Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your return this year, the IRS urges you to choose that preparer wisely. Even if a return is prepared by someone else, the taxpayer is legally responsible for what’s on it. So, it’s very important to choose your tax preparer carefully.
This year, the IRS wants to remind taxpayers to use a preparer who will sign the returns they prepare and enter their required Preparer Tax Identification Number (PTIN).
Here are ten tips to keep in mind when choosing a tax return preparer:
1. Check the preparer’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.
2. Check on the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
3. Ask about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.
4. Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.
5. Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
6. Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.
7. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
8. Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
9. Make sure the preparer signs the form and includes their PTIN. A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
10. Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).
Absent Congressional action, a number of beneficial tax provisions will expire at the end of 2011, leading to a potential for increased taxes in the future. Below is a list of expiring items that will impact many small businesses and their owners:
- Accelerated write-offs for leasehold improvements,
- Reduction of benefits provided by "bonus depreciation",
- Lower dollar limits on assets eligible for Sec 179 expensing,
- Elimination of social security tax reduction available to employees and self-employed individuals,
- Elimination of energy credits available to homeowners,
- Reduced AMT exemption amount leading to more taxpayers being subject to the alternative minimum tax, and
- Elimination of tax-free distributions from retirement accounts directly to charitable organizations.
The aforementioned items are not all-inclusive, but are a sampling of benefits that will not be available in future years if Congress does not act. It is anticipated that many of the items will be extended, but you should not assume that will be the case.
There is still time to act to accelerate items into the current year to ensure that you will benefit, but you will need to act fast and consult with a tax professional.
The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please contact us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
New settlement offer for misclassified workers. The IRS has launched a new Voluntary Classification Settlement Program (VCSP) for employees that have been misclassified as independent contractors (or as other nonemployees). The VCSP is available to taxpayers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to prospectively treat the workers as employees. To be eligible, a taxpayer: (a) must have consistently treated the workers as nonemployees; (b) must have filed all required Forms 1099 for the workers for the previous three years; and (c) cannot currently be under audit by the IRS, or currently under audit concerning the classification of the workers by the Department of Labor or by a state government agency. A taxpayer who applies for and is accepted into the VCSP will agree to prospectively treat the class of workers as employees for future tax periods and in exchange:
- Will pay 10% of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, determined under reduced rates;
- Will not be liable for any interest and penalties on the liability;
- Will not be subject to an employment tax audit for the worker classification of the workers for prior years; and
- Will agree to extend the period of limitations on assessment of employment taxes for three years for the first, second and third calendar years beginning after the date on which the taxpayer has agreed under the VCSP closing agreement to begin treating the workers as employees.
Personal use of employer-provided cell phones generally nontaxable under new guidance. Where an employer provides employees with cell phones primarily for noncompensatory business reasons, neither the business nor personal use of the phone results in income to the employee, and no recordkeeping of usage is required. And, in most instances, an employer's reimbursement to employees for their providing a cell phone for bona fide employment-related business use won't be taxable.
Simplified per-diem rates increase slightly for post-Sept. 30 business travel. An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses (M&IE). If the rate paid doesn't exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn't subject to income- or payroll-tax withholding and isn't reported on the employee's Form W-2.
Guidance on electing zero estate tax for 2010 decedents. Under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, estates of decedents who died in 2010 can choose zero estate tax, but at the price of beneficiaries being limited to the decedents' basis plus certain increases under Code Sec. 1022. In early August, the IRS issued detailed guidance on how this election is made. The guidance revealed that the election is made by filing a Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent.
Time for executors to make portability election for 2011 decedents. In a new notice and accompanying news release, the IRS reminded executors of the estates of married decedents dying after 2010 that they must file an estate tax return in order to pass along the unused estate and gift tax exclusion amount, available for the first time this year, to their surviving spouse. The first estate tax returns for estates eligible to make the portability election started becoming due on Oct. 3, 2011 (i.e., nine months after a post-2010 date of death). Because the IRS believes that most married couples will want the surviving spouse to be able to take advantage of the unused exclusion amount of the first spouse to die, the election is deemed made if a Form 706 (estate tax return) is properly and timely filed. No affirmative statement or other indication is necessary. Even if the estate isn't required to file a Form 706 (e.g., because the value of the gross estate is less than the exclusion amount), the Form 706 must be filed in ordered to make the election. For estates that aren't required to file a Form 706, simply not filing the form will effectively prevent the making of the election.
WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:
- The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
- The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.
Credits, deductions, and related phase outs.
- For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
- The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
- The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
- For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.
|
Medical Savings Accounts (MSAs)
|
Self-only coverage
|
Family coverage
|
|
Minimum annual deductible
|
$2,100
|
$4,200
|
|
Maximum annual deductible
|
$3,150
|
$6,300
|
|
Maximum annual out-of-pocket expenses
|
$4,200
|
$7,650
|
The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.
Estate and Gift
For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.
The annual exclusion for gifts remains at $13,000.
Other Items
- The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
- Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.
Details on these inflation adjustments can be found in Revenue Procedure 2011-52, which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011.
