Are you missing a tax refund? This video from the Internal Revenue Service explains how you can find out if you are owed a refund and how to get a missing refund.

Daniel Stoica Accounting Professional

The Internal Revenue Service is reminding taxpayers whose tax-filing extensions run out on October 17, 2011 to double-check their returns for expanded individual and business tax benefits.  In addition, they can file their returns electronically using IRS e-file or the Free File system.

There were 10.1 million taxpayers who requested an automatic six-month extension this year, and even at this late date, many have yet to file. IRS e-file is fast and secure and is a good option for those rushing to meet the Oct. 17 deadline that is looming for people who requested extensions, or the special Oct. 31 deadline that applies to many taxpayers affected by recent natural disasters.

Most taxpayers qualify for e-file whether or not they prepare their returns themselves or use a paid preparer.  Also, those taxpayers with incomes at or below $58,000 can file their returns for free using the Free File link on IRS.gov.

Taxpayers who file electronically can also e-pay by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers.

Paper and electronic filers who cannot pay what they owe may be able to set up a payment agreement with the IRS in a few minutes. Search for the Online Payment Agreement section on IRS.gov for more information.

Daniel Stoica Accounting Professional

If you have a smartphone, you now have another way to connect with the IRS. The Internal Revenue Service is now utilizing social media and other methods in order to give you the most up-to-date information regarding your taxes.

1. IRS2Go: The IRS recently launched this application that allows taxpayers to access IRS services on their phones. It gives refund statuses and other tax updates. The IRS2Go app is available on iPhone, iTouch and Android phones.
2. YouTube: The IRS has their own channel on YouTube which provides informative videos regarding several different tax topics. The videos can be played in English, American Sign Language and several other languages.
3. Twitter: The IRS is on Twitter and they tweet about tax announcements, tax news for professionals and updates for those looking for a job. You can follow their tweets at @IRSnews.
4. Audio files for Podcasts: The IRS provides tax information on audio podcasts. They are available via iTunes or the Multimedia Center on www.irs.gov. On the IRS website, transcripts of the podcasts are available.
5. Widgets: Widgets can be placed on websites, blogs, social media sites, or can send others to www.irs.gov for tax information. It is the newest IRS feature in regards to tax initiatives and IRS programs. They can be found on Marketing Express, which lets IRS partners and tax preparers communicate with the IRS.

The IRS uses these social media platforms to provide information to taxpayers. Confidential information should not be shared on any of these sites. The IRS cannot assist taxpayers with any questions on any of these sites. For questions and further information, visit the IRS website.

For links to IRS media sites, visit www.irs.gov and click on “IRS New Media”.

 Daniel Stoica Accounting Professional

When someone in the Armed Forces dies in combat from wounds, injury or disease, his or her tax liability is forgiven by the Internal Revenue Service.

It is granted for the year of death and the previous tax year that ended before the soldier began their service in active duty in a combat zone. The same applies to unpaid taxes for the years ending before they began their tour. If the spouse pays any taxes due after the time of death, the IRS will issue a refund.

If a soldier died outside of a combat zone, but was in a support position, the forgiveness rules also apply.

If a member of the military dies from wounds or injuries that occurred due to terrorist or foreign military action, their tax liability is also forgiven.

How to claim the forgiveness or refund.

A 1040X form is used to claim a refund.

Once the tax liability is forgiven, the deceased military person’s representative must do the following:

-File a 1040 form if a return has not yet been filed. A 1040X should be filed if the return has been filed. The 1040X must be filed for each year that is requesting a forgiveness. A description on the line for “total tax” should be placed on the return.

-An attachment showing total tax liability of the deceased must be provided before a forgiveness can be granted. The Department of Defense or Department of State will provide the representative with a certification. It must be attached to the request. A 1310 form should be attached as well. This form is a statement from the person who is claiming the refund on behalf of the deceased military member.

-If there is not enough tax information to file a claim, but the certification is received, the representative will need to file a 1040X form as well as a 1310 form. There is a filing deadline for these claims. The time frame is three years from the date of filing or two years from the tax payment, whichever date is later.

All returns and claims must be filed and one of these addresses:

For U.S. postal service: Internal Revenue Service, PO box 4053, Woburn, MA 01888.

