CNN lists 6 new small business tax breaks

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.

Think you have back tax debt? Day trader nailed with $172 million bill for back taxes

From The New York Daily News

Marcos Esparza Bofill was shocked to find out he owed over $172 million in back tax debt. Esparza Bofill moved to New York i from Spain in 2006 when he decided he wanted to try his hand at day-trading. After one year – and barely surviving on a “beer budget” and no profit – he decided to go back home to Spain.

Esparza did not know he was required to file a tax return during the year he was swapping stocks. But, the IRS was tracking his every move – and they assumed that Esparza made pure profit on his day trading transactions. This would have given Esparza Bofill a whopping $500 million in income.

“Who is the IRS?” Esparza was said to have asked of his American friends. One friend commented that Esparza thought he was kidding when he told him the IRS had hit him with a $172 million dollar tax bill.

Marc Albaum, a Manhattan CPA points out that the tax lien will probably be completely resolved when Esparza Bofill files his tax return for the year in question.

“When you do not file a return, the IRS assumes you made pure profit,” said Albaum. “Now the remedy here is simply to file (a tax return). He could wipe out anything he owes.”

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

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

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).

Honest Dialogue

by Ike Nobel, JK Harris Tax Consultant

I had a gentleman visit my office few weeks ago who had returned to JK Harris to contract for our tax resolution services. He met with me about a year ago, but at that time, had opted to try to handle his tax problem on his own. Time passed…fast forward to our meeting a few weeks ago. The gentleman returned to my office after having spent much time trying to handle his tax issue with the IRS on his own – until finally , he reached frustrated, he reached his boiling point and realized it was time to revisit with me to get help through JK Harris.

During the appointment, the client presented me 42 letters he recently received from an IRS office in Oklahoma. He also expressed that his recent contact from the IRS included a visit from an IRS agent to his home in New Jersey, letters from an IRS office in Kansas City regarding a defaulted arrangement, phone calls from an IRS office in Seattle, requests to send documents to the IRS in Fresno, California, and additional requests to forward payments to Andover, MA. He felt completely overwhelmed, until he contracted with JK Harris to help him.

Note: Since this client has just recently contracted with JK Harris, we will post the outcome of his case when his case comes to a close.

Things to keep in mind when choosing a tax preparer

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.

Top Ten Reasons to visit the IRS website

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.

IRS sends out 2011 Top ten tax tips

IRS Tax Tips 2011-01:

It’s that time of the year again, the income tax filing season has begun and important tax documents should be arriving in the mail. Even though your return is not due until April, getting an early start will make filing easier. Here are the Internal Revenue Service’s top 10 tips that will help your tax filing process run smoother than ever this year.

1. Start gathering your records Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return.

2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return.

3. Use Free File: Let Free File do the hard work for you with brand-name tax software or online fillable forms. It’s available 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.

4. 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.

5. Consider other filing options There are many different options for filing your tax return.You can prepare it yourself or go to a tax preparer.You may be eligible for free face-to-face help at an IRS office or volunteer site.Give yourself time to weigh all the different options and find the one that best suits your needs.

6. Consider Direct Deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.

7. Visit the IRS website again and again The official IRS website is a great place to find everything you’ll need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes.

8. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax on the IRS website. It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.

9. Review! Review! Review!Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return. Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors made by taxpayers.

10. Don’t panic! If you run into a problem, remember the IRS is here to help. Try http://www.irs.gov or call toll-free at 800-829-1040.

Tax resolution blog adds new feature

by Gina Anton, Director of Corporate Communications

Happy 2011! In the spirit of the New Year and a fresh new start, I would like to introduce a new feature on our tax resolution blog – Honest Dialogue: Stories from our Tax Consultants. Honest Dialogue will feature information from our consultants on what the most common tax issues they see are, the most frequently asked questions they get and stories from the field – situations they’ve seen where we have been able to help our clients with their back tax problem.

Our tax consultants are the second person to speak with our clients (second only to speaking with one of our appointment setters for their appointment), before the actual work begins on our clients’ cases. Often, our consultants are counselor, confidante and friend to their clients who have been burdened with their back tax liability for quite some time. Our consultants are very familiar with the tax issues our clients deal with and are familiar with the fear the client faces of the IRS and its tactics.

In the first installment later this week, one of our consultants, Antonia Martin, will tell us what the top five questions about tax resolution she gets from her clients are and how she answers those questions.

If you have a tax question you would like JK Harris to answer, please submit it to us here or via email at jkharris@jkharris.com.

Happy New Year!

TIGTA Reports Possible $576 Million in Back Taxes Owed From Non-filers For 2007

According to an article published by Accounting Today, the Treasury Inspector General released a report stating the IRS could unearth up to $1.3 billion in unpaid taxes by making better use of currency report data. These reports could help pinpoint non-filers who have generated enough income from certain financial transactions, but have failed to file a tax return.

TIGTA estimated over 40,000 potential non-filers in 2007 could owe as much as $576 million in back taxes, penalties and interest, while under-reporters could owe as much as $758 million in back taxes, penalties and interest for the same period. Read the full article below:
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The Internal Revenue Service could unearth as much as $1.3 billion in unpaid taxes, penalties and interest by making better use of currency report data to identify taxpayers with potentially unreported income, according to a new government report.

The report, by the Treasury Inspector General for Tax Administration, assessed the IRS’s use of currency reports to address nonfilers and under-reporters. Banks and other financial institutions are required to file reports on currency and suspicious transactions, which are in turn used by law enforcement officials to battle a range of financial crimes, such as narcotics trafficking, tax evasion and financing of terrorist activities.

TIGTA identified a number of individuals who have enough cash to engage in currency transactions totaling at least $20,000, but did not file tax returns even though they appeared to have a filing requirement.

TIGTA also identified a number of other individuals engaged in similar currency transactions who filed tax returns, but reported income that did not appear sufficient to cover their basic living expenses. The difference between their income and expenses raises questions about whether additional income sources should have been reported.

TIGTA estimated that 42,804 potential nonfilers may collectively owe as much as $576 million in delinquent taxes, penalties and interest for 2007. TIGTA also estimated there are 78,770 potential under-reporters who may owe as much as $758 million in additional taxes, penalties and interest for 2007.

TIGTA recommended that, as resources become available, the IRS should explore the feasibility of making greater use of currency transaction reports to pursue additional nonfilers and under-reporters for audit.

IRS management agreed with the recommendation. However, IRS management did not commit to pursuing additional potential under-reporters for audit, nor did they agree with the outcome measure because of concerns with the selection criteria used. TIGTA maintains that the potential $1.3 billion of increased revenue is reasonable considering the assumptions used to make the estimate.

Posted by JK Harris