Posted by Wally Ross on Tue, Jul 13, 2010
Written by: Jordan Baigas, Office Manager
When a client has a tax liability our accountants will often help them set-up a payment plan with the IRS. In this regard, last month a client of ours received the following notice:
In the past, even if only one payment was missed the entire installment agreement was terminated and all outstanding tax liability was due immediately. Now, as it appears from this notice, not only does the Fed "understand" the hardships of current economic conditions, but they even "might be able to reduce monthly payment."
Shocked? Definitely. Humored? A bit. But, hey, we aren't complaining. If the IRS has taken a friendly-turn it is welcomed whole-heartedly. However, once Uncle Sam starts negotiating your tax payments, doesn't it make you wonder? Why is the IRS so desperate for money? Shouldn't the administration be cutting taxes for everyone? Should I adjust my W-4 so that less is withheld from each paycheck in case there's no money for a refund in the future?
Honestly, only time will tell. We suggest that you have discipline in your savings and always use your money wisely. And, who knows, maybe the IRS will continue to be as understanding when you get in a sticky situation.
Posted by Wally Ross on Wed, Jul 07, 2010
Along with the health care changes that we discussed in our previous blog post, President Obama's new laws bring change to our old friend: the W-2. Starting with the 2011 tax year (the W-2 you will received in 2012), employers will be required to report the value of health insurance premiums provided for each employee.
This announcement caused a tremendous uproar because there have been many reports indicating that these insurance amounts would be taxable. However, rest assured that these reports are incorrect. Though the value of health coverage provided by employers must now be listed separately on the W-2, it will not be added to taxable wages. Our current law states that health insurance is not taxable and the new health care laws do not change this.
The reason behind this change is simply that Congress wants to tell employees how much is being spent on their health benefits each year.
Posted by Ross Tax & Accounting on Fri, May 21, 2010
A massive reform on our country's health care system has taken place with the passage of two bills. The first, the "Patient Protection and Affordable Care Act," was signed by President Obama on March 21, 2010. The companion bill, the "Health Care and Education Reconciliation Act of 2010," was signed into law on March 30, 2010 and made several changes to the "Patient Protection Act." Together, these two pieces of legislation will have a dramatic affect on taxes paid by businesses and individuals and, of course, on the health care industry.
Provisions in these laws will go into effect over the next several years, creating an estimated $438 billion in new taxes on employers and individuals. For the first time, employers will be subjected to taxes if they do not offer coverage to employees or if the coverage fails an affordability test.
To help you keep up with the latest developments, below are key tax provisions of the health care reform laws:
- 10% tax will be imposed on indoor tanning services starting July 1, 2010.
- Beginning in 2018, insurance companies will be assessed a 40% excise tax on health insurance plans with annual premiums exceeding $10,200 for individuals and $27,500 for families.
- Starting in 2014, employers with at least 50 employees would be assessed an annual penalty of $2,000 for each employee that they did not provide coverage to.
- Starting in 2011, the penalty for using health savings account funds (FSA) for nonqualified expenses will increase from 10% to 20% and over-the-counter medications cannot be purchased with FSA funds. Staring in 2013, contributions to FSA's for medical expenses will be limited to $2,500.
- If make more than $200,000 a year, starting in 2013 the 2.35% of your payroll wages will go to Medicare tax (currently it's 1.45% of wages)
Ross Tax & Accounting Co. will continue to keep you posted any provisions that will affect your personal or business tax situations. If you have any questions or opinions, please comment below - we'd love to hear how you feel about the health care reforms.
Posted by Wally Ross on Fri, Mar 19, 2010
Individuals who can not obtain a social security number or who are non-residents of the United States and are liable to pay taxes here, are issued an Individual Taxpayer Identification Number (ITIN) by the IRS.
Effective January 1, 2010, the North Carolina Department of Revenue requires that 4% of pay be withheld for ITIN contractors who receive more than $1,500 per year. According to the NCDOR "payers should file and pay withholding taxes on contractors with ITIN's just like they would for regular employees."
If this new law effects you, and you do not already pay withholding taxes, you must register with North Carolina. After you register you will receive a withholding account number and then can begin filing and paying the taxes.
If you have questions, or if we can be of any assistance, please contact us.
