Posts Tagged ‘Tax’
In Accounting & Finances,Business,Culture,Family,Insurance & Liability,Taxes on November 23, 2012 by Sufen Wang Tagged: Emergency management, Employment, Gross income, Hurricane Sandy, Private foundation, Tax, Tax exemption, Taxable income
Hurricane Sandy Qualifies as a Disaster: Victims Given Much-Needed Tax Relief
Just because Hurricane Sandy has disappeared from the Doppler radar does not mean its aftermath dropped off the map. Almost a month has passed, but many East Coast residents are still picking through debris on their lawns and others will be homeless for the holidays. The storm really was a disaster in many ways – which is why it has been designated as a “qualified disaster for federal tax purposes.”
That’s actually good news: victims can exclude qualified disaster relief payments received from their employer (or anyone else for that matter) from their taxable income. So any payments used to repair homes or repair/replace the contents not covered by insurance, would not be included in the individual recipient’s gross income. This is also the case with any payments received for uninsured personal, family, living, or funeral expenses resulting from the storm. As a result, hurricane victims won’t have to worry about paying extra later when they’ve already lost so much.
Hurricane Sandy being named a “qualified disaster” will also help anybody trying to help the storm’s victims. Now, employer-sponsored private foundations can provide disaster relief to employee-victims in areas affected by the hurricane without having to worry that their tax-exempt status will change. An official list of those affected areas can be found here.
This tax relief is nice, but assistance for Hurricane Sandy victims shouldn’t stop there. Every cent does count, so donate whatever you can. Or if you don’t have a lot of money, volunteer a little of your time. It’s the season of giving after all.
Happy Thanks–Giving….
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Taxes on November 19, 2012 by Sufen Wang Tagged: FTA, Internal Revenue Service, irs, IRS tax forms, Tax, Treasury Inspector General for Tax Administration, Waiver
The IRS Made it Hard to Find…
Failed…
That’s the only word to describe the IRS’ actions concerning penalty forgiveness. How else could you explain forgetting to inform 1.45 million taxpayers that they qualified for and had a right to ask for relief from tax penalties totaling $181 million? If you’re like most people and have never heard of this tax penalty relief, here’s the reason why:
The IRS fines taxpayers when they don’t file a tax return or pay the full tax shown on any tax return. However, any taxpayers who have demonstrated full compliance over the previous three years can have these fines waved in something known as “first-time abate” (FTA). The only catch is that you need to first request the penalty waiver – and that’s hard to do if you don’t even know the waiver exists.
And the IRS has certainly kept its lips zipped and its fine print invisible. The potential penalty relief is not mentioned anywhere on Form 1040, nor is it on the IRS website’s page about penalties, or on any balance due notices – not even within the text on those documents mentioning penalties for failure to file or pay. Even worse, over 90% of the people who actually did qualify for the penalty relief were not granted it.
Of course, the IRS’ failure does not mean that all taxpayers are perfect angels. The TIGTA found that a number of taxpayers who received the FTA waivers failed to fully pay off their taxes six months after the postponement. Accordingly, the TIGTA suggested that the IRS also use the FTA waiver as a compliance tool: make taxpayers aware of their potential to receive an FTA waiver based on their past compliance history and make receipt of the waiver dependent on taxpayers paying their current liability. That way, it’s a win-win situation for everyone involved.
If you to read all of the juicy legal tidbits regarding the TIGTA’s findings, you can check out the full report here.
On the Money, Sufen Wang, Wang Solutions
In Accounting & Finances,Business,Culture,Entertainment,Family,Taxes on August 20, 2012 by Sufen Wang Tagged: Internal Revenue Service, IRS tax forms, Renting, Residential Rental Property, Tax, Vacation property, Vacation rental
Rent Smart and Take a Vacation from Taxes:
Hopefully you were able to sneak away from work this summer and relax with your family at your vacation home: swimming, fishing, trying to keep up with the kids on breath-taking hikes. Unfortunately, it’s time to go home. The kids are tired of wearing sunscreen, and just want to go back to their air-conditioned rooms, and video games. Worse, your boss already sent you a dozen e-mails about what’s due next week. As you’re loading up the car, you wish you could find a renter to put the vacation home to good use for the last few weeks of summer.
