Are you a small business owner or are you self-employed?  If you are, you probably have questions about taxes for your particular situation.  You can check out the IRS’s Small Business and Self-Employed Tax Center on the IRS website.

The IRS’s one-stop shop offers a variety of resources and online tools to help small businesses and self-employed individuals by providing resources such as:

• A-Z Index for Business, a fast way to find information
• Small business forms and publications
• Online applications for an Employer Identification Number
• Employment tax information – federal income tax, Social Security and Medicare taxes, FUTA and self-employment tax
• Tax-related news that could affect your business
• Small business educational events
• IRS videos for small businesses

Did you know that there is also a Tax Calendar for Small Business Taxpayers?  The Tax Calendar for Small Businesses and Self-Employed – Publication 1518 – is available online or as a printable PDF file. This 12-month calendar containts information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, and common tax filing dates. Each page highlights different tax issues and tips that may be relevant to small-business owners, with room on each month to add notes, state tax dates or business appointments.  You can also download the tax events into your calendar or subscribe to the tax calendar events.  The calendar provides the small business owner with a ready resource for meeting their tax obligations.

If you have other questions about your tax obligations, you might want to contact a tax professional.

Daniel Stoica Accounting Professional

If the IRS has made a determination concerning a tax issue, as a taxpayer you may turn to Appeals if you do not agree with their determination. Appeals provides taxpayers an opportunity to discuss disagreements they may have concerning the application of tax law, and the mission of Appeals is to settle tax disagreements in a fair and impartial basis and also avoid going to the Courts and a formal trial.

The following information will help you determine if you qualify to speak with Appeals:

-If you received an IRS correspondence explaining you have the right to come to Appeals to dispute an IRS decision.
AND
-You do not agree and are not signing an agreement form sent to you.

If the above are true, then you may be ready to request an Appeals conference or hearing. This page explains how to request an appeals conference or hearing.

Appeals is not applicable to you if:

-You cannot afford to pay the amount you owe and agree that you owe the amount
-The correspondence you received from the IRS was a bill and there was no mention of Appeals.

If you cannot identify the requirements, or if you do not meet the conditions for coming to Appeals as explained above, contact the person in the IRS you are working with or Customer Service for assistance at 1 (800) 829-1040.

These online videos can also help you understand what to what to expect of the Appeals process.

Daniel Stoica Accounting Professional

Lawyers who specialize in tax law and handle legal and technical tax law issues are also called tax attorneys.

The following are reasons why you would probably want to work with a tax attorney:

• You are being investigated by the IRS for criminal activity
• You have claimed false deductions and credits (tax fraud) and need representation
• You have a case pending before the US Tax Court and want your case reviewed by an independent party
• You are planning to sue the IRS
• You have a taxable estate and you need help with estate planning strategies or an estate tax return
• You are starting a business and want legal advice about your company’s structure and tax treatment
• Your business deals internationally and you want legal advice about contracts or other legal matters

A good tax attorney should have advanced training in tax law.  Many also have degrees in taxation and even accounting.

If you have a legal tax issue but do not have the means to pay for a tax attorney, you can also check out free or low-cost tax clinics.  A complete list of tax clinics is available from the IRS.  More information about tax clinics is available on this post as well.

Daniel Stoica Accounting Professional

When you owe money to the IRS and they feel that they have run out of options on collecting the money that you owe, they will deduct money from your paychecks until your debt has been paid.  The IRS uses this tax collection method (also called a wage levy) after sending multiple letters and notices that taxes are owed.  Wage garnishments can cause great hardship to those whose paychecks are being reduced by the IRS.

It is always best to work with the IRS if you are notified that you owe back taxes.  Do not ignore their notices.  Although they attempt to leave you with enough money to pay your bills, this does not always happen.  The IRS can actually garnish close to 80% of your wages until your debt has been paid.

The IRS can garnish salaries, bonuses, wages, commissions, pension earnings, retirement money and properties.  They are required to send you a final notice of their intent to garnish your wages as well as details about your right to have a hearing at least 30 days before they will begin to garnish your wages or seize property.