Posted by Wally Ross on Fri, Mar 05, 2010
Business Alert: the IRS is to conduct employment audits on 6,000 U.S. companies in search of unpaid employment taxes.
Starting February 2010, the IRS launched a three-year auditing project to collect data to identify areas of noncompliance. 2,000 firms (including nonprofits & governmental entities) will be selected at random each year to be examined.
The government estimates that about $345 billion worth of taxes goes uncollected each year. A deputy IRS commissioner said last month that "a significant portion" of this tax gap comes from unpaid employment taxes. This new project aims reduce that gap by ensuring that all U.S. companies are paying to fund Social Security & Medicare benefits.
The following are areas that auditors will be interested in:
- Worker Classification: Are workers properly classified as employees or independent contractors? This includes executives rehired as consultants, dual status employees, and employee leasing arrangements.
- Fringe Benefits (including expense reimbursement arrangements and non-cash benefits): Problems arise in cases where employees use company cars, planes, vacation homes, ect. for personal use. The IRS wants to ensure that usage of these benefits are taxed accordingly.
- Executive Compensation: fringe benefits, executive retirement contracts, golden parachutes, and stock options.
Although there is nothing you can do to prevent your business from being selected for an audit, there are proper steps that can be taken to avoid penalties assessed. We advise you to seek assistance from an accountant or attorney to review your employment tax record keeping. If an issue is self-found and addressed, the penalties are much less severe than they would be if the IRS found them.
Should you have any questions, or wish to discuss this further, please do not hesitate to contact us at 704-341-9611.
Posted by Wally Ross on Fri, Feb 26, 2010
Taxpayers all over the nation should be thanking Nina Olson, our National Taxpayer Advocate, for trying to keep the IRS up to par. Since 2001 Nina has been pushing Congress to improve their services for taxpayers. This year in her annual report she singled out "poor telephone services" as the IRS' most serious issue:
The IRS has set a target for 2010 of answering 71% of calls (this means that 3 out of 10 people calling the IRS hotline wont get through to an actual person). And to make matters worse, callers who do get through will have an average wait of 12 minutes. So this year, Olson offered a solution: increase IRS staff so that 85% of calls can be answered with an average wait time of five minutes.
So, we will see if our advocate's criticisms are taken note of by Congress or if it is answered with only a big yawn.
We encourage you to take use of the IRS website. If you need to track your refunds we offer a refund tracker link on our website. And if you are brave, the toll-free help line for individuals is 800-829-1040.
Posted by Wally Ross on Fri, Feb 19, 2010
As an initiative to encourage people to use their tax refund for retirement savings, tax payers can now elect to have their 2009 tax refund automatically sent to them as savings bonds. When filing your 2009 tax return, it is as easy as checking a box on IRS Form 8888 to notify the IRS that you want to use your refund (or part of it) to purchase Series I savings bonds. Savings bonds are a great way to protect your money from inflation & also a great option for saving for your children. Here a few details about this 2010 savings initiative:
- The type of bonds available for this program are U.S. Series I Savings Bonds. These low-risks bonds are a combination of two interest rates: a fixed rate that is determined by the US Treasury (currently 0.30%) & a variable rate that is based on inflation (currently 3.36%).
- Each social-security number is limited to $5,000 worth of bonds.
- Bonds must be purchased in multiples of $50 (i.e. if your refund is $280 you will get 5 $50 bonds and the remaining $30 will be deposited in a checking or savings account of your choice). If more than $250 of bonds are purchased, you will receive higher denomination bonds ($100, $200, $500, & $1,000).
- If you're married and filing a joint return, the bonds will be issued in both names.
- Bonds purchased will be sent to you directly by mail.
- You must hold on to Series I Bonds for at least 12 months before cashing them in (emergency exceptions apply).
This is part of President Obama's retirement savings initiative. The idea is to give tax payers an easy way to start (or continue) building a comfortable nest egg. Keep you ears open for changes in this program in the 2011 tax season.
If we are currently preparing your 2009 tax return, or you plan on bringing it to us soon, please indicate if you are interested in this new way of using your tax refund. Call us today, at 704-341-9611, or complete our contact us for on our website for further information.
Posted by Wally Ross on Fri, Feb 12, 2010
As of January 2010, everyone is eligible to convert a traditional account into a Roth IRA, regardless of income. The taxpayers who were originally shut out by the $100,000 income limit can now take advantage of redeeming their retirement money tax-free.
