CNN lists 6 new small business tax breaks

February 17, 2011

At JK Harris, we have a lot of small business clients who come to us for either back tax help through our tax resolution services or for bookkeeping services through JK Harris Small Business Services. And, since our company is technically considered a small business, we always keep an eye out for small business owners and their needs.

CNN Money ran an article a few weeks ago which talks about six new breaks for small business owners.

Own a business? 6 new tax breaks by Catherine Clifford

Doing your taxes stinks, right? No fun at all. But take note as you brace for your 2010 return: A handful of changes in the tax code could translate into a fatter refund check.

The Small Business Jobs Act, passed last September, and the historic health care reform law, passed in March, enacted hefty credits and deductions for capital investments and employee health insurance costs.

Here is a rundown of six new credits and deductions likely to affect the most small business owners. Read the rest of the article here.


Last minute payment of back taxes does not prevent prosecution in federal case

February 14, 2011

In a recent edition of Lawson Condell’s Tax, Accounting and Auditing update, the federal case of U.S. v. Quinn, DC KS, 107 AFTR 2d ¶2011-412 was discussed. Rosie Quinn owed IRS trust fund taxes (i.e. payroll taxes such as income taxes and FICA that are withheld from employees’ pay) that should have been paid on various dates between 2003 and 2005. Ms. Quinn decided to pay them on December 4, 2010 – which was coincidentally, just before she was set to go to court over her back payroll taxes.

The federal court ruled Ms. Quinn could still be prosecuted even though she paid the tax debt right before her trial date. According to the law, any person “required to collect, account for and pay over” trust fund taxes and who “willfully fails to collect or truthfully account for and pay over such tax shall in addition to other penalties provided by law, be guilty of felony and upon conviction thereof, be fined up to $10,000 or imprisoned not more than 5 years, or both…”

Ms. Quinn argued that she should not face such prosecution because she had paid the trust fund taxes. The court did not see things Ms. Quinn’s way – and ruled she could still be prosecuted for willfully avoiding paying the payroll taxes. While the court was probably thankful that Ms. Quinn came into compliance and repaid her tax debt, she could not avoid prosecution by paying at the last minute.

Moral of the story: Make sure to set aside and pay all trust fund taxes on time. If you cannot – seek professional assistance immediately!


What should you do if you don’t get your W-2?

February 10, 2011

From IRS Tax Tip 2011-28

The IRS has reminded taxpayers about the steps they should take if they have not received their Form W-2, Wage and Tax Statement. Employers had until Jan. 31 to send employees a 2010 Form W-2 earnings statement.

The agency suggested four specific actions for taxpayers to take.

First, contact the employer to inquire if and when the W-2 was mailed. After making contact, allow a reasonable amount of time for the employer to resend or to issue the W-2.

Second, if the W-2 is not received by Feb. 14, contact IRS for assistance at (800) 829-1040.

Third, even if the taxpayer still has not received the Form W-2, a tax return or request for an extension to file must be filed by April 18. If the Form W-2 is not received by the due date, and the taxpayer has completed the previous steps, the taxpayer may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Form 4852 should be attached to the return, with an estimate of income and withholding taxes.

Finally, a taxpayer may have to file Form 1040X, Amended U.S. Individual Income Tax Return. If a missing W-2 is received after the return was filed using Form 4852 and the information is different from what was reported on the return, the return must be amended. Complete details can be found here.
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IRS Offers Five Tips if You Changed Your Name Due to Marriage or Divorce

February 7, 2011

From the IRS website

(The IRS recently published this tax tip to remind taxpayers it is important to let the IRS know you have changed your last name. It is also important – if you are a client of JK Harris & Company – to contact us to update any name or address changes so that we can stay in contact with you.)

If you changed your name as a result of a recent marriage or divorce you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.

2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov, or by calling 800-TAX-FORM (800-829-3676).


JK Harris presents… News from the Net

January 27, 2011

There is a lot going on with tax news and financial information right now, so I decided to do a news round up – something I have not done on the Tax Resolution blog before. There were several informative links I found and wanted to share with our readers this morning. The first link was provided by one of our blog readers, Ann.

Ann covered the topic of “5 Tips for determining the amount a bank will lend you to buy a home.” Her article is an informative one that may help many of our clients who are getting out of tax debt so they can buy a home of their own. Thank you to Ann for providing this link.

MarketWatch covered some of the best tax tips in their Tax Guide 2011. This web guide offers advice on everything taxes. While it may be too late for your 2010 tax return, this helpful article can give you ideas on tax planning for 2011.

And, according to CNNMoney.com, it looks like Congress will be getting right to work on repealing the much hated IRS ruling with regard to 1099s. The rule, as it currently stands would have required small businesses to issue a 1099 IRS form not only to contracted workers, but also to any individuals or corporations from which they buy more than $600 in goods or services in a year. This rule was slated to take effect in 2012 and was much maligned by small business due to the amount of additional work it would cause. (Many small businesses would have had to hire additional staff to keep up with the paperwork alone.)

And last, but not least – the IRS’ tax tip of the day recommends taxpayers choose direct deposit to receive your tax refund faster. Visit the IRS website to read the full article.


Ten Tax Benefits for Parents

January 26, 2011

From the IRS Newsroom

Did you know that your children may help you qualify for some tax benefits? Here are 10 tax benefits the IRS wants parents to consider when filing their tax returns this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.