Of course, you can avoid a wage garnishment by filing and paying your taxes every year.  If you cannot afford to pay the IRS, you must stay in contact with them to arrange a payment agreement.  If you have questions or get into trouble with the IRS, it’s a good idea to work with a tax professional right away.  Tax professionals can help you make sense of IRS notices as well as negotiate with the IRS on your behalf.

Daniel Stoica Accounting Professional

Today’s post is by Michael Rozbruch, Founder and CEO of Tax Resolution Services, Co. (@TaxResolution)- This is an update to the post since the IRS extended the deadline.

The second (and likely the last) IRS amnesty program for Foreign Bank Account Report (FBAR) violators has been extended to September 9, 2011 (from August 31, 2011) due to Hurricane Irene. Compliance with FBAR regulations is a serious matter and not to be taken lightly. The strict requirements of the Foreign Bank Account Report (FBAR) must be adhered to by Americans with offshore accounts since foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. If you have undeclared funds in foreign bank accounts, this is an opportunity for you to minimize severe tax penalties and/or chances of criminal prosecution.

The 2009 Offshore Voluntary Disclosure Program resulted in more than 14,700 Americans with secret offshore accounts coming forward and taking the IRS up on their offer of tax amnesty for voluntary disclosure. In doing so, they avoided criminal prosecution if they paid FBAR back taxes, interest and reduced civil penalties. According to the IRS, the 2009 FBAR amnesty program generated “billions of dollars” in new revenue from back taxes. With global banks under more pressure than ever to disclose U.S. accounts, those people with their accounts offshore are strongly encouraged to report and settle taxes due before the 2011 amnesty deadline expires.

All offshore reporting activity is being managed through the IRS’s Criminal Investigation Division (CID). The Foreign Bank Account Reporting (FBAR) penalties for not filing and meeting the amnesty guidelines are severe:
• FBAR penalties can exceed 100% of the value of the asset, plus tax penalties and interest.
• If CID makes a referral to the U.S. Department of Justice for felony indictment, the criminal sanctions can be as much as up to 5 years in prison.

Navigating the complex waters of offshore account reporting can be overwhelming. Mistakes are very costly if taxpayers don’t know how to report correctly. FBAR compliance is a serious matter, and global banks are getting more pressure than ever to disclose U.S. accounts, so this is the time to get these matters settled – but I strongly suggest that you do this with help from experts. You can’t afford to not take advantage of the second amnesty program offered by the IRS. Having expert tax professionals on your side when reporting offshore bank accounts is a small investment that can make a big difference financially, emotionally and legally.

To learn more, follow these resources:

• FBAR and Offshore Account Disclosure

• FBAR Amnesty & The Offshore Voluntary Disclosure Initiative (OVDI)on Cafe Tax

• Offshore Tax Settlements on Tax Resolution University

About the author: Michael Rozbruch is a recognized tax expert and the Founder and CEO of Tax Resolution Services, Co. To learn more visit, www.taxresolution.com

The Department of Treasury and the IRS announced the implementation of the requirements for the Foreign Account Tax Compliance Act (FATCA). This new law is for the non-compliance of U.S. taxpayers with foreign accounts. Financial institutions in foreign countries and United States holding agents will be given enough time to get documentation together in order to be compliant with the new law.

The implementation of FATCA will aid in U.S. efforts to fight for compliance with offshore account holders. The IRS is fully aware that taking action on this is huge for all financial institutions. It reflects how serious the IRS and the Treasury Department is about enforcing this law, but they also understand how challenging it will be for the financial institutions that are affected. They will need to adjust how they do business to make compliance as easy as possible for everyone.

As part of the Hiring Incentives to Restore Employment (HIRE), the FACTA was made into law in 2010. It required all FFIs (foreign financial institutions) to report all information about their accounts held by U.S. taxpayers to the IRS. The FFIs that participate will enter into an agreement with the IRS to:

-Identify all U.S. taxpayer accounts,

-Report information to the IRS regarding U.S. accounts, and

-Withhold a 30% tax on payments to non-participating FFIs and account holders who are unwilling to provide the required information.

