine that value. Additional rules apply for a contribution of $250 or more.
• Charitable contributions are deductible in the year they are made. If you charge a donation to a credit card before the end of the year, but the credit card bill isn’t paid until the following year, you still get to claim the deduction for the year is which the charge was made. Also, checks count for the year they were written as long as they are mailed during that year and clear shortly thereafter.
• Only individual taxpayers who itemize their deductions on Form 1040 Schedule A may claim deductions for charitable contributions. This deduction is not available to individuals who choose the standard deduction, including anyone who files a short form (Form 1040A or 1040EZ). A taxpayer will have a tax savings only if the total itemized deductions (mortgage interest, charitable contributions, state and local taxes, etc.) exceed the standard deduction. Use the 2009 Form 1040 Schedule A to determine whether itemizing is better than claiming the standard deduction.
• The deduction for a motor vehicle, boat or airplane donated to charity is usually limited to the gross proceeds from its sale. This rule applies if the claimed value is more than $500. Form 1098-C, or a similar statement, must be provided to the donor by the organization and attached to the donor’s tax return.
• If the amount of a taxpayer’s deduction for all noncash contributions is over $500, a properly-completed Form 8283 must be submitted with the tax return.

If you have any questions about charitable donations and your taxes, contact a tax professional.

Daniel Stoica Accounting Professional

On November 28, 2011, the IRS announced that interest rates will remain the same beginning Jan. 1, 2012 for the calendar quarter. According to the IRS website, the interest rates will be:

• 3% for overpayments; 2% in the case of a corporation
• 3% for underpayments
• 5% for large corporate underpayments
• 1/2% for the portion of a corporate overpayment that exceeds $10,000

The 3% interest rate also applies to estimated tax underpayments for the first calendar quarter in 2012 as well as the first 15 days in April 2012.

The rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. In the case of a corporation, the underpayment rate generally is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.

The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point. Further, the federal short-term rate that applies during the third month following the taxable year also applies during the first 15 days of the fourth month following the taxable year.

These interest rates are computed from the federal short-term rate during October 2011 to take effect Nov. 1, 2011, based on daily compounding.

Daniel Stoica Accounting Professional

Have you received emails from the “IRS Office of Professional Responsibility”?  If you have, you should know that these emails are most likely part of a “phishing” scheme that tries to get your personal information.  The subject line of this email is “Acquire new EIN” (or some variation) and the email itself instructs the addressee to obtain a new Employer Identification Number (EIN) by clicking on a link and providing personal information.

“Phishing” is a scam that is usually done by sending out unsolicited email to get unsuspecting victims to provide personal and financial information.

You should know that the IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS also does not request personal information through email or ask for PIN numbers, passwords, credit card information or bank information. If you receive an email from someone who claims to be the IRS, do not click on any links provided or respond to these emails.

If you receive a “phishing” email like the one described above, or any other email from someone who claims to be the IRS and asks for personal information, please report it to phishing@irs.gov.

Daniel Stoica Accounting Professional

I shared this video called “May You Be Blessed” last year on Thanksgiving, and I want to share it with you again this year.  Happy Thanksgiving!

“Thanksgiving, after all, is a word of action.” ~W.J. Cameron

Daniel Stoica Accounting Professional

The IRS is launching a new Registered Tax Return Preparer competency test in an effort to improve the tax preparation industry. Oversight of the tax preparation industry is a major initiative of the IRS, and this competency test is part of that initiative.  As of 2010, all paid tax return preparers are required to obtain a Preparer Tax Identification Number (PTIN), and now all preparers who have a valid PTIN will have until 12/31/2013 to pass the competency test.

Once a preparer passes the test and meets other requirements, he or she will be designated as a Registered Tax Return Preparer.  Like other designations, the Registered Preparers will be required to maintain their status by renewing their PTINs annually as well as completing 15 hours of continuing education every year.  Attorneys, Certified Public Accountants and Enrolled Agents will be exempt from these new requirements because they must already meet more rigorous guidelines in order to obtain their professional credentials.

There will be a fee for the competency test: $116.  This fee includes an IRS fee as well as a fee for Prometric Inc., which is a third-party test vendor.  The test covers preparation of Form 1040 and related schedules.  Test scheduling will begin the week of November 28, 2011.

Prometric will eventually administer the test at more than 260 centers nationally, but the test is not available at all locations currently. Test sites will be added daily and international locations may be added in the future.

The IRS estimates that approximately 350,000 people may be initially subject to the Registered Tax Return Preparer test requirement.

Fact Sheet 2011-12 provides additional details about the test, including which preparers are required to take it and how to schedule an appointment.