Actually, that’s a very good idea. See, if you rent out your vacation home for fewer than 15 days a year, you don’t have to report it to the IRS. And if you don’t report something to the IRS, you don’t have to pay taxes on it. In other words, your rental income for 14 days or less is tax free.
14 is the magic number though (or more specifically, 14 days, 23 hours, 59 minutes, and 59 seconds). Anything over that and you must report the income on Schedule E. So if Joe Schmoe Renter is really enjoying the lake house after two weeks and wants to stay longer, you have to decide if you want to deal with the hassle of kicking him out, or the hassle of filling out Schedule E.
If you choose the latter option, things get a little confusing. You have to start looking at how much you used the vacation home for personal use versus how many days it was occupied by a renter. Then you’ll be able to figure out how much you can deduct, which expenses you can claim, and how you report them. You can check out how to do the math on Publication 527: Residential Rental Property. If only vacation could always be all play and no work…
In Accounting & Finances,Business,Culture,Education,Family,Insurance & Liability on July 31, 2012 by Sufen Wang Tagged: Employment, Internal Revenue Service, IRS tax forms, Self-employment, Social Security, Tax, United States, Withholding tax
At first, working during the summer sounds awful to most young adults. Then they usually stop complaining when their first paycheck arrives. However, they usually start complaining again once they realize that with income, comes taxes.
Meet Form W-4: Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paychecks to cover your income tax liability. You, along with everybody else, must fill out a W-4 when you start a new job – even if you work at that job for just one day.
Maybe you were lucky and found work as a waiter. Dealing with customers is difficult, but it also means you can get extra money from tips, and who’s going to say no to free,extra money? Unfortunately, you can’t just pocket your tips and forget about them– all tips you receive are taxable income which you must report.
Perhaps you decide you want to be your own boss for the summer. You start doing odd jobs around town: babysitting, mowing your friend’s dad’s lawn, walking your neighbor’spoodle up and down the street. Congratulations on being a young entrepreneur,but the earnings you receive from self-employment are still subject to income tax. And if you end up mowing a lot of lawns and make $400 or more from self-employment, you’ll have to pay a self-employment tax.
If you get a job as paperboy (or girl), at least you’ll be done with work by the time most of America wakes up for work. And teens have special rules when it comes to federal taxes. Because newspaper deliverers are generally treated as self-employed, they have to pay the self-employment tax. However, if you’reunder 18, and you don’t meet all of the carrier self-employment conditions, you are exempt from that tax.
Everyone has to start working at some point. If you have nothing do this summer except wait for school to start, then you might as well start mowing some lawns!
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Culture,Taxes on June 14, 2012 by Sufen Wang Tagged: Amazon, Amazon.com, california, Online shopping, Patterson, Sales tax, San Bernardino, Tax
with a Big Share of the Sales Tax….
Amazon could soon be your next-door neighbor. The online retailer already has plans to build fulfillment centers in San Bernardino and Patterson, CA. While these huge brick and mortar warehouses won’t attract tourists, they will generate much-needed local jobs and, even better, about $8 million for each city.
That’s because Amazon agreed to start collecting sales tax starting Sept. 15. Since all Amazon purchases by California customers will “originate” from San Bernardino and Patterson, those two cities will earn 100% of the city portion of the state-wide, standard sales tax that will be charged by the online merchant.
Except the cities won’t be keeping the full 100% – after all, Amazon needs a housewarming gift. Specifically, a sales-tax rebate of 75% from Patterson and 80% from San Bernardino. These deals are still in the works, but the high numbers are indicative of how desperate cities are to welcome major online retailers to the neighborhood.
However, Amazon as the new kid on the block isn’t necessarily a win-win situation. California law leaves it up to the merchant to pick the point of sale – that is, the community where they are physically housed which gets the share of the sales taxes. That means that online merchants can shop around the state for the best sales-tax rebate deal, while cities butt heads and try to out-bargain each other.
