Category Archives: The IRS

When To Expect Your W-2, 1099 & More Tax Forms In 2017 (And What To Do If They’re Missing)

Tax season is open. Most tax reporting forms are either in the hands of taxpayers or in the mail. Here’s what you need to know about tax form due dates and what to do if yours is late.

Source: When To Expect Your W-2, 1099 & More Tax Forms In 2017 (And What To Do If They’re Missing)

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Do You Need To File A Tax Return In 2016? – Forbes

Do you need to file a tax return in 2016? Here’s what you need to know.

Check it out at Do You Need To File A Tax Return In 2016? – Forbes

Understanding Your Tax Forms 2016 – Forbes

Tax season is officially in full swing. The Internal Revenue Service (IRS) began accepting paper and electronically filed returns on Tuesday, January 19, 2016; the due date for tax returns is Monday, April 18, 2016 (not April 15, 2016, as in years past since there’s a holiday).

By now, you should have received most of your forms. If you’re still looking for yours, here’s a list of due dates for forms – along with information about what to do if yours are late.

Figuring out what’s on your tax forms – and how to report that information on your tax return – can be daunting. Follows is a quick primer for tax forms you might expect to receive in 2016:

Source: Understanding Your Tax Forms 2016 – Forbes

 

read more at forbes.com

Despite Complaints, Past Failures & Opportunities For Fraud, Congress Pushes Private Tax Collection – Forbes

Sometimes it feels like the government does this best. Failed policies are often recycled – often many times – in some sort of desperate attempt to make them work. Or to spend taxpayer dollars to promote self-serving agendas. Sometimes it’s hard to tell the two apart. The latest attempt to recycle failed policies is the outsourcing of tax debts to private collectors, an item which has re-appeared as part of the Highway Trust Fund Bill. Yes, you read that right. And no, the two really have nothing to do with each other. But this is, as you know, something that Congress loves to do (Remember those credit card reporting requirements that found their way into the Housing and Economic Recovery Act? Or last year’s Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that changed tax return due dates?). So, as Congress moves to slap another band-aid on the wounded Highway Trust Fund (we technically ran out of highway money on October 29), they decided to toss in a handful of other provisions in an effort to sneak them by taxpayers make it look like they were getting something done move things forward. One of the provisions buried inside the Highway Trust Fund is a requirement that IRS use private collectors to collect existing tax debts. Brilliant, right? Only not so much. It’s been tried and failed before (more on that in a bit) so it’s perplexing that Congress would re-introduce the policy except for well, politics. The House is not a big fan of the Internal Revenue Service right now – a cynic might view this as a move to systemically take down the IRS.

Source: Despite Complaints, Past Failures & Opportunities For Fraud, Congress Pushes Private Tax Collection – Forbes

Despite Complaints, Past Failures & Opportunities For Fraud, Congress Pushes Private Tax Collection – Forbes

Sometimes it feels like the government does this best. Failed policies are often recycled – often many times – in some sort of desperate attempt to make them work. Or to spend taxpayer dollars to promote self-serving agendas. Sometimes it’s hard to tell the two apart.

The latest attempt to recycle failed policies is the outsourcing of tax debts to private collectors, an item which has re-appeared as part of the Highway Trust Fund Bill. Yes, you read that right. And no, the two really have nothing to do with each other.

But this is, as you know, something that Congress loves to do (Remember those credit card reporting requirements that found their way into the Housing and Economic Recovery Act? Or last year’s Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that changed tax return due dates?).

So, as Congress moves to slap another band-aid on the wounded Highway Trust Fund (we technically ran out of highway money on October 29), they decided to toss in a handful of other provisions in an effort to sneak them by taxpayers make it look like they were getting something done move things forward.

One of the provisions buried inside the Highway Trust Fund is a requirement that IRS use private collectors to collect existing tax debts. Brilliant, right? Only not so much. It’s been tried and failed before (more on that in a bit) so it’s perplexing that Congress would re-introduce the policy except for well, politics.

The House is not a big fan of the Internal Revenue Service right now – a cynic might view this as a move to systemically take down the IRS.

Read more at Despite Complaints, Past Failures & Opportunities For Fraud, Congress Pushes Private Tax Collection – Forbes

Top 10 Tips for Starting a Small Business

1) Do what you love.

You’re going to devote a lot of time and energy to starting a business and building it into a successful enterprise, so it’s really important that you truly deeply enjoy what you do, whether it be running fishing charters, creating pottery or providing financial advice.

2) Start your business while you’re still employed.

How long can most people live without money? Not long. And it may be a long time before your new business actually makes any profits. Being employed while you’re starting a business means money in your pocket while you’re going through the starting a business process.

3) Don’t do it alone.

You need a support system while you’re starting a business (and afterwards). A family member or friend that you can bounce ideas off and who will listen sympathetically to the latest business start up crisis is invaluable. Even better, find a mentor or, if you qualify, apply for a business start up program such as The Self-Employment Program. When you’re starting a business experienced guidance is the best support system of all.

4) Get clients or customers first.