Daniel Stoica Accounting Professional

Did you know that there is still time take advantage of two home energy credits if you make energy-saving and green-energy home improvements this year?

Homeowners who install energy efficient improvements such as insulation, new windows and furnaces may qualify for the Nonbusiness Energy Property Credit. The credit is more limited than in the past years, but can still provide substantial tax savings.

The rate for the Nonbusiness Energy Property Credit is 10 percent of the cost of qualified energy efficiency improvements, such as energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count.

The credit can also be claimed for the cost of residential energy property, including labor costs for installation. Residential energy property includes certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel.

The Nonbusiness Energy Property Credit has a lifetime limit of $500, of which only $200 may be used for windows. If the total of nonbusiness energy property credits taken in prior years since 2005 is more than $500, the credit may not be claimed in 2011. Qualifying improvements must be made and used in the taxpayer’s principal U.S. residence before January 1, 2012.

The Residential Energy Efficient Property Credit is designed to encourage homeowners to invest in alternative energy equipment.

The credit equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property.  No cap exists on the amount of credit available except for fuel cell property. Generally, labor costs are included when figuring this credit.

Not all energy-efficient improvements qualify for these tax credits, so homeowners should check the manufacturer’s tax credit certification statement before they purchase. Taxpayers can normally rely on this certification statement which can usually be found on the manufacturer’s website or with the product packaging.

Eligible homeowners can claim both of these credits on Form 5695, Residential Energy Credits when they file their 2011 federal income tax return. Because these are credits and not deductions, they reduce the amount of tax owed dollar for dollar. An eligible taxpayer can claim these credits regardless of whether he or she itemizes deductions on Schedule A.

Daniel Stoica Accounting Professional

If you receive tips as part of your employment, you must claim all tip income that you receive.  This includes both the tips that you receive directly from a customer as well as tips that your employer pays to you when a customer makes a credit card payment.

Tip Requirements for Employees

Employees must use Form 4070, Employee’s Report of Tips to Employer, to report tip income. This report is due on the 10th day of the month after the month the tips are received. This statement must be signed by the employee and must show the following:

• Employee’s name, address, and SSN
• Employer’s name and address
• The month or period the report covers
• The total tips received

No report is required from an employee for months when tips are less than $20.

Both Forms 4070 and 4070-A, Employee’s Daily Record of Tips, are included in Publication 1244, Employee’s Daily Record of Tips and Report to Employer.

Daniel Stoica Accounting Professional

Are you closing your business?  If you are, here are some things you’ll need to do in order to stay out of trouble with the IRS.

First, make sure you file the right tax returns for the year in which you close the business. If you have employees, you must also deposit payroll taxes.

You will need to file a different form depending on whether you are a corporation, an ‘S’ corporation, a partnership, or a sole proprietor.  Talk to a tax professional to determine the correct form.

Make sure you report tips if you sell food and/or beverages. Also, you’ll need to mark “final return” in the correct space on the form.

Your employees will still need their W-2s for the year the business closed so they can file individual returns.

If you have an employer identification number (EIN), correspond by mail with the IRS to close the account. The EIN will still belong to the business, so you can use it again later. You should also make sure the business has met all its state and local tax responsibilities.

For more information, including a checklist, go to irs.gov and type the words “closing a business” in the search box.

Daniel Stoica Accounting Professional

Although the upcoming holidays may be the biggest stress you’re thinking about right now, you can greatly reduce your holiday AND tax stress by getting organized and keeping good records.

Here are some tips to get you organized for tax time (and some are good tips for the holiday season as well).

Individual taxpayers should usually keep the following records that support their tax returns for at least three years:

• Bills
• Invoices
• Credit card and other receipts
• Mileage logs
• Canceled, imaged or substitute checks or any other proof of payment
• Any other records to support deductions or credits you claim on your return
• Stocks and other investments
• Individual Retirement Arrangement transactions

Generally speaking, keep records relating to properties until at least three years after you sell or otherwise dispose of the property.

• A home purchase or improvement
• Rental property records

If you are a small business owner, you must keep all your employment tax records for at least four years after the tax becomes due or is paid.  Examples of important documents business owners should keep Include:

• Gross receipts: Cash register tapes, bank deposit slips, receipt books, invoices, credit card charge slips and Forms 1099-MISC
• Proof of purchases: Canceled checks, cash register tape receipts, credit card sales slips and invoices
• Expense documents: Canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips for small cash payments
• Documents to verify your assets: Purchase and sales invoices, real estate closing statements and canceled checks

Daniel Stoica Accounting Professional