by steve | Jun 20, 2010 | Tax News
Affordable Care Act Provides Expanded Tax Benefit to Health Professionals Working in Undeserved Areas
As part of a larger Administration announcement on efforts to strengthen the health care workforce, the Internal Revenue Service today announced that under the Affordable Care Act health care professionals who received student loan relief under state programs that reward those who work in undeserved communities may qualify for refunds on their 2009 federal income tax returns as well as an annual tax cut going forward.
?Doctors and nurses who choose to practice in undeserved areas make a great contribution to their local communities,? Commissioner Doug Shulman said. ?By expanding the tax exclusion for student loan forgiveness, the Affordable Care Act provides an even greater incentive to practice medicine in areas that need it most.?
The Affordable Care Act included a change in the law, effective in 2009, that expands a tax exclusion for amounts received by health professionals under loan repayment and forgiveness programs. Prior to the new law, only amounts received under the National Health Service Corps Loan Repayment Program or certain state loan repayment programs eligible for funding under the Public Health Service Act qualified for a tax exclusion.
The Affordable Care Act expands this tax exclusion to include any state loan repayment or loan forgiveness programs intended to increase the availability of health care services in underserved areas or health professional shortage areas and makes this exclusion retroactive to the 2009 tax year.
Health care professionals participating in these programs who have reported income from repaid or forgiven loan amounts on their 2009 returns, possibly after receiving a Form W-2, Wage and Tax Statement, or Form 1099, may be due refunds. Those who believe they qualify for this relief may want to consult their state loan program offices to determine whether the program is covered by the new law.
Health care professionals who have not yet filed for 2009 need not report eligible loan repayment or forgiveness amounts when they file. Those who have already filed may exclude eligible amounts by filing Form 1040X, Amended U.S. Individual Income Tax Return. This form can be downloaded from this website or obtained by calling the IRS toll-free at 1-800-TAX-FORM (1-800-829-3676). Individuals filing Form 1040X to claim this exclusion should write ?Excluded student loan amount under 2010 Health Care Act? in the Explanation of Changes box.
Health care professionals may request an employer or other issuer to provide a Form W-2c, Corrected Wage and Tax Statement, or 1099 and may attach the corrected form to the Form 1040X. However, the Form 1040X may also be filed without attaching a corrected form.
An individual whose employer withheld and paid taxes under the Federal Insurance Contributions Act (FICA) on payments covered under the new exclusion may request that the employer seek a refund of withheld FICA on the employee?s behalf. And because employers also pay a portion of the FICA tax, the employer also may also be entitled to a refund.
To obtain a refund, an employer should file a separate Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund, for each Form 941, Employer’s Quarterly Federal Tax Return, which needs to be corrected. An employer filing a Form 941-X is also required to file a Form W-2c for each employee who benefits from the exclusion.
This blog is taken from the IRS professional site.
by steve | Jun 19, 2010 | IRS Tax Advice
Type of IRS Audits by IRS Office Audit, Field Examination,Matching documentation
1. The first type of audit examination is called the office audit. You will receive a notice from IRS instructing you when and where this audit takes place. Usually this is in the local IRS never your place of residence. The audit is usually kicked out because something in the IRS computer system did not like something on your return, it usually did not match up to the local profile. The DIF score was to high. The local examiner examines the tax return and you will have appeal rights should you chose.
2. The field examination. This audit is going to be more complicated and a specially trained examiner will conduct this audit. Usually, these cases are business related