Roth IRA's are often more popular than Traditional IRA's due to the fact that you pay tax on money before you contribute it, thus avoiding being taxed at distribution (when the tax rates will most certainly be higher). However, if you forsee yourself being in a lower tax bracket at retirement age or expect to withdraw the money in less than 5 years, converting to a Roth IRA may not be beneficial for you. Be sure to consider all factors before deciding if a conversion is best.
Calculate the benefits (if any) of converting to a Roth IRA with our "Roth vs Traditional IRA" calculator.
*Dont forget that it is still not too late to contribue to an IRA for the 2009 tax year. Click here, or call us, for help preparing your 2009 personal tax return.
Posted by Wally Ross, CPA on Fri, Feb 05, 2010
The tragedy in Haiti left many people wanting to help in any capacity possible. Congress even called upon all Americans to contribute what they could by passing a new tax incentive. On January 22, President Obama signed a law to give taxpayers an early deduction for contributions made towards earthquake relief in Haiti. The contribution must be made after January 11, 2010, and before March 1, 2010.
If you make a monetary contribution through your cell phone via a text message, you may use your telephone bill to substantiate your contribution. The telephone bill must show the name of the charitable organization, the date of the contribution, and the amount of the contribution. Otherwise, as normally done, keep record of the receipt you receive for your donation.
Please note that if you claim a Haiti relief deduction on your 2009 return, you may not claim it on your 2010 return. You should compare the tax benefit of a 2009 deduction or a 2010 deduction. For 2009, higher-income taxpayers have a limit on their total itemized deductions. This limit is eliminated for 2010, so the deduction may actually provide a bigger tax break if taken on your 2010 tax return.
If you need additional information or filing assistance, please contact our office. Our hearts & prayers go out to the victims of the earthquake and their families.
Posted by Wally Ross on Fri, Jan 22, 2010
Deduction Reminders
With the tax laws changing from year to year, it's easy to lose track of what's deductible this year vs. last year. Be sure not to miss these deductions for your 2009 return:
* New Vehicle Deduction. You can deduct up to $49,500 of the sales tax on the purchase price of a new car.
* Educator's Deduction. If you're a teacher, you can deduct up to $250 for classroom supplies purchased.
* College Deduction. If you or your dependents are in college, don't miss out on deducting tuition and fees.
* Standard Deduction. Additional standard deduction of up to $500 ($1,000 for couples) for real estate taxes paid.
* Choice of deducting sales taxes paid in 2009 or state and local income taxes paid.
Please note - there are most always various restrictions and income limits.
IRA contributions
If you didn't make your IRA contribution in 2009, make it now. You can still contribute in 2010 (until April 15th to be exact) and use this contribution as a deduction on your 2009 tax return.
Tax Returns For Children
Did your children have income in 2009? If so, they may be required to file a 2009 income tax return, too. A child will need to file a 2009 tax return if any of the following apply:
had wages of more than $5,700,
had self-employment earnings over $400, or
had investment income (such as dividends, interest, or capital gains) over $950.
(If your child had both earned and investment income, other thresholds apply)
Don't let your child miss out on their opportunity to receive a refund.
Charitable Contribution Record Keeping
There are strict record keeping requirements for deducting charitable contributions. For cash contributions under $250, you must have a bank record such as a cancelled check, credit card record, or receipt from the charity. For donations of $250 or more, a receipt from the charity must be obtained before filing your return.
Your Rax Refund
If you're among the many taxpayers who get a large tax refund this year, do yourself two favors:
Invest the refund instead of spending it, and
Adjust your 2010 withholding so that your money can be invested rather than giving the government an interest-free loan.
You can track your refund on our website by clicking here.
Extension request
As always, the deadline for filing a 2009 individual income tax return is April 15, 2010. If you cannot file your return on time, be sure to file an extension request with the IRS by this date. If you project that you owe money on your 2009 tax return you must pay it by the April 15 deadline to avoid penalties and interest (yes, even if you have an extension filed). An extension gives you six more months to gather your data, thus your new due-date is October 15, 2010.
Ross Tax & Accounting will gladly file an extension for you. Please contact our office for more information.