Should an FFI not enter into this agreement, they will have to withhold some payments such as U.S. interest and dividends, gross proceeds from U.S. taxpayer deposits on securities, and all pass-thru payments.

IRS Notice 2011-53. The IRS and the Treasury will provide a feasible time frame for FFIs and U.S. agents to put into action the requirements of the FATCA. The FATCA notices specifies the following:

-An FFI must enter into an agreement with the IRS by June 30th, 2013, to make sure it is identified as a participating FFI in enough time to let withholding agents stop withholding beginning on January 1st, 2014.

-Withholding on U.S. source dividends and interest paid to non-participating FFIs will begin on Jan. 1st, 2014, and withholding on all allowed payments will be fully in place on Jan. 1st, 2015.

-Requirements for identifying new and pre-existing U.S. accounts will begin in 2013. Reporting requirements will begin in 2014.

-High risk accounts include private banking accounts with a balance that is equal to or greater than $500,000.

The IRS and the Department of Treasury are working with businesses and foreign government to make sure the FATCA is effective.

If you have any questions about the FATCA, please contact a tax professional.   

Daniel Stoica Accounting Professional

The Internal Revenue Service has announced that a voluntary disclosure initiative has been implemented that is designed to bring money that is held offshore back to the U.S., which will assist people with income in hidden offshore accounts to become current with their taxes. The disclosure initiative is voluntary and will be available through Aug. 31st of this year.  Individuals with hidden off-shore accounts would be wise to consult with a tax professional in order to get the best information and comply with the regulations. 

IRS Commissioner Doug Shulman says, “As we continue to gather more information and follow more people internationally, the risk to individuals hiding assets offshore increases.” He goes on to say, “This new effort gives people who are hiding money in foreign accounts a tough, fair way to resolve their tax problems. It also gives them a chance to come in before we find them.”

The IRS has decided to open another initiative which follows taxpayers with foreign accounts. The first disclosure program closed with 15,000 individuals sending voluntary disclosures on Oct. 15, 2009. Since then, over 3,000 taxpayers have come forward with bank account information from around the world. They are now eligible to take advantage of the provisions of this new initiative.

The goal here is to get this money back in the U.S.  For the IRS, fighting international tax evasion is a top priority. According to the IRS, there are many more banks under review. The situation is said to get worse for taxpayers who are hiding their assets and income in offshore banks. This new disclosure initiative is their best chance for them to get back into the system.

The new initiative, called the 2011 Offshore Voluntary Disclosure Initiative,  includes many revisions from the 2009 Initiative. The penalty is higher now, which means that people who did not come forward in 2009 won’t be rewarded for coming forward now. The 2011 initiative does have new features, though.

There is a new structure which requires taxpayers to pay a penalty of 25% of the amount in those foreign bank accounts. A few of those taxpayers may be eligible for 5% or 12.5% penalty. Those who comply with the voluntary initiative must also pay back-taxes, and interest, for eight years. They will also be required to pay accuracy-related and/or delinquency penalties.

Taxpayers who participate in this voluntary initiative will have to file all original and amended tax returns. They will also have to include their payments for taxes owed and other penalties by the Aug. 31 deadline.

The IRS also states that they will be making additional modifications to the 2011 disclosure initiative.

Participants will be faced with a 25% penalty, but taxpayers who qualify for limited situations will receive a 5% penalty.

The IRS appointed a new penalty class of 12.5% for smaller offshore accounts. Those with offshore accounts or assets below $75,000 qualify for this lower rate.

The 2011 initiative gives benefits taxpayers which should encourage them to come in now instead of waiting for the IRS to find them. Taxpayers who currently have offshore assets who don’t come forward will face much bigger penalties and the possibility of criminal charges.

Doug Shulman stated that this initiative is fair. It allows people with offshore accounts to come forward so they can “get right” with the IRS. The initiative gives them the opportunity to receive accurate information about how their case will be handled by the IRS. Those taxpayers who do come in on their own accord will also avoid criminal prosecution.

The IRS is taking care of these voluntary disclosures in central areas of the United States to be more efficient in the processing of the applications.