7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970, Tax Benefits for Education.

9. Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see the IRS website.

The forms and publications on these topics can be found at IRS.gov or by calling 800-TAX-FORM (800-829-3676).


National Taxpayer Advocate releases annual report to Congress

January 11, 2011

Last week, National Taxpayer Advocate Nina Olson released her annual report to Congress detailing the need for reform within certain parts of the IRS. Again this year, Ms. Olson has listed the need for tax reform as the number one priority for the IRS. She expressed concern over the IRS’ continued use of tax liens and the lack of alternative collections methods.

Ms. Olson’s report stated more than 1.1 million taxpayers had tax liens filed against them by the IRS in Fiscal Year 2010. Tax liens can be financially devastating to a taxpayer since the lien shows up on their credit report and will linger for seven years after the tax liability is paid. Once a taxpayer has a tax lien on their credit report, it can affect their ability to gain housing (owned or rented), employment, and can affect their ability to get affordable loans and insurance.

In the industry, we have seen an increased number of tax liens being filed and Ms. Olson’s report confirmed it. The NTA report states that tax lien filings have increased 550 percent in the past ten years.

You can view the JK Harris official press release on this issue at Expert Click.


Things to keep in mind when choosing a tax preparer

January 10, 2011

The IRS sent out its list today of what to look for when choosing a tax preparer. Remember, it is important to choose carefully when you decide to have your returns prepared by a professional. JK Harris offers tax preparation in conjunction with our tax representation services, small business services or as a stand alone service.

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Most return preparers are professional, honest and provide excellent service to their clients.

Here are a few points to keep in mind when choosing someone else to prepare your return:

1. Ask if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.New regulations require all paid tax return preparers including attorneys, CPAs and enrolled agents to apply for a Preparer Tax Identification Number — even if they already have one — before preparing any federal tax returns in 2011.

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 Professional Responsibility for enrolled agents.

3. Find out 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.

4. 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.

5. Provide all records and receipts needed to prepare your return. Most 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.

6. Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

7. 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.

8. 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.


New tax act retains some education benefits

January 10, 2011

According to a recent article on The Street by Joe Mont, the recently passed Tax Act included extensions of the Coverdale IRA, the American Opportunity Tax Credit and the Lifetime Learning Credit. If you are planning to go back to school, take advantage of these credits in 2011.

Read the whole article on The Street.


Top Ten Reasons to visit the IRS website

January 7, 2011

If you have never visited the IRS’ website, it is well worth your time. The website is a comprehensive, educational tool for learning about and assisting you with filing your federal returns. You can find out everything you need to know about filing your income taxes, what to do if you receive a notice from the IRS or how to file an overdue tax return.

Here is the IRS’ own Top Ten list of reasons why you should visit their website:

Don’t wait in line, go online. Point and click your way through the tax season. All you need is a computer and Internet access because the IRS website has a wealth of free information and online tax support. Here are the top 10 reasons to visit http://www.irs.gov.

1. If you find yourself working on your tax return over the weekend, there’s no need to wait to get a form or an answer to a question – visit the IRS website anytime. The website is accessible all day, every day.

2. Use Free File: Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s exclusively at http://www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $58,000 or less, you qualify for free tax software that is offered through a private-public partnership with manufacturers. If you made more or are comfortable preparing your own tax return, there’s Free File Fillable Forms, the electronic versions of IRS paper forms. Visit http://www.irs.gov/freefile to review your options.

3. Try IRS e-file: After 21 years, IRS e-file has become the safe, easy and most common way to file a tax return. Last year, 70 percent of taxpayers – 99 million people – used IRS e-file. Starting in 2011, many tax preparers will be required to use e-file and will explain your filing options to you. This is your chance to give it a try. IRS e-file is approaching 1 billion returns processed safely and securely. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, combine e-file with direct deposit and you get your refund in as few as 10 days. More information about e-file is available at http://www.irs.gov.

4. Check the status of your tax refund. Whether you chose direct deposit or asked the IRS to mail you a check, you can check the status of your refund through Where’s My Refund?

5. Find out how to make payments electronically. You can authorize an electronic funds withdrawal, use a credit or debit card, or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System to pay your federal taxes. Electronic payment options are a convenient, safe and secure way to pay taxes.

6. Find out if you qualify for the Earned Income Tax Credit. EITC is a tax credit for many people who earned less than $49,000. Find out if you are eligible by answering some questions and providing basic income information using the EITC Assistant.

7. Get tax forms and publications. You can view and download tax forms and publications any hour of the day or night.

8. Calculate the right amount of withholding on your W-4. The IRS Withholding Calculator will help you ensure that you don’t have too much or too little income tax withheld from your pay.

9. Request a payment agreement. Paying your taxes in full and on time avoids unnecessary penalties and interest. However, if you cannot pay your balance in full you may be eligible to use the Online Payment Agreement Application to request an installment agreement.

10. Get information about the latest tax law changes. Learn about tax law changes that may affect your tax return. Special sections of the website highlight changes that affect individual or business taxpayers.

Remember the address of the official IRS website is http://www.irs.gov. Don’t be confused by Internet sites that end in .com, .net, .org or other designations instead of .gov.


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