The result is that Amazon, previously so resistant to charging sales tax, could profit the most from the state sales tax – and not California itself. Now that’s hospitality at its best.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Taxes on May 20, 2012 by Sufen Wang Tagged: Fresh Start, Fresh Start Initiative, Internal Revenue Service, irs, Offer in compromise, OIC, Tax, YouTube
A Fresh Start from the IRS
If you still owe taxes, you might be feeling the heat from deadlines and failure-to-pay penalties. Luckily, the IRS is cool enough to give you relief in three areas with its “Fresh Start” initiative.
1. PENALTIES: That’s right folks, the Fresh Start Penalty Initiative gives eligible taxpayers a six-month extension (until Oct. 15, 2012) to fully pay their 2011 taxes, without any penalties. This won’t get you out of paying interest on your owed taxes. But as long as you pay those taxes and the interest by the October deadline, you won’t be charged any nasty failure-to-pay penalties.
All the people who aren’t getting a lot of business/unemployed people in the house raise your hands! Your bad luck is good news for you, because the Fresh Start Penalty Initiative is only available to: Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to this year’s April 17 tax deadline – OR – Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.
To find out more about this limited time offer, you’ll need to visit the IRS website and read over the brand spankin’ new Form 1127A.
2. INSTALLMENT AGREEMENT: The Fresh Start initiative also offers expanded and improved streamlined installment agreement provisions. Sounds fancy, but it actually makes things simpler. Under this option, more people will have more time to catch up on back taxes, which means fewer penalties for everyone involved. Best of all, streamlined installment agreements require limited financial information.
3. OFFER IN COMPROMISE: What’s the difference between an agreement and a compromise? Well, the “Offer in Compromise” is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Under the Fresh Start initiative, the IRS decided to get real and has been working on more common-sense changes to the OIC program.
Tired of reading, but want to find out more? Then grab some popcorn and enjoy the IRS Fresh Start YouTube video and the IRS video series “Owe Taxes: Understanding IRS Collection Efforts.” They’re not as boring as they sound.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Taxes on May 11, 2012 by Sufen Wang Tagged: Forbes, Internal Revenue Service, irs, Notice, Tax, tax return, Telephone number, TurboTax
It Shouldn’t Be…
You head out to your mailbox expecting to find this week’s issue of Forbes. Instead, you open the mailbox and see a notice from the IRS sitting on top. Don’t assume it’s going to be a hassle – most of these letters can be handled without having to call or visit an IRS office.The notice might order you to pay up, but often it will simply notify you of account changes. Whatever the problem, the letter will provide specific instructions about what you need to do.
Please read carefully. If you received a correction notice, compare it with the information on your tax return. If everything looks A-okay, there’s no need to reply – unless the notice tells you otherwise. If the correction looks incorrect, you’ll need to let the IRS know with a written explanation.
Just because you don’t need to contact the IRS, doesn’t mean you can’t. If you have a question, just call the telephone number in the upper right corner of the notice. Have your tax return handy when you call.
See, you’ll be relaxing and reading your magazine in no time – until the next IRS notice arrives in the mail.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Human Resources,Taxes on April 23, 2012 by Sufen Wang Tagged: accounting, Audit, Credit card, Internal Revenue Service, irs, Tax, tax return, United States
You’re Not Done Yet!
Now that you’ve filed your tax returns, you might be tempted to push your tax documents out of sight, out of mind. That’s not a good idea. Keeping good records after you filed is a good idea, just in case the IRS selects your returns for an audit.
In general, any documents relating to your federal tax returns should be saved for at least three years. This includes bills, credit card receipts, invoices, and any other records that support deductions or credits you claim on your return.
Don’t pull out the shredder for your whole filing cabinet just yet. To be on the safe side, you should keep any and all real estate refinancing loan docs, exchange calculation, escrow closing statements, inheritance or funds gifted to children, trust-related issues, stocks and bond trades, etc. for more than 3 years. Let’s try 5 to 7 years.