The IRS recently launched a section on irs.gov that includes the terms and conditions of the 2011 Offshore Voluntary Disclosure Initiative. It also includes a set of questions and answers to assist taxpayers and tax professionals alike. The IRS web site also has a detailed section where people can make their voluntary disclosure.

In the 2009 voluntary disclosure program, taxpayers were looking at a 20%  penalty that covered a six-year period. Approximately 15,000 taxpayers presented the IRS with voluntary disclosures in an effort to avoid the high penalties. These disclosures covered banks in over 60 countries.

Shulman said this international effort will increasingly continue as the year goes on.

Secrecy in taxes continues to fall apart. The IRS is not giving up on these international issues. For those taxpayers who are hiding cash or assets offshore, the IRS advises that they come forward now because their risk of being caught is becoming greater.

Daniel Stoica Accounting Professional

With the NBA play-offs well under way, there are probably thousands of basketball fans out there who have bet money on the winning teams. But do you know that the money you win has to be claimed on your 2011 taxes?  It does, and your tax professional can help you with the details. 

Most everyone enjoys gambling, whether it be at a casino, a horse race, or joining the sports pool at work. The problem is that most people don’t understand how the winnings affect their tax return. Here are a couple of examples.

 Twenty-five years ago, someone on Social Security could  go to Las Vegas and win $50,000. And because they were on Social Security, they had not been required to file a tax return for many years. Because gambling winnings are considered added income, that senior citizen ended up having to pay taxes on their social security income, which they normally wouldn’t have had to do.

Another example is that of someone who likes to do a little gambling at the local casino after work. Over the course of the year, they win $250,000, but over the course of that same year, they end up spending more than what they had won. When tax time comes around, they don’t understand why they owe so much in taxes when they had spent more than they had won.

Your winnings from gambling are taxed  a little differently than your earned income. These winnings are part of your adjusted gross income. Schedule A is where the amount you have spent is deducted. The IRS will limit what can be deducted if your adjusted gross income is too high; this also includes medical expenses, college tuition credits, child tax credits, and exemptions. The IRS records these deductions before gambling losses are ever deducted. This means that even if you only break even with your winnings, you will still lose your tax deductions, which will cost you more money.

 IRS Tax Topic 419 – Gambling Income and Losses

The following rules apply to casual gamblers. Gambling winning must be reported on your tax return and are fully taxable. You must file Form 1040 and include all of your winnings, including, but is limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525 Taxable and Non-taxable Income.

A payer is required to issue you a Form W-2G if you receive certain gambling winnings or if you have any gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported on your Form 1040, including winnings that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505 Tax Withholding and Estimated Tax.

You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A, as a miscellaneous itemized deduction that is not subject to the 2% limit.

It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to Miscellaneous Deductions for more information.

The National Disaster Relief Act of 2008 provides tax relief for victims of federally declared disasters.  Before the passage of the National Disaster Relief Act, Congress gave tax benefits for taxpayers affected by a disaster that were specific to that particular disaster.  The National Disaster Relief Act provides tax benefits that can be used by those who are affected by a federally declared disaster. It replaces the way the government provides benefits for disaster victims in the weeks or months following the disaster.  If you have been affected by a federally declared disaster, speak with a tax professional about your options. 

Major parts of the National Disaster Relief Act are listed below:

Losses Due to Federally Declared Disasters
Section 706 of the National Disaster Relief Act gives relief to taxpayers whose personal-use property was damaged or destroyed by a casualty in a federally declared disaster area.

The new law removes the 10% of adjusted gross income limitation for net disaster losses and lets individuals claim the net disaster losses even if they do not itemize their deductions.

To qualify, the loss must be due to a federally declared disaster and happen in an area determined by the President to warrant federal assistance. Information on disaster declarations and the areas they include can be found at the Federal Emergency Management Agency (FEMA) Web site.

Disbursement of Qualified Disaster Expenses
Section 707 of the National Disaster Relief Act allows taxpayers to deduct qualified disaster expenses. Qualified disaster expenses are expenses paid within a business or with business-related property that would be capitalized and that are:
-For the reprieve or control of hazardous substances that were released because of a federally declared disaster;
-Debris removal of structures on real property damaged or destroyed by a federally declared disaster; or
-For the repair of business property damaged by a federally declared disaster.

