College students who apply for all types of loans in order to pay for their education are often forced to apply for un-subsidized Stafford loans due to the high costs of college tuition. These types of loans are available to financially strapped students and students who have been able to prove they are unable to pay for school any other way. Interest on Stafford loans is figured from the first payment and continues until the last payment. The best part of these loans is that a student’s repayments can be put off until after graduation.

Anyone applying for a student loan must also remember that interest accumulates during deferment. Students can opt to make interest payments while in school or wait and begin making payments when they are out of school, but it’s important to remember that they may be at risk of defaulting if they are unable to find work after college. Defaulting on student loans is a lot like defaulting on taxes. If someone files for bankruptcy, student loans, like tax debt, cannot be claimed on bankruptcy filings, which means collections and wage garnishments.

When a borrower doesn’t pay for more than two months, they are considered in default. The lender will contact the borrower to remind them that payments need to be made and, in most cases, will offer deferment options. If a borrower is combative and simply refuses to pay, collection proceeding begin, which will cause wage garnishments, tax refunds taken and credit reports will reflect default. That, alone, will make it impossible to get any type of credit. The worst part, interest continues to accumulate and your loan gets bigger and bigger, making it nearly impossible to pay later on when the borrower may finally be able to being repayment.

When a borrower is in default, the lender is legally able to take 15% of any wages earned each month to repay what is owed. If the borrower holds a professional license, that, too, can be revoked. In extreme cases, the lender will take legal action against the borrower where the borrower is ordered to either begin making payments immediately, or ordered to pay the amount in full. The latter is ordered on rare occasions. This rule applies to all loans, including Stafford loans.

So, what can you do before going into default on a student loan?

Consider carefully all of your options before going into default. If you find that you are just unable to make payments, or are only able to make small payments, you should get in contact with your lenders to make arrangements for deferment or forbearance so you do not end up in default. There is nothing worse than owing money to the government, and many student loan funds come from the government.

Daniel Stoica Accounting Professional

Want to become an advisor to the IRS? The IRS has announced that they are currently looking for applicants for their vacant spots on the Advisory Committee on Tax Exempt and Government Entities (ACT). ACT gives the public the opportunity to discuss major issues in the tax administration.

The current vacancies are as follows:

-Employee Plans – 2 vacancies

-Exempt Organizations – 2 vacancies

-Tax Exempt Bonds – 2 vacancies

-Indian Tribal Governments – 1 vacancy

The Department of the Treasury will announce the newly appointed members, who will all have 2-year terms that will begin in June of 2012.  Applicants must apply no later than December 1^st, 2011.

ACT works with public forums for the IRS and agents who work with employee plans, exempt companies, tax-exempt bonds, and federal, state, local, and Indian tribal governments. ACT lets the IRS get comments regarding policies and procedures on Tax Exempt and Government Entities Division issues.

Applications are accepted by mail or by applying electronically at www.irs.gov. Anyone who wishes to apply must explain their qualifications and they must not be federally registered lobbyists.

Applicants may fill out an application here: http://www.irs.gov/pub/irs-pdf/f12339c.pdf. It should be filled out and sent to: Bobby Zarin, TE/GE Communications and Liaison Director, Internal Revenue Service, 1111 Constitution Ave., NW-SE:T:CL Penn Bldg, Washington, DC 20224. It can also be faxed to 202-283-9956. This is not a toll-free number.

Daniel Stoica Accounting Professional

The IRS is informing professionals and accounting firms that they need to get EFINs (Electronic Filing Identification Numbers) in order to be compliant for the 2012 e-filing requirements (if they haven’t already received an EFIN).

Beginning in January of 2012, paid preparers who will be preparing and filing more than eleven 1040 or 1041 forms must e-file with the IRS. Individuals and businesses who file their own taxes still have the option of filing their returns on paper.

Tax preparers must create an e-services account in order to be an authorized IRS e-filer. They will have to send an EFIN application and pass the necessary tests. The process takes at least 45 days. Individuals and tax firms only need one EFIN.

Next year’s requirements are the second and final part of a law that was created to help e-filing become the main method of tax filing for individuals, trusts and estates. For 2011, the e-filing requirement was meant for paid preparers and tax firms who filed at least 100 tax returns. In 2011, the rate for returns that were sent via e-filing increased by more than 12%.

80% of tax returns are filed online and the IRS has estimated that almost 1 billion tax returns were filed electronically safely and securely since e-filing began in 1990.

Professional tax preparers can see how the process works on www.irs.gov at “Become an Authorized e-file Provider” or by accessing the FAQ section.

If this new requirement causes hardship for preparers, they may request a waiver for one year by sending an 8894 Form (“Preparer e-file Hardship Waiver Request”). If a client asks for a paper return be sent to the IRS, the preparer must send an 8948 Form “Preparer Explanation for Not Filing Electronically” with the tax return. All forms must be kept with the preparers records.

Daniel Stoica Accounting Professional

The IRS has announced that for the 2012 tax year, exemptions and deductions will rise and tax brackets will get larger because of inflation.

