Tax filing tips

waltky

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Granny says, "Dat's right - dis fer all dem rich folks dat ain't payin' dey's fair share o' taxes...
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What to Give Your Tax Professional
January 17, 2014 ~ Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
Dear Tax Client:

I want to make sure you take advantage of all the tax deductions and credits to which you are entitled – but I can only do this if you give me complete and accurate information. When sending me your tax information, be sure to include all of the following information (if it applies to your situation):

* Social Security numbers and dates of birth for you, your spouse and all dependents.
* W-2 forms (all copies), and the final pay-stub for the year for all employers. Please make a copy of your W-2s to keep with you before sending them to me.
* All 1099s (for interest, dividends, gross proceeds and other income), 1098s (for mortgage interest, contribution of a motor vehicle to charity, student loan interest and tuition and fees) and K-1s (and all attachments) from all sources. Do not give me your information until you have received everything.
*All year-end statements from brokerage and mutual fund accounts and any AVERAGE COST STATEMENTS received from a mutual fund on the sale of fund shares.

Provide a detailed listing of:

* itemized deductions (unreimbursed medical payments, charitable contributions, and job-related, job-seeking, and investment expenses),
*rental income and expenses, and/or
* self-employment income and expenses.

I don't need to see actual bills, receipts or cancelled checks. For the most part I just need numbers. Do not send me a pile of medical bills and receipts and insurance statements and expect me to sort through them to determine your allowable medical deduction.

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waltky

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Tax statements and forms to be on the lookout for...
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The Forms Are In The Mail: Quick Tax Tip
January 24, 2014 ~ Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
In the next few weeks, you will be receiving the information returns needed to prepare your 2013 Form 1040. Employers, banks, brokers, mortgage companies, mutual funds, etc. must provide taxpayers with W-2s, 1099s and 1098s by January 31, 2014. The deadline is extended to Feb. 18th for:

1099-B (Proceeds from Broker and Barter Exchange Transactions)
1099-S (Proceeds from Real Estate Transactions), and
1099-MISC (Miscellaneous Income) if there is an entry in Box 8 or 14.

Here is a listing of the common types of information returns you could receive –

W-2: Wage and Tax Statement – reports taxable federal, state, and local wages and income tax withholding, Social Security and Medicare tax withholding, and other related information.

W-2G: Gambling Winnings
 

oldfart

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Tax statements and forms to be on the lookout for...
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The Forms Are In The Mail: Quick Tax Tip
January 24, 2014 ~ Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
In the next few weeks, you will be receiving the information returns needed to prepare your 2013 Form 1040. Employers, banks, brokers, mortgage companies, mutual funds, etc. must provide taxpayers with W-2s, 1099s and 1098s by January 31, 2014. The deadline is extended to Feb. 18th for:

1099-B (Proceeds from Broker and Barter Exchange Transactions)
1099-S (Proceeds from Real Estate Transactions), and
1099-MISC (Miscellaneous Income) if there is an entry in Box 8 or 14.

Here is a listing of the common types of information returns you could receive –

W-2: Wage and Tax Statement – reports taxable federal, state, and local wages and income tax withholding, Social Security and Medicare tax withholding, and other related information.

W-2G: Gambling Winnings
A good start!

There is a big difference between a tax preparer and a tax practitioner. Someone who calls themselves a "tax professional" could be either. Both are regulated by the US Treasury under Circular 230 ("Rules of Practice") but the scope of their practice is substantially different.

A tax preparer is obviously the person who fills out income tax returns. The IRS proposed continuing education requirements and a competency examination, but that was struck down by the District Court for the Federal Circuit and is on appeal. The only current requirements are that a preparer must register with the IRS (they soak us for $63 a year), be subject to penalties for various statutory violations, and identify themselves with the IRS issued Preparer Tax Identifying Number (PTIN). There is no educational, experience, or minimum competency requirement. Tax preparers are also allowed to assist taxpayers at examination level proceedings.