Finally, any and all payroll related records should be kept for about 10 years. Yes, you read that right: one whole decade. A few years ago I encountered a case where the State of California Employment Office (EDD) could not reconcile data on an employee, dating back to 1999 and decided to seek out my assistance via an audit. Fortunately, I was able to complete the audit, clean as a whistle, because I had all of the original records on the subject employee.
That just goes to show that employers should make room for keeping records. If you want to save space, go digital and scan all of the employees’ records – but always ensure that their signatures are clear and legible in the scanned images. However you do it, save your records now so you can save yourself some trouble in the future.
On the Record,
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Taxes on April 16, 2012 by Sufen Wang Tagged: Computer file, Credit card, Filename extension, Internal Revenue Service, irs, Overtime (sports), Tax, tax return
Can’t Pay? It’s Okay! Don’t Delay, File Your Returns Today
Tax returns will be due in less than 48 hours. Don’t have a panic attack if you can’t pay all the taxes you owe when you file. There are always solutions to problems….. But File, File, File – on time. It’s better to file right now and pay as much as you can, than to not file at all. If you don’t, you’ll be looking at a late filing penalty, in addition to a late payment penalty, and accrued interest charges. Or make sure you file an extension by April 17 with some estimated tax along with it.
This extension will give you an extra 6 months, until October 15. But remember this extension will only give you extra time, but not to reduce your tax liabilities. Interest and penalty will continue to accrue during this 6 months extended period on your tax responsibilities. Folks, DO NOT wait until October 15 to seek another extension, because there is NO extension on your extension…
Business Extension Form 7004.
Personal Extension Form 4868.
If you are not able to pay your taxes right now, still file your returns on time, and then request for an installment payment agreement from the IRS (for a fee, of course). You can also use this option when your bill arrives from the IRS. Remember the IRS also accept credit cards… In any case, File, File, File…
On the Money
Sufen Wang
Wang Solutions
In Accounting & Finances,Business,Taxes on April 11, 2012 by Sufen Wang Tagged: Alien (law), Filing Status (federal income tax), Head of Household, Internal Revenue Service, Itemized deduction, Marriage, Standard deduction, Tax
Find Your Perfect MatchTo itemize or not to itemize? That is the question with personal tax returns due April 17. When choosing between a standard or itemized deduction, you’ll want to pick the method that gives you the lower taxes.
To do this, first figure out the amount of your standard deduction. It’s based on your filing status and can change each year from inflation adjustments. For 2011, the amounts are:
Single: $5,800
Married Filing Jointly: $11,600
Head of Household: $8,500
Married Filing Separately: $5,800
Qualifying Widow(er): $11,600
These numbers are higher for taxpayers who are blind and/or 65 or older. If the total amount you spent on qualifying expenses is more than your standard deduction, you can usually benefit by itemizing.
However, not everybody gets to choose between itemized and standard deduction. Are you a nonresident alien, dual-status alien, or an individual who files returns for periods of less than 12 months due to a change in accounting periods? If you answered yes to any of the above, you are not eligible for the standard deduction.
Those in the “Married Filing Separately” category have some extra rules when it comes to deductions. If one spouse itemizes deductions, the other spouse must also itemize to claim their allowable deductions. Better dust off those communication skills and make sure you and your spouse are on the same page, that is “standard or itemized?” Hit that “refresh” button and make sure both of your tax returns are in sync….
Now that you’ve decided on standard or itemize, the next item on your list should be to finish your taxes…
On the Money,
Sufen Wang
Wang Solutions
Hurricane Sandy Qualifies as a Disaster: Victims Given Much-Needed Tax Relief
That’s actually good news: victims can exclude qualified disaster relief payments received from their employer (or anyone else for that matter) from their taxable income. So any payments used to repair homes or repair/replace the contents not covered by insurance, would not be included in the individual recipient’s gross income. This is also the case with any payments received for uninsured personal, family, living, or funeral expenses resulting from the storm. As a result, hurricane victims won’t have to worry about paying extra later when they’ve already lost so much.
Happy Thanks–Giving…. 
Wang Solutions 