The amounts for many provisions that affect each taxpayer has to be amended every year in order to stay in line with inflation. Here are the new amounts that will affect 2012 taxes are:

-Personal and dependent exemptions will be $3,800.

-Standard deductions is $11,900 for joint returns, $5,950 for single and married, filing single and $8,700 for head of household. Most taxpayers take standard deductions rather than itemizing deductions.

-Tax brackets will get larger for every filing status.

Credits, deductions, and related phase outs.

-The earned income tax credit (EITC) for low and moderate income taxpayers will grow to $5,891. It is determined by family size and filing status. The maximum income limit to claim the EITC will now be $50,270.

-Foreign earned income deductions will rise to $95,100.

-Modified adjusted gross income (AGI) will be $104,00 for joint returns and $52,000 for single and head of household returns.

-Annual deductibles for Medical Savings Accounts (MSAs) will rise from last year.

The $2,500 deduction for student loan interest will phase out for joint returns with incomes of $125,000 and will totally phase out at incomes of $155,000, both of which are higher than last years amounts. Single filers will see no change for next year.

Estate and Gift

For estates of those who pass away in 2012, exclusions for estate tax will be $5,120,000 for 2011. For executors who use special valuation, the decrease in property value cannot be more than $1,040,000. The yearly gift exclusion will stay at $13,000.

Other Items

-Monthly limits on transportation benefit exclusions for employer provided parking will increase to $240. This is a temporary increase and limits the value of the transportation benefit exclusion in a commuter vehicle and transit passes that are employer provided. It will go back to $125 in 2012.

-Many other benefits won’t change for 2012. Standard deductions for the blind and seniors will stay at $1,150 for joint returns and $1,450 for single and head of household returns.

More detailed information on inflation adjustments, taxpayers can find Revenue Procedure 2011-52, which will be published in the Internal Revenue Bulletin 2011-45 on November 7^th, 2011.

Daniel Stoica Accounting Professional

The IRS is very strict when it comes to payroll taxes and deductions. One miscalculation could get a business in a lot of trouble with the government. This is why you need to keep accurate records of your business’s payroll and stay informed about payroll tax rules.

The first thing every business needs to do when they hire a new employee is to make sure the employee fills out a W-4. This form calculates payroll taxes based on the employee’s marital status and how many dependents they have. Most states base their payroll taxes on federal guidelines, which helps businesses correctly calculate withholdings for both federal and state taxes.

It is important for businesses to accurately calculate and report payroll taxes. Every employee should be given their own payroll account so these deductions can be paid to state and federal governments at the end of each year.

If you operate a fairly new business and have just begun to hire hourly or salaried employees and need help figuring your payroll taxes, you can speak to a payroll or tax professional for help.

Daniel Stoica Accounting Professional

The IRS recently reported that they have selected four new members and one chairman for the Electronic Tax Administration Advisory Committee (ETAAC).

Organizing and discussing electronic tax administration issues as well as assisting with communication between tax professionals and the IRS via electronic interaction is what the ETAAC does.

David R. Williams, the director of the IRS Return Preparer Office, had this to say, “ETAAC provides the IRS with valuable input regarding the development and implementation of effective electronic tax administration. The IRS is pleased with the continued support of the committee.”

These new members are taking over for the members whose terms have ended. All of the new members have promised to maintained the continuity of the ETAAC. These new members are:

Timothy Blevins, Mayetta, Kansas: Timothy is a consultant with CGI’s Tax, Revenue, and Collections Center of Excellence. Timothy has more than 30 years of experience in the performance, management and improvement efforts of government information technology solutions with the Kansas Department of Revenue: Division of Taxation and Division of Motor Vehicles.

Cyrus Daftary, Newton, Massachusetts: Cyrus is a partner with Burt, Staples & Maner, LLP. His responsibilities include: consulting with multi-national corporations and financial institutions on their compliance in the IRS tax withholding and information return reporting rules, developing and implementing tax software solutions for withholding and information return reporting, and authoring a three series treaty on E-Commerce.

Yasmine (Mimi) Nolan, Kansas City, Missouri: Mimi is the director of Tax Forms Management with H&R Block. She develops tax software, validates tax calculation software, and tests tax law changes for regulatory accuracy. She is responsible for a team that monitors and analyzes changes to the federal and state income tax forms, as well as electronic filing development, tax forms management, and quality assurance in systems development. Nolan is a member of National Association of Computerized Tax Processors.

Timur Taluy, Oxnard, California: Timur is the CEO of FileYourTaxes.com. He is responsible for the development of the user interface, the secure external interface and tax intelligence platform. He also supervises the activity that contributes to the accuracy of the final tax product. He is a member of Council for Electronic Revenue Communication Advancement.

Mark Steber, Sarasota, Florida: Mark will serve as Chairman of ETAAC for the 2011-2012 term. Mark is a CPA and the chief tax officer for Jackson-Hewitt Tax Service. He has more than 25 years of experience in the tax industry and is responsible for the overall tax service delivery compliance. He is a member of the American Institute of Certified Public Accountants.

The ETAAC sends reports to Congress regarding the progress of IRS electronic tax enterprises every June. The ETAAC began in 1998 by the IRS Electronic Tax Administration. The IRS was required to set up the ETAAC because of the IRS Restructuring and Reform Act of 1998.