A tax practitioner under Circular 230 must generally be an attorney, a CPA, or an enrolled agent directly regulated by the Treasury. Each of these has separate competency and continuing education requirements. Attorneys and CPAs are not required to demonstrate any specific level of tax expertise, as this is assumed to be covered in their training in law or accountancy, but enrolled agents must generally demonstrate a level of expertise in taxation. A tax practitioner is allowed to represent any taxpayer before any level of the IRS, including examination, appeals, collections proceedings, or in other matters.

Most people don't need a tax practitioner to do their tax return. However if you use a tax preparer, I would suggest that you use one associated with an office that contains a tax practitioner and ask about that person who would represent you if you encountered a problem. Find out at what point the services of the practitioner are considered normal support you are entitled to as part of the tax preparation fee and when such services will be a separate billing.

In today's market, I see little correlation between fees and quality of service. Some of the worst returns are put out by the most expensive firms. High fees are not a guarantee of quality. I have seen a few preparers do fine work at really cheap prices, but that is rare. The average price last year was $263 and there was a lot of local variation.

The IRS begins accepting electronic returns on January 31; so let the games begin!
 
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waltky

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possum gets tangled up inna addin' machine roll when Granny does her taxes...
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Why You May Not Have to File A Tax Return This Year
January 29, 2014 ~ Editor's Note: This article is part of our 2014 Tax Tips series. Robert Flach is an expert with more than 40 years of experience as a tax professional and also blogs as The Wandering Tax Pro.
Do you have to file an income tax return this year? Generally you must file a 2013 federal income tax return – Form 1040 or Form 1040A – if your gross income exceeds the total of your standard deduction and personal exemption, unless you are filing separately. This translates to –

$10,000 if filing as Single,
$20,000 if Married filing a joint return,
$12,850 if filing as Head of Household, and
$ 3,900 if Married filing separately
There are special rules for dependents.

The IRS tells us that "Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax." If your gross income falls under the filing threshold, you are still required to file a federal income tax return if you are liable for other taxes, such as –

Employment taxes on household employees (Schedule H).
Self-employment tax (Schedule SE); you must file a tax return if you had net earnings from self-employment (Schedule C, Schedule C-EZ or Form K-1) of at least $400.
The premature withdrawal 10% penalty tax and other additional taxes on IRAs and qualified retirement plans (Form 5329).
Repayment of the First-Time Homebuyer Credit (Form 5405).
Unreported Social Security and Medicare tax on tips you did not report to your employer (Form 4137) or on misclassified wages (Form 8919).
Uncollected payroll taxes on taxable group-term life insurance provided by a former employer.

Even though you are not required to file a tax return, there are several reasons why you should.

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waltky

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Watch out for identity theft...
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Tax Time is Scam Time
February 10, 2014 — While most people worry about writing the Internal Revenue Service a big check or just merely filing their taxes by April 15, the IRS is warning filers there's another growing concern for taxpayers — namely fraud and identity theft.
The IRS issued that warning citing that in 2013, the agency initiated 1,492 identity theft related criminal investigations, an increase of 66% from 2012. The IRS also reported indictments and sentencing doubled in 2013, with the average prison term being 38 months — and the longest sentenced being 26 years. "As consumers begin making preparations to file their taxes, now is the right time for them to learn more about this important issue," said Jessica Rich, director of the Federal Trade Commission's Bureau of Consumer Protection.

According to the FTC, identity theft has been the top consumer complaint for 13 consecutive years, and tax identity theft has been an increasing share of those complaints. In 2010, tax identity theft accounted for just 15% of the total FTC's identity theft complaints from consumers, while in 2011 it jumped to 24% of the overall identity theft complaints. However, in 2012, tax identity theft accounted for more than 43% of the identity theft complaints — becoming the largest category of identity theft complaints.