A federally declared disaster is any disaster determined by the President to need help by the federal government under the Stafford Act.

Net Operating Losses Attributable to Federally Declared Disasters
A net operating loss is held back two years and carried forward 20 years. Section 708 of the National Disaster
Relief Act lets taxpayers hold back a disaster loss for 5 years. A qualified disaster loss is the taxpayer’s net operating loss for the taxable year or the sum of the following:
-The taxpayer’s losses allowable for the tax year due to a federally declared disaster in a disaster area; and
-The taxpayer’s deduction in the tax year for qualified disaster expenses.

Special Depreciation Allowance for Qualified Disaster Property
Section 710 of the National Disaster Relief Act gives a 50% depreciation allowance for purchases of disaster assistance property. It lets taxpayers take 50% off of the cost of qualified disaster assistance property plus the normal depreciation allowance.

To qualify for the depreciation allowance, at least 80% of the use of the property must be in the disaster area and be business property used by the taxpayer in the disaster area. The property owner must also fix any property damage, or replace the property.

Increased Expensing for Qualified Disaster Assistance Property
A taxpayer may choose to “expense up” to a certain amount or dollar limit if the property is placed in service during the tax year. This limit is reduced, but not below zero, if the cost of of the property placed in service during that year passes a certain amount, or reduced dollar limit.

Daniel Stoica Accounting Professional

You might be impacted by the Affordable Care Act tax provisions, whether you are a small business owner or an individual.

President Obama signed The Affordable Care Act into law on March 23, 2010. The goal of the health reform is to guarantee that all Americans have access to affordable health insurance. The law will affect nearly every American, including those who are on government run health insurance, people who pay for their own insurance, small businesses, seniors on or eligible for Medicare, and large employers who offer medical coverage.

The Affordable Care Act contains several tax provisions that will begin as different areas of the health reform legislation are put into action. Action on the health reform law is the duty of the Department of Health and Human Services. The purchase of health insurance is included in many worker’s jobs and tax-related benefits. Almost all of the new regulations involve the involvement of the Department of Labor and the IRS.

Below is a list of some of the tax-related effects of the Affordable Care Act that have been decided. For the complete list, please visit www.irs.gov.

Employer-Provided Health Coverage is not taxable
Starting in the 2011 tax year, the Affordable Care Act requires your employer to report your health insurance coverage on your W-2. This is only for your information. It is there to let you know the value of your health care benefits. The amount doesn’t affect your tax liability because the cost of your employer’s contribution will not be included in your income and is not taxable.

Small Business Health Care Tax Credit
If you own a small business, this credit will help you to afford coverage of your employees. It is for businesses with low to moderate income workers. The credit encourages small business employers to offer health insurance coverage for the first time or keep coverage it may already have. The credit is available to small business employers that pay at least half the cost of coverage for their employees.

To qualify for the small business tax credit you must meet the following eligibility rules:
-Provide health care coverage: You must cover the cost of at least 50% of health care coverage for some of your workers based on the single rate.
-Company size: You must have fewer than 25 full time employees. An employer with fewer than 50 part time employees may be eligible.
-Average annual wage: You must pay an average annual wage of less than $50,000.

If you are eligible, the credit is worth up to 35% of your premium costs. This rate increases to 50% (35% for tax-exempt employers) on January 1, 2014. The credit decreases slowly for companies with average wages between $25,000 and $50,000, and for companies with 10 to 25 full time employees.

Health Coverage for Older Children
Health care coverage for your children under the age of 27 is now tax-free. It applies to a variety of work place and retiree health plans. This change became effective in September of 2010 and allows employers with cafeteria plans to allow employees to make pre-tax contributions to pay for this benefit. This tax benefit also applies to people who are self-employed to also qualify for the self employed health insurance deduction on their federal income tax return.

If you are uncertain about any details of the Affordable Care Act tax, it is a good idea to talk to a tax professional. He or she can assist you in determining which one will bring the most tax benefits for you.

Daniel Stoica Accounting Professional