Daniel Stoica Accounting Professional

Time and circumstances seem to change on a daily basis. Once upon a time, the majority of marriages lasted a lifetime. Today, however, the chances of a lasting marriage are less than 50%. Because of that, the changes in taxes are important to note.

As we all know, divorce isn’t pretty. Parents fight, children rebel, and the long process of divorce takes its toll on everyone involved, not to mention the cost. Just because your divorce is final doesn’t mean you still don’t have issues. It’s now time to deal with taxes. When you understand how your taxes change, it makes the divorce process a little easier.

Alimony can be an issue in divorce. Alimony is payments made by one party to the other to maintain the lifestyle they have become accustomed to. Every state regards alimony differently, but the premise is the same. The IRS has strict rules regarding alimony that all taxpayers need to know.

The IRS does tax alimony payments that are received. The payer gets the better deal. They get a deduction on alimony payments they pay. It only applies, however, when alimony payments are granted in the divorce decree. If there is nothing about alimony written in the decree, the payments are not taxed, nor are they deductible.

In the case of child support, the IRS would rather avoid the subject matter altogether. Therefore, child support is neither taxable nor deductible.  However, if you don’t pay your child support as required by the court, they will take it from any refunds you may be entitled to. That is the only involvement the IRS has.

The IRS doesn’t care that you’re contemplating divorce, in the middle of divorce, or legally divorced, so it’s up to you, the taxpayer, to make sure you completely understand all of the tax issues.

Daniel Stoica Accounting Professional

In order to collect on back taxes, the IRS hires third party debt collectors. In the past, debt collection companies that were hired by the IRS were notorious for not following the law when collecting back taxes. Taxpayer rights had been violated with threats of judgments, liens and jail time.

The IRS still uses collection agencies to collect back taxes, but these days, debt collection companies are more strictly monitored. Notices that are sent to taxpayers who owe money detail the entire process of collection and what the IRS can and can’t do in order to collect on the debt. The notice also states that debt collectors legally cannot threaten taxpayers with judgments, tax liens or jail time. The worst thing they can do is call taxpayers regularly to remind them of the debt, as well as send letters demanding payment.

It is imperative that you contact the IRS immediately to discuss payment options before your bill ends up in collections. If you have already been contacted by an IRS hired collection agency, and they have harassed or threatened you, you should call the taxpayer advocate office right away. If you are concerned about your rights in the collection process, you can also seek the advice of a tax professional or even a tax attorney. You have the right to legal representation.

Daniel Stoica Accounting Professional

Maintaining a small business accounting system can be daunting for small business owners. Meticulous records must be kept at all times, which is a task that many businesses owners lack knowledge or experience in.

Most business owners like to keep their records themselves, but without the proper training in accounting, it could end up hurting their business; that’s why hiring a professional will save money in the long run.

There are four types of professionals that can help a small business owner with their accounting needs.

Bookkeeper

A bookkeeper is a professional who takes care of everyday accounting. These professionals handle the daily accounts payable and accounts receivable, as well as manage the general ledger and prepare tax records.

Accountant

A Certified Public Accountant, or CPA, has a certification in accounting and can handle daily bookkeeping along with more complicated tax issues. CPAs generally take financial information about the company they work for and give advice on financial planning and steps to help the business grow financially.

Controller

A controller is the auditor and general accountant, usually in larger corporations, who is responsible for the accounting activities of the company. They are often authorized to make decisions about the company’s finances and investments.

Chief Financial Officer

A chief financial officer, or CFO, is an executive in a large corporation who manages every aspect of the corporation’s finances. They oversee financial planning and report company finances to the CEO and president of the corporation.

Daniel Stoica Accounting Professional

The current health care reform was designed to give tax credits to small businesses. These credits are benefits for small employers who would like to offer health insurance to their employees. Many employers see this credit as a bonus and say they will use the money they save on health insurance for investment in their businesses and, possibly, employee raises.

Other businesses feel the credits will not help their companies that much because the credit is short-term; only six years. Many employers plan for the long-term with respect to their employees, so some feel that the short amount of time the credit is in place won’t be helpful to them.

Critics claim there isn’t enough of a benefit in affording health insurance to their employees. There are specific levels to this credit. On the higher end, companies with 10 or fewer full-time employees will get a 50% credit on the cost of coverage. Part-time employees will receive a prorated amount based on how many hours they work. Their wages must be less than $25,000, which is a difficult salary to live on without having to pay health care premiums.

Businesses with wages of $50,000 and at least 25 employees will be allowed a partial tax credit. Larger companies will not get any credit on their taxes.

The National Federation of Independent Business Owners and the U.S. Chamber of Commerce don’t believe these tax credits will help them to easily afford group health insurance for their employees. The U.S. Chamber of Commerce opposed the health care reform bill in Congress.

If a small employer qualifies for the credit and is able to pay half of the premiums, they are eligible to take the credit on next year’s taxes. It will be part of the general business credit.

What are your thoughts about the Small Employer Health Insurance Tax Credit?

Daniel Stoica Accounting Professional