In the recently released National Taxpayer Advocate's 2013 Annual Report to Congress, identity theft is named as one of the most serious problems facing taxpayers. "Because identity theft is an invasive crime that can have traumatic emotional impact on its victims, I believe the IRS should model its centralized identity theft unit after its innocent spouse unit that assists taxpayers who may have been victims of domestic abuse," said Nina Olson, who bills herself as the National Taxpayer Advocate. "Most importantly, there should be one IRS employee assigned to interact with the victim and maintain control of the taxpayer's case."

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waltky

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IRS Tax Audit Hell...
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Tax Audit Horror Stories That Will Haunt Your Dreams
February 27, 2014 — When we were kids, nightmares were all about monsters and zombies, but as adults, many of us are afraid of something much more mundane: tax audits.
Sure, the odds of being audited are low (around 1%). And yes, we know we're not supposed to have anything to worry about as long as our financial house is in order. But the mere prospect of a stranger snooping around our accounts and the sheer effort of marshaling all our records (if we even kept pristine records in the first place, that is), sounds very daunting. Most of us have nothing to worry about. But to fuel your healthy appetite for Schadenfreude, we bring you a selection of auditing nightmares . . . so you can be grateful that Turbotax worked out so well for you in the past.

Tim and Tracey Kerin

This couple experienced the ultimate nightmare. According to Tim, the IRS agent outright lied about her findings, because she didn't have time to go through the estimated 4,000 pages of documents they provided. The audit was about the pair's company expenses, and they learned a costly lesson: Their CPA hadn't correctly evaluated their expense categories and they'd signed off on the forms without reading them thoroughly.

"A lesson moving forward is that every business owner should spend time with their CPA and bring their Quickbooks in and go over every expense account to make sure it complies with the current tax laws," says Tim. "Also, you should visit your CPA on a regular basis and not just at tax time when the year is already closed out."

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waltky

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A heads-up if you work for yourself...

Self-Employed Taxes: How to Handle the IRS on Your Own
February 28, 2014 — Growing numbers of Americans are now self-employed. In fact, Quartz recently reported that by the year 2020, as many as 40 percent of American workers will be freelancing. If you received a 1099-MISC form this year, you're going to have to file as a freelancer, at least in part. If this is your first time doing so, you might be in for a big sticker shock.
But before you panic, know that there are some things you can do to ease the pain. You can't retrace your steps from last year, but you can mitigate some of the damage as well as prepare for next year.

It's Never Too Late

"The process needs to start last year," says Janet Lee Krochman, a self-employed CPA, who says that every year people show up and hear all the stuff they should have been doing... right before their eyes glaze over. "If you haven't been collecting the data over the last year, you're going to wish that you had."

The solution going forward? Krochman recommends getting QuickBooks or something like it to keep track of your self-employment finances over the year. "The basic version, QuickBooks Essentials, can produce a report with everything that you need based on information you input over the course of the year," she says. For last year, however, you're just going to have to start digging around in receipts and bank records looking for deductible items.

Save or Expect to Pay Big

"People think 1099s are just like W-2s except they didn't have anything withheld," says Bradford L. Hall, managing director of Hall and Company in Irvine, Va. "You also owe Social Security and Medicare tax that you probably haven't thought about." He cites this as the biggest mistake that people make when setting up a business -- to the tune of 15.3%.

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oldfart

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A heads-up if you work for yourself...

Self-Employed Taxes: How to Handle the IRS on Your Own
February 28, 2014 — Growing numbers of Americans are now self-employed. In fact, Quartz recently reported that by the year 2020, as many as 40 percent of American workers will be freelancing. If you received a 1099-MISC form this year, you're going to have to file as a freelancer, at least in part. If this is your first time doing so, you might be in for a big sticker shock.
But before you panic, know that there are some things you can do to ease the pain. You can't retrace your steps from last year, but you can mitigate some of the damage as well as prepare for next year.

It's Never Too Late

"The process needs to start last year," says Janet Lee Krochman, a self-employed CPA, who says that every year people show up and hear all the stuff they should have been doing... right before their eyes glaze over. "If you haven't been collecting the data over the last year, you're going to wish that you had."