Posted by
Amy Seger on Thu, Sep 22, 2011 @ 10:48 AM
The following is a summary of the most important tax developments that have occurred in the past three months that may affect your small business, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
Standard mileage rates increase for last half of 2011. The IRS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is increased 4.5¢ from 51¢ to 55.5¢ per mile for business travel from July 1, 2011 to Dec. 31, 2011 to better reflect the real cost of operating an auto in this period of rapidly rising gas prices. This rate can also be used by employers to reimburse tax-free under an accountable plan employees who supply their own autos for business use, and to value personal use of certain low-cost employer-provided vehicles. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense also increases 4.5¢ for the last half of 2011 from 19¢ to 23.5¢ per mile.
FUTA surtax is no longer in effect. Beginning July 1, 2011, the 0.2% federal unemployment tax (FUTA) surtax is no longer in effect. Thus, the FUTA tax rate, before consideration of state unemployment tax credits, is now 6.0%. Employers need to separately track FUTA taxable wages paid before July 1, 2011, and FUTA taxable wages paid after June 30, 2011, since the FUTA tax rates are different during those two periods. Employers whose FUTA tax is more than $500 for the calendar year need to make quarterly FUTA deposits. The next quarterly payment is due on Aug. 1, 2011, but that payment is based on taxable wages paid through June 30, 2011, so it will be computed using the 6.2% FUTA tax rate. However, the payment after that is due on Oct. 31, 2011, and it will be computed using the 6.0% FUTA tax rate if legislation is not enacted to retroactively reinstate the FUTA surtax beginning July 1, 2011.
Two bonus depreciation deductions for one expenditure. Under IRS regulations, businesses that trade in machinery or equipment for which they claimed bonus depreciation may qualify for another bonus depreciation deduction on the remaining depreciable basis if they swap for like-kind property that also is eligible for bonus depreciation. In effect, the business gets two bonus depreciation deductions for its expenditure on the traded-in property.
Real estate professionals allowed late election to aggregate rental real estate interests. The IRS has provided guidance that allows certain real estate professionals to make a late election under the regulations to treat all interests in rental real estate as a single rental real estate activity for purposes of the passive activity loss (PAL) rules. This election can make it easier to currently deduct losses from real estate activities. As a general rule, the election is made by filing a statement with the taxpayer's original income tax return for the tax year. However, under new guidance, a taxpayer meeting certain conditions can make a late election on an amended return.
Trust's investment advice fees. The Supreme Court has held that investment advisory fees paid by a trust were deductible only to the extent that they exceeded 2% of the trust's adjusted gross income (AGI), where the investment advisor didn't charge the trustee anything extra, or treat the trust any differently than it would have treated an individual. Thus, such expenses didn't qualify for the exception to the 2% of AGI limit in the tax law for costs paid or incurred in connection with the administration of a trust or estate that wouldn't have been incurred if the property weren't held in the trust or estate. However, for the sake of administrative convenience, the IRS has provided that, until final regulations are issued, nongrantor trusts and estates will not have to “unbundle” a fiduciary fee (i.e., separate the fee into components that are subject to the deduction limit and those that aren't). As a result, until the regulations are issued, affected taxpayers can deduct the full amount of a bundled fiduciary fee without regard to the 2% floor.
Tax Tips: Filing an Extension
If you can't meet the April 15 deadline to file your tax return, you can get an automatic six-month extension of time to file from the IRS. The extension will give you extra time to get the paperwork into the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.
To get the automatic extension, file Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 15 deadline, or make an extension-related electronic payment. You can file your extension request by phone or by computer, or mail the paper Form 4868 to the IRS.
You can file Form 4868 by phone anytime through April 15. You will need to provide certain information from your federal income tax return. The special toll-free phone number is 1-888-796-1074. Use Form 4868 as a worksheet to prepare for the call and have a copy of your federal income tax return available.
The system will give you a confirmation number to verify that the extension request has been accepted. Put this confirmation number on your copy of Form 4868 and keep it for your records. Do not send the form to the IRS. As this is the area of our expertise, please contact us for more detailed information on how to file an extension properly!
photo rights
5 Tips for Early Preparation Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund.
There are five easy ways to get a good jump on your taxes long before the April 15 deadline rolls around:
- Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don’t forget to save a copy for your files.
- Get the right forms. They’re available around the clock on IRS.gov in the Forms and Publications section.
- Take your time. Don’t forget to leave room for a coffee break when filling out your tax return. Rushing can mean making a mistake — and that can be expensive!
- Double-check your math and Social Security number. These are among the most common errors on tax returns. Taking care on these reduces your chances of hearing from the IRS.
- Get the fastest refund. When you file early, you get your refund faster. Using e-filing with direct deposit gets you a refund in half the time as paper filing.
photo by
Teegardin
Our Commitment
We believe in the value of relationships. We view every client relationship like a partnership, and truly believe that our success is a result of your success.
We are committed to providing close, personal attention to our clients. We take pride in giving you the assurance that the personal assistance you receive comes from years of advanced training, technical experience and financial acumen. Our continual investment of time and resources in professional continuing education, state-of-the-art computer technology and extensive business relationships is indicative of our commitment to excellence.
Vision Statement
We are a team of trusted professionals endeavoring to -
- Surpass the expectations of our clients through a menu of value-driven services, state of the art technology and professional skills,
- Service our clients with respect, smiles, understanding and enthusiasm,
- Improve the quality of life in our community through active participation in business, service and charitable organizations.