For a private delivery service: Internal Revenue Service, stop 661, Andover, MA 05501

Please consult with a tax or accounting professional if you have any questions about this information.

Daniel Stoica Accounting Professional

The IRS announced that it will be sending letters to nearly 100,000 tax preparers who prepared returns this year, but didn’t follow the new PTIN (Preparer Tax Identification Number) rules. This part of the Internal Revenue Service’s oversight program of the tax preparer industry.

The IRS began an initiative to decrease the oversights of tax preparers who didn’t follow guidelines in 2010. The also began to regulate the conduct of those tax preparers. All preparers are now required to get a Preparer Tax Identification Number, or PTIN and, when preparing taxes, they must sign and include their PTINs on all tax returns refund requests they are paid to prepare.

Beginning July 7^th, 2011, the Internal Revenue Service started sending letters to preparers to preparers who had outdated PTINs or who used their Social Security numbers on the returns they prepared. This letter explained the IRS oversight program and explained how to register for a PTIN or renew an outdated one, and where to get help.

Many tax preparers have been in compliance, but some simply did not get the PTIN, so the letter from the IRS assisted them with getting in compliance. The IRS believes that everyone who is paid to prepare federal tax returns should be on the same page.

The IRS began the new PTIN registration program in the fall of 2010. Nearly 712,000 tax preparers have registered or renewed their PTINs since then. If they are not CPAs, attorneys, or Enrolled Agents, they must follow other requirements and pass a competency test and preparer suitability check. They will also be required to complete no less than 15 hours of continued education credits every year, beginning in 2010. 

The IRS is aware that some preparers might try to get out of this oversight program by not signing the returns they prepare, so taxpayers should hire a preparer who will sign their returns and add their PTINs.

The IRS’s attempts to find these “ghost preparers” will be to send letters to taxpayers who had their returns professionally prepared, but the preparer neglected to sign the tax return. The letter will let taxpayers know how to file a complaint against the preparer and will tell them how to find a preparer who is in compliance. This tactic is an effort to protect taxpayers from preparers who refuse to follow the law by being registered with the IRS.

Being in compliance is the major focus of the new program and the letter from the IRS is a step closer to getting preparers registered with new or renewed PTINs and follow the regulations. The IRS also says it will do its best to find the non-compliant preparers and meet with them face-to-face over the next two years.

Daniel Stoica Accounting Professional

Most working parents still have to work during the summer, even when their children are out of school. Because of this, there are extra expenses for child care if you have a child 13 years of age or younger. These expenses add up, but there is now a tax credit for parents who send their children to summer day camp.

 The Internal Revenue Service recently announced that expenses for summer day camp for your child could give you tax credits on your federal tax return.

Dianne Besunder, media relations spokesperson for the IRS said, “If you pay someone to care for your child, spouse, or dependent, you can claim the Child and Dependent Care Credit on your federal income tax return.”

People who are working, or looking for work, need to have child care while they do so. Day care and summer day camp qualify for this tax credit, which can be up to 35% of your expenses, depending on your income.

There are 9 qualifying factors that allow you to claim the Child and Dependent Care Credit.

1. Care must have been given to at least one qualifying person. This would be your dependent child who is 13 years old or younger, a spouse and anyone else who is physically or mentally disabled whom you care for. You must list each person on your tax return.
2. Care must be given so you, or your spouse, can work, or look for work.
3. You, or your spouse, must have earned income from wages, salary, tips, or earnings from self-employment. If you, or your spouse, were a full-time student, or care for a disabled person, you may qualify as having earned income.
4. You may not pay your spouse or other dependent, for the care. Your child may not be 19 years old or older at the end of the year, even if they are not your dependent. The care-giver must be identified on your tax return.
5. You must file as single, married filing jointly, head of household, or qualifying widow(er) with a dependent child.
6. The qualifying person must have lived with you for at least six months out of the year. The only exceptions are birth or death of the qualifying person, or if the child is of separated or divorced parents.
7. For the 2011 tax year, you are allowed up to $3000 of your expenses for the year for one dependent and $6000 for two or more dependents.
8. The expenses must be reduced by the amount of dependent care benefits that are provided by your employer which are deducted or left out of your income.
9. If you pay someone to care for your dependent in your home, you may have to withhold social security and Medicare tax, and also pay federal unemployment tax. Publication 926, Household Employer’s Tax Guide, explains this in detail.