The solution going forward? Krochman recommends getting QuickBooks or something like it to keep track of your self-employment finances over the year. "The basic version, QuickBooks Essentials, can produce a report with everything that you need based on information you input over the course of the year," she says. For last year, however, you're just going to have to start digging around in receipts and bank records looking for deductible items.

Save or Expect to Pay Big

"People think 1099s are just like W-2s except they didn't have anything withheld," says Bradford L. Hall, managing director of Hall and Company in Irvine, Va. "You also owe Social Security and Medicare tax that you probably haven't thought about." He cites this as the biggest mistake that people make when setting up a business -- to the tune of 15.3%.

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And then there are people who cross out the juris clause at the bottom and write: "These are all the deductions I can prove and all the income you can find!"
 
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waltky

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How to lessen chances of a tax audit...

Biggest Tax Audit Triggers
March 25, 2014 — You walk out to the mailbox to find a letter from the IRS. Hair raises on the back of your neck in dread: Is this an audit?
Probably not. In fact, less than 1% of tax returns are audited by the IRS every year. Most of those are handled with what is called a "desk audit." This is when the IRS contacts you requesting more information, or to square away a discrepancy between their records and yours. All returns aren't created equally, however: some are more likely to trigger an audit than others. If you want to avoid the full-cavity search of an all-out IRS audit, here's what to avoid.

Inaccuracies

It might sound obvious, but it's one of the most common ways that a desk audit gets triggered: not having accurate information on your return. "If your W2 or 1099 or 1098 doesn't match your return, that's going to trigger a desk audit," says Leif Novie, a principal in the tax and accounting department at MBAF.

Deductions Problems

Mike Campbell, a tax partner in the private client services group at BDO, urges people to take every deduction that they're legally entitled to. "People shouldn't skip deductions, because they're afraid it will trigger an audit," he said. At the same time, he acknowledges that inaccurate deductions are one of the biggest reasons for an audit. "Incorrect information is the hardest to defend at an audit," he explains. "Sometimes people just put deductions in the wrong place," he says, which can trigger a desk audit. Problems arise when people are inappropriately claiming deductions. "Don't claim a loss on a Schedule C business that's actually a hobby," he says.

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Granny keeps her bitcoins with her Confederate money...

IRS says bitcoin will be taxed like property
Mar 25,`14 WASHINGTON (AP) -- Virtual currencies like bitcoin will be taxed like property - not currency, the Internal Revenue Service said Tuesday.
The IRS says bitcoin is not legal tender. You can't use it to pay your taxes. However, if you receive wages in bitcoin, you have to pay taxes on it just like you would if you got paid in dollars. Or if you got paid in chickens. The IRS issued a series of 16 questions and answers Tuesday to clarify the tax treatment of virtual currencies like bitcoin. In general, the IRS says it will apply the same rules that govern other barter transactions.

If you receive wages in bitcoin, they would be taxed at their fair market value at the time you were paid, the IRS said. If you use bitcoins to pay for goods or services, the vendor must report the income, using the fair market value of the bitcoins at the time of the transaction. For investors, bitcoins will be treated like other commodities, the IRS said. If they increase in value, you have to pay capital gains taxes after you sell them. If they lose value, you can recognize a capital loss.

Created in 2009, bitcoin is an online currency that allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks or other third parties. Bitcoins have become popular with libertarians, tech enthusiasts and speculators.