Don’t wait until you’ve officially started your business to line these up, because your business can’t survive without them. Do the networking. Make the contacts. Sell or even give away your products or services. You can’t start marketing too soon. (See Attracting New Business on a Shoestring Budget and The 7 Best Places to Find Clients for tips.)

5) Write a business plan.

The main reason for doing a business plan first when you’re thinking of starting a business is that it can help you avoid sinking your time and money into starting a business that will not succeed. (See Why You Need a Business Plan for other good reasons.)

Remember, you don’t have to work through a full scale business plan for each new business idea you come up with; my Quick-Start Business Plan, for instance, will let you test the potential of your business idea much more quickly.

6) Do the research.

You’ll do a lot of research writing a business plan, but that’s just a start. When you’re starting a business, you need to become an expert on your industry, products and services if you’re not already. Joining related industry or professional associations before you start your business is a great idea.

7) Get professional help.

On the other hand, just because you’re starting a business, doesn’t mean you have to be an expert on everything. If you’re not an accountant or bookkeeper, hire one (or both).(These Tips for Finding a Good Accountant may be useful.) If you need to write up a contract, and you’re not a lawyer, hire one. You will waste more time and possibly money in the long run trying to do things yourself that you are not qualified to do.

8) Get the money lined up.

Save up if you have to. Approach potential investors and lenders. Figure our your financial fall-back plan. Don’t expect to start a business and then walk into a bank and get money. Traditional lenders don’t like new ideas and don’t like businesses without proven track records.

9) Be professional from the get-go.

Everything about you and the way you do business needs to let people know that you are a professional running a serious business. That means getting all the accoutrements such as professional business cards, a business phone and a business email address, and treating people in a professional, courteous manner.

10) Get the legal and tax issues right the first time.

It’s much more difficult and expensive to unsnarl a mess afterwards. Does your business need to be registered? Will you have to charge GST or PST? Will you have to have Workers’ Compensation Insurance or deal with payroll taxes? How will the form of business you choose affect your income tax situation? Learn what your legal and tax responsibilities are before you start your business and operate accordingly.

Following the advice on starting a business above will make starting a business both a smoother, less stressful process and go a long way towards ensuring the business you start lasts and thrives.

via Top 10 Tips for Starting a Small Business.

12 Expenses That Aren’t Tax Deductions For Most Taxpayers

“Can I deduct the cost of taking care of my cat? She’s like a member of the family.”

Over the course of the year, I’ve received a bunch of questions – like the one above – about deductions. My answer is often, “It depends.” That’s because facts and circumstances matter: deductibility may hinge on such specifics as your occupation, whether you’re self-employed, the location of your office or whether you have a diagnosed medical condition.

But for many taxpayers, the ones without quirky jobs or unusual circumstances, the answers are largely the same. With that in mind, I’ve compiled a list 12 expenses that you likely can’t deduct on your individual federal income tax return:

Pets. No matter how much your four-legged, scaly or feathered friend feels like a member of your family, the cost of caring for your pet – from food to vet visits – is generally not deductible. The IRS considers pet-related expenses routinely personal. A few exceptions do apply, including service animals and guard dogs.

Alarm systems. Generally, there is no tax deduction for installing an alarm system at your home. Similarly, the monthly fees are not deductible. If, however, the property that you alarm is a rental or commercial property, the installation and the monthly fees are deductible as the cost of doing business. Additionally, if you take the home office deduction, then you may claim the pro rata portion of the alarm system on your taxes, just as you do with other home office expenses; the portion attributable to the non-office portion of your home is still not deductible.

Gym memberships. Most weight loss programs are only deductible as a treatment for a specific disease diagnosed by a physician. The diagnosis is key and the program must be specifically ordered by the doctor: if your doctor merely advises you to lose some weight to protect your health, that’s not sufficient. That said, you cannot deduct gym or health club membership dues even if your doctor orders you to up your activity level. Some separately stated activity fees, such as those for water aerobics, however, could be deductible if prescribed by a doctor.

Maternity clothes. Clothing for work is only deductible if the sole purpose of the clothing/uniform is clearly for business purposes (think branded uniforms). It’s not deductible if you could wear the clothes outside of your workplace even if you don’t. That goes for maternity clothes, too. If you have to stock up on maternity clothes – including suits for court or coats for outdoor use – to get you through your pregnancy, that cost is not deductible even if you don’t plan to wear them again.

Driver’s license fees. While state and local taxes are deductible, including certain personal and real property taxes, associated costs and fees may not be. That includes your driver’s license fees and car inspection fees. Similarly, you can’t deduct the cost of licensing dogs, cats or other animals – even if they’re considered property in the state where you live.

Plastic surgery. You cannot deduct the cost of surgeries to simply look or feel better; the procedure must be a treatment for a specific disease diagnosed by a physician. But plastic surgery for non-medical purposes (including breast augmentation surgery for cosmetic reasons) is never a deductible expense.

Political contributions. You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. And don’t try to be tricky: you can’t get around the rules by claiming it’s for business or other purposes. The IRS clearly states that advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible.

Commuting expenses. You cannot deduct the costs of getting to and from work, no matter if you take a bus, trolley, subway, taxi, or drive your own car. Commuting expenses to and from your regular place of work (as opposed to travel for work) are never deductible.