Use the 2441 Form, Child and Dependent Care Expenses, to figure you credits, and send it in with your tax return.

Daniel Stoica Accounting Professional

Recently, the Internal Revenue Service declared that the 2011 Spring issue of the Statistics of Income Bulletin is available. The issue features information on high-income tax returns that were filed for the 2008 tax year.

More than 4.3 million returns were filed by taxpayers with adjusted gross incomes of $200,000 or more for the 2008 tax year. That equals 3% of all returns filed for 2008.

The Statistics of Income Division of the IRS announces the bulletin every quarter. The articles in the bulletin give the most recent figures available from several different tax returns that are filed by U.S. taxpayers. This quarter’s issue of the bulletin includes articles on the following:

-Individual income tax figures, sorted by the age of the taxpayer. For the 2007 tax year, individual taxpayers filed nearly 143 million returns. 27.1 of those were filed by those between the ages of 35 and 44. Those were the most returns filed by any age group that year.
-Individual income tax data, according to the state. Individual taxpayers from the state of Connecticut claimed the highest adjusted gross income, on average, in the United States for the 2007 tax year. Connecticut was the only state where the average adjusted gross income was more than $90,000.
-Foreign recipients of United States Income. For the 2008 tax year, U.S. income payments to foreign workers totalled $659.7 billion. Eight countries, including the United Kingdom, Cayman Islands, Germany, Japan, Switzerland, Canada, France, and the Netherlands, accounted for nearly 67% of all income paid to foreign people.
-International boycott reports. For the 2008 tax year, 138 United States entities got almost 3,700 requests to participate in boycotts that were unsanctioned by the U.S.
-Gift tax returns. Individuals filed about 235,000 federal gift tax returns with over $40.2 billion in assets that were transferred during 2008.

The Statistics of Income Bulletin is available for download at irs.gov/taxstats. You can find printed copies at the office of the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The cost of an annual subscription is $53, and single issues cost $39.

For more information about these figures, you can write to the Director, Statistics of Income (SOI) Division, RAS:S, Internal Revenue Service, P.O. Box 2608, Washington, DC 20013-2608.

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

More than half of the people who filed their taxes got refunds this year, a little more than usual, but the amount of those refunds has surged over the last ten years. Many Americans have overpaid on their taxes throughout the year to get a larger refund at tax time.

Last year’s refunds averaged over $3,000, and this year’s average is not far behind, according to the Internal Revenue Service. This is nearly twice as much as the $1,700 average from 1999.

Current tax data from the IRS shows the growth in refunds hasn’t been limited to any one income level. People who suffered job or investment losses during the recession overpaid inadvertently, giving them bigger refunds.  The past decade also brought short-lived tax benefits where many taxpayers may not have adjusted their withholdings. A few examples include: the American Opportunity Education Credit; the Home-Buyer Credits; and the Expanded Child Credit.

Tax professionals and other financial advisors often frown on large tax refunds because they add up to interest-free loans to the government, thereby reducing investment capital in the same amounts. Many advise that it’s better to have the money in hand every month and invest it, spend it or just let it earn interest.  To many Americans, thought, a $3,000 check looks a lot better than $3,000 coming out of their paychecks over the year.

If your refund seems too big or too small, fixing it usually means making changes to your W-4. It’s the form your employer uses to figure withholdings on your paycheck. Amending it involves three worksheets and two tables, which is sometimes overwhelming to the average person.

The W-4 can be a headache even for people familiar with the 1040. A withholding allowance isn’t the same thing as an exemption. It’s intimidating for even the most seasoned taxpayers. If you aren’t comfortable filling out your own W-4, don’t try. It’s better to hire a tax professional.

If you pay a professional to do your taxes, he or she will most likely give you free help with your W-4. Most accountants do offer it. H&R Block doesn’t charge to fill out your W-4, if you are using them to prepare your taxes. Turbotax has a W-4 feature as part of its software program. The IRS also offers a withholding calculator at the IRS website. Make sure you have your paycheck and your tax return when you have this done to avoid any complications or delays.

Daniel Stoica Accounting Professional