Regulators worry about criminals using them to avoid detection. In February, one of the largest bitcoin exchanges, based in Tokyo, filed for bankruptcy, adding to mistrust of the currency. Supporters say problems at the exchange were isolated.

http://ap.stripes.com/dynamic/stories/U/US_IRS_BITCOIN?SITE=DCSAS&SECTION=HOME&TEMPLATE=DEFAULT
 
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waltky

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Uncle Ferd makes his g/f's pay the expenses when he takes `em out in his pick-`em-up truck...
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How to Deduct Auto Expenses on Your Taxes
March 28, 2014 — You have two options for claiming a deduction for using your car for business. The simplest way is to use the "standard mileage allowance", which is 56.5 cents per mile for 2013. This rate applies no matter where in the United States you drive, and no matter what type, model or make of car you drive. It is available for both a car that you own and a car that you lease.
In addition to the standard mileage allowance you can deduct any business-related parking fees and tolls. A self-employed individual can also deduct the business portion of any auto loan interest and state and local personal property taxes on Schedule C. Employees cannot deduct the business portion of auto loan interest, but they can deduct qualifying state and local personal property taxes as a tax on Schedule A.

You can also elect to claim the "business use percentage" (business miles divided by total miles driven for the year) of the total cost of maintaining your car, which include -

auto club membership
depreciation
gas and ail
insurance
license and registration
lease payments
repair and maintenance
tires
wash and wax

Generally to be able to claim the standard mileage allowance you must elect to do so in the first year the car is placed in service (the year you purchased the car, or the first year you used the car for business). If you claim the standard mileage rate in the first year you can switch to actual expenses in a later year. But if you claim actual expenses in the first year you may not be able to change over to the standard mileage allowance in later years. If you choose to claim the standard mileage allowance on a leased car you must use it for the entire period of the lease.

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waltky

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Head's up on tax scam...
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IRS Warns of Biggest Year for Phone Scams Yet
March 26, 2014 ~ You get a call from someone claiming to be with the IRS. The person probably uses a very common surname, making it harder to identify who he or she actually is. The caller knows the last four digits of your Social Security Number, and your caller ID will probably read as an IRS toll-free number. You even hear a call center in the background.
The caller will threaten you with jail time and the loss of your driver's license before hanging up on you. You'll then get a call from the local police department, or the DMV, again citing numbers squaring with that claim. Unsurprisingly, the caller will demand that you pay immediately with a pre-loaded debit card that is, more or less, untraceable. It's a scam, and it mostly targets recent immigrants and people with a prior history of owing the IRS.

So be careful when you answer the phone: the IRS reports that this is the biggest year for phone scams yet. All told, the scam described above has snared 20,000 taxpayers already to the tune of $1 million... and it's not even April. J. Russell George, the Treasury Inspector General for the Tax Administration is calling it "the largest scam of its kind that we've ever seen."

If you get a call from the IRS and you know or suspect that you owe taxes, call the agency at 800-829-1040. The IRS has among some of the best trained customer service people out there. If you have no reason to suspect that you owe, call the Federal Trade Commission immediately at 800-366-4484.

More IRS Warns of Biggest Year for Phone Scams Yet - MainStreet
 
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waltky

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Uncle Ferd always borrowin' from possum's piggybank...

Does Uncle Pete Owe You Money? Deduct It
April 02, 2014 ~ — Does Uncle Pete owe you money? Deduct it on your tax return! This can get a little sticky, especially if you are expected to see him at the next family reunion. If you tried over and over again to get your money back, the Internal Revenue Service (IRS) will allow you to take a non-business bad debt deduction on your tax return.
So, how does it work? Before you go crazy with this deduction and deduct everything that everyone has ever owed you, there are a few things you should know.

Yes, it has to be a loan

The most essential requirement is that it has to be a loan. Simply put, this can't be a situation where you gifted money to your ex-girlfriend and then after a horrible breakup you now decided it was a loan instead! The IRS requires at the time of the transaction that there was an intention for the money to be a loan and not a gift.

Therefore, there was a real expectation that the money would be repaid and it was a bona fide loan. At the time the loan was established, each party must've had an understanding that it was a loan with the expectation to be paid back at a later time. While it doesn't require parties to have signed a promissory note of some sort, this is not a bad idea to substantiate that a loan existed.

Did you try to get your money back?

While the IRS does not require you to go to court to retrieve your money, it does require you to take reasonable and necessary steps to obtain your money. The law requires you to show evidence that you have tried to collect.