Private school. Private school expenses (including tuition) are not deductible. However, expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are deductible for purposes of the child care tax credit if they otherwise qualify as child care. The IRS takes the position in Pub 503 (downloads as a pdf) and in the Regs that expenses to attend private or parochial kindergarten or higher grades are not deductible (I happen to think that’s not always the case).

Babysitting. Occasional babysitting so that you can catch a movie that isn’t animated (!) or enjoy a nice meal may be a much-needed expense, but it’s still considered personal in nature and not deductible. This should be distinguished from childcare that allows you to work or look for work: those expenses may be count towards the child and dependent care credit.

Vitamins. For federal income tax purposes, you can only deduct qualifying medical expenses: qualifying medical expenses include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. That includes any medicine or drug which requires a prescription of a physician for legal use. Over the counter meds – even if you need them – don’t count unless prescribed by a doctor (like gym memberships, the prescription is required, a mere mention or suggestion isn’t sufficient).

Child support. Child support is tax neutral. It is neither tax deductible to the payor nor taxable to the recipient. Spousal support, on the other hand, is both tax deductible to the payor and taxable to the recipient. You don’t get to choose which is which at tax time: that’s up to the judge or it must be memorialized in agreement.

 

It’s worth mentioning again that some taxpayers can claim certain of these deductions under specific circumstances (home offices, diagnosed medical conditions, special occupations) but these deductions are off-limits for your average taxpayer. If you think they might apply to you – or you’re not sure – it’s always best to consult with your tax professional.

–from Kelly Phillips Erb via Forbes.com. For more info go to 12 Expenses That Aren’t Tax Deductions For Most Taxpayers.

Impact of Sec. 1411 on S Corporations and Their Shareholders

One of the more significant changes to the tax landscape in recent years is the new 3.8% tax on net investment income under Sec. 1411. This tax, which was further clarified in recently finalized regulations, will affect many entities and taxpayers including S corporations and their shareholders. The following discussion outlines noteworthy aspects of these rules pertaining to S corporations and their owners.

In General

Effective for tax years beginning on or after Jan. 1, 2013, Sec. 1411 imposes a tax of 3.8% on the lesser of (1) an individual’s net investment income or (2) the excess (if any) of the taxpayer’s modified adjusted gross income over certain thresholds. Sec. 1411(c) defines net investment income as the sum of:

  1. Gross income from interest, dividends, annuities, royalties, and rents (other than such items that are derived in the ordinary course of a trade or business that is not a passive activity with respect to the taxpayer or trade or business of trading in financial instruments or commodities);
  2. Gross income from passive activities under Sec. 469 with respect to the taxpayer or from the trade or business of trading in financial instruments or commodities; and
  3. Net gain attributable to the disposition of property other than property held in a trade or business that is not a passive activity with respect to the taxpayer or a trade or business of trading in financial instruments or commodities.

Net investment income is reduced by certain allowable expenses, as detailed in Regs. Sec. 1.1411-4(f).

Issued on Dec. 2, 2013, the final regulations under Sec. 1411 (T.D. 9644) generally apply to tax years beginning after Dec. 31, 2013. While the final regulations clarify many areas of uncertainty under the prior proposed regulations, several issues remain for S corporations and their shareholders to consider with respect to Sec. 1411.

Impact of Sec. 1411 on S Corporations and Their Shareholders.

Order Your IRS Forms Online for Free

If you’re an employer, you’ve probably purchased those red tax forms at one point or another from an office supply house. They aren’t cheap…so why not get them for free?

You may not know that you can order W-2’s, 1099’s and other forms online from the IRS, and they will be mailed directly to you for nothing. (After the IRS is up and running again, of course.)

The website for ordering is here: http://www.irs.gov/Businesses/Online-Ordering-for-Information-Returns-and-Employer-Returns

I recommend ordering them soon so you’ll be ready when the tax year ends. It does take a week or so (normally) to get them.

(I’m going to order some today and we’ll see how long it does take…)

 

 

IRS: Pay me now…I’ll pay you later.

The Internal Revenue Service has temporarily stopped sending out tax refunds, and the Tax Court has suspended operations during the federal government shutdown, as lawmakers in Congress continue their battle over delaying or defunding “Obamacare” (the Affordable Care Act) for a year.

The Internal Revenue Service reminded taxpayers that the October 15th deadline remains in effect for people who requested a six-month extension to file their tax return.

While the current government shutdown has shuttered many offices and turned off many services, it “does not affect the federal tax law, and all taxpayers should continue to meet their tax obligations as normal,” the IRS said in a statement.

Over 12 million people filed for automatic six-month extensions earlier in 2013, most of whom will have to file by the October 15 deadline. Some groups do have more time, the IRS noted, including members of the military and others serving in Afghanistan or other combat zones, as well as people in parts of Colorado affected by severe weather, flooding, landslides and mudslides.

The service encouraged taxpayers to e-file their returns, but said that it would accept returns both electronically or on paper, and accept and process payments accompanying either type of return. It will not be able to issue refunds, however, until normal government operations resume.

–from Accounting Today for the Web CPA