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waltky

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Most people don't do their own returns - it's too complicated...
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IRS: 90% of Taxpayers Seek Help in Preparing Their Returns
April 9, 2014 -- Over the past 20 years, an increasing number of American taxpayers -- bewildered by "the increasing complexity of tax law" and "confusion over how to comply with the tax code" -- have sought help in preparing their income tax returns, IRS Commissioner John Koskinen told the Senate Finance Committee on Tuesday.
According to Koskinen, about 80 million returns, or 56 percent of the total individual tax returns filed each year, are done by paid preparers. Another 34 percent of taxpayers use tax preparation software, making a total of 90 percent of taxpayers who seek some form of assistance. Koskinen wants Congress to authorize the IRS to regulate all paid tax return preparers, so it can root out incompetence and fraud. Right now, the IRS cannot set minimum standards for tax preparers -- "so all we can do for taxpayers, which we do do, is say you should 'be careful.' Make sure you know who the tax preparer is and what their background and experience is," Koskinen said.

In his opening statement, Kokinen said the IRS continues to do compliance checks on some tax preparers, making visits to thousands of preparers around the country and penalizing those who made "egregious errors." "A major focus of our return preparer compliance strategy involves preparers who prepare large numbers of returns containing claims for the Earned Income Tax Credit (EITC)," Koskinen said. He estimated that "about 60 percent of EITC returns are done by paid tax return preparers." The credit -- which sends money to low-income workers who owe no tax -- is easily abused, and Koskinen said the IRS conducts field audits to make sure tax preparers "are performing due diligence to ensure that individuals claiming the EITC are in fact eligible for the credit."

Rep. John Thune (R-S.D.) noted that "incredible complexity of the tax code" already is forcing Americans to turn to tax preparers, and he said things will only get more complicated as Obamacare provisions kick in, driving even more Americans to get help with their returns. "I think we're going to have a lot of questions by preparers and taxpayers about the Affordable Care Act," Koskinen agreed."The vast majority of Americans are going to be unaffected by it. They're going to check off a box that says they have insurance, they've got Medicare, and they won't be affected. "But for the people who are...applying for insurance, getting advance premium credits, there are going to be questions asked. One of our concerns is to make sure we're prepared to answer those questions."

Tax code complexity is an issue for Congress, Committee Chairman Sen. Ron Wyden (D-Ore.) told the hearing: "I very much appreciate that you're highlighting complexity of the code, because Congress is not blameless here," Wyden said. "Virtually every session, some other group comes up...and what happens here on the Finance Committee, we just add it to the code. There have been something like 15,000 changes -- it comes to maybe one or two for every working day in recent years, and so that's right at the heart of tax reform." Wyden says he's a "firm believer" in comprehensive tax reform that would make filing easier for everyone. Sen. Johnny Isakson (R-Ga.) told Wyden he agrees that "tax simplification is the key to this."

IRS: 90% of Taxpayers Seek Help in Preparing Their Returns | CNS News
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IRS: 'Slim' Chance of Muzzling Tax-Exempt Groups Before End of 2014
April 9, 2014 -- Senate Republicans are pressing the IRS not to impose strict new rules on tax-exempt groups before the November election, or before Congress has finished its various investigations into the IRS targeting of conservative groups.
But on Tuesday, IRS Commissioner John Koskinen would only say that a proposed regulation limiting the advocacy and educational activities of tax-exempt groups probably won't be finalized until the end of the year. "The chances of our finishing any regulation before the end of the year are very slim if not non-existent," Koskinen said. I think that, unless the investigations are going to go on into next year, somebody will issue at least one (report) -- and hopefully this committee, perhaps others, will issue their report some time in the next 3 or 4 months, which will be well in advance of any time that we would have a chance of completing this regulation." "With regard to the regulation...my commitment is, that any regulation that is ultimately issued should be fair to everybody. It should be clear, and it should be easy to administer."

Koskinen said the IRS will "carefully review" all 150,000-plus comments that have been made on the proposed regulation. "And as I've said, by the time we hold a public hearing -- in all likelihood, re-propose any regulation that we were considering and get more public comments -- it's going to be well into the end of this year." On Nov. 29, 2013, the Treasury Department issued a proposed IRS rule that would broadly define prohibited 501(c)(4) political activity to include voter registration, voter education, communications that mention a candidate or party, grants to advocacy groups, and events in which a candidate participates. Even non-partisan activities would be limited, Republicans say.

Sen. Pat Roberts asked Koskinen if he was unequivocally committing to the committee that the 501(c)(4) regulations will not be finalized this year. "I think what I have said is that the chances of it being finalized before the end of the year, not before the election, before the end of the year are slim. We are not rushing to get them done --" "That expression," Roberts interrupted. "You know, the chances of something happening in Dodge City, Kansas, are slim and none, and Slim left town. So why don't we just say 'none this year,' and more especially, until the investigations are done. Why can't we do that?" Roberts asked. "What I could easily commit to is we won't be anywhere near completing these regulations before somebody has completed an investigation," Koskinen said.

Roberts and 39 other Senate Republicans have introduced a bill that would protect the free-speech rights of (tax-exempt) 501(c)(4) organizations by prohibiting for one year the finalization of the proposed IRS regulation that would significantly limit the advocacy and educational activities of those groups. The regulation specifically singles out 501(c)(4) organizations, and does not apply to other nonprofit organizations such as charities, labor unions or trade associations. On May 14, 2013, the Treasury Department’s inspector general for tax administration released a report saying that the IRS had inappropriately applied excessive scrutiny to the applications of conservative groups applying for 501(c)(4) tax-exempt status.

IRS: 'Slim' Chance of Muzzling Tax-Exempt Groups Before End of 2014 | CNS News
 

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Audit: 17 of 19 paid tax preparers got it wrong

The GAO's report cited a small undercover study of 19 paid preparers in February, chosen randomly in states that do not regulate tax preparers. The findings:

• Seventeen of 19 preparers made mistakes.

• Errors ranged from giving the taxpayer refunds $52 less than due to a refund of $3,718 more than due.

• Most frequent error: not reporting tips (12 of 19 returns).

Unfortunately, the report didn't come as a surprise. The GAO surveyed taxpayer errors from 2006 through 2009 and found that tax returns prepared by preparers had a higher estimated percent of errors — 60% — than self-prepared returns —50%.
 
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waltky

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Granny says be onna look-out fer tax scams...
:eek:
IRS Scams To Watch Out For
April 10, 2014 — Owing money to Uncle Sam this year is problematic enough, but there are countless online scammers who claim they are with the IRS and are waiting to seize the opportunity to defraud consumers of their hard-earned cash.
The latest scam is an email which appears to be from the IRS claiming there is an issue with your tax return from 2013. Unfortunately, that's just one of many scams occurring this year. This phishing email claims to be from the IRS Taxpayer Advocate Service and says that due to a processing error, it has been flagged for a review. The scammer provides a link which allegedly has information about the taxpayer and his reported income; there's also a promised advocate delegated to the case.

Instead, the IRS says the link leads consumers to a "fraudulent website that solicits personal information including names, personal contact information and income details." Anyone receiving this email should report it to the IRS. Scammers use these phishing emails to obtain access to your financial accounts and steal your identity. While the Taxpayer Advocate Service is a real entity, it does not contact consumers via email, text or through social media. Neither does the IRS.

The email reads as follows: "Your reported 2013 income is flagged for review due to a document processing error. Your case has been forwarded to the Taxpayer Advocate Service for resolution assistance. To avoid delays processing your 2013 filing contact the Taxpayer Advocate Service for resolution assistance."

Consumers who receive the email need to forward the email to the IRS's designated address for these scams – phishing@irs.gov.

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Claim the Child Care Credit on Summer Day Camp Costs
April 10, 2014 — If both you and your spouse work, or if you are a working single parent, the cost of day care or after-school for your dependent child under age 13 care may qualify for the Credit for Child and Dependent Care Expenses.
You can also claim the credit, reported on IRS Form 2441, on the cost of a summer day camp. Only day camp expenses can be used for the credit. The cost of an overnight camp does not qualify. If you have one qualifying child you can claim the credit on up to $3,000.00 in expenses. For two or more qualifying children the maximum is $6,000.00.

The amount of child care expenses eligible for the credit is further limited to the earned income of the taxpayer or spouse. If one spouse earns $50,000.00 and the other $2,500.00, only $2,500.00 of expenses is eligible for the credit.

If one spouse works and the other is disabled or a full-time student, the non-working spouse is treated as earning $250.00 per month if there is one qualifying child or $500.00 per month if there is more than one. This applies to only one spouse per month. If both spouses are full-time students during the same month, only one is treated as earning the $250.00 or $500.00.

The amount of the credit depends on your Adjusted Gross Income. If your AGI does not exceed $43,000.00 the credit ranges from 35% to 21%. The credit is 20% for AGI of more than $43,000.00. In most cases, if you are married you must file a joint return to be able to claim the credit.

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waltky

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Granny all in favor of tax loopholes...
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How to Contribute to a Roth IRA When You Make Too Much Money
April 11, 2014 — The Roth IRA is the ticket to tax-free income for life after work. Pay your government dues now, and then never again.
That's great until you bump into the barrier of ineligibility. With strict restrictions on the amount of money you can make and still qualify to contribute, the Roth can have a closed-door policy on participation. Unless you go through the back door. If you make more than $129,000 as a single taxpayer, or $191,000 as a married couple filing jointly, you can't make a Roth contribution. But there is a legal loophole.

First, you put the money into a traditional IRA. Of course, you won't likely be able to deduct this contribution because of your above-average income. Uncle Sam says deductions aren't allowed if you are covered by an employer-sponsored retirement plan, or if you make more than $116,000 on a married-filing-jointly return, or $70,000 as a single taxpayer. But the deduction is not what we're looking for – the tax-free retirement income is.

So say you and your income-earning spouse put in your full $5,500 contributions each – and we'll also make you over 50 years old so you both get the $1,000 catch-up contributions, too. That's $13,000 total all nice and tidy in your old-school IRA.

Now, here's the loophole. The IRS doesn't have restrictions on the amount of assets that you can convert from a traditional IRA into a Roth -- you just have to pay the tax on the growth of the investment. And since you just stashed the cash in the traditional IRA, there's not likely to be anything to tax.

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Financial Services Industry Could Face "Massive" Class-Action Lawsuit
April 11, 2014 — Generally, the average investor makes bad decisions, earning less -- in many cases much less -- than market returns allow.
That's the conclusion of the 20th annual "Quantitative Analysis of Investor Behavior," (QAIB) conducted by Dalbar. And it might take a "massive" class-action lawsuit to change the industry, according to Dalbar president Louis S. Harvey. The latest report shows a 20-year history of underperformance by the typical mutual fund investor.

While the S&P500 has recorded a gain of 9.22% since 1984, equity investors have seen only a 5.02% return. Dalbar says the major cause of the performance gap is the tendency of investors to sell low and buy high in an attempt to time the market. A primary reason for the behavior may be the long-held practice for the industry to present investment options based on past performance.

"The things that investors are looking at are not only distracting, but destructive," Harvey says. "The industry doesn't want to be exposed to lawsuits or to regulatory action, so they want to push the decisions, as much as they can, off on the investor." That allows the financial services industry to claim the "investor was fully informed" and avoid any liability.

Harvey says it might take massive class action litigation, suing the industry for "billions of dollars," before things change. "I see an unfair practice where the people in the know put the decisions to the people who don't have a hope of knowing," he says. Rather than "chasing the performance" of last year's high-returning investments, which rarely repeat excess returns from one year to the next, Harvey says investors should focus on building a better decision-making process, by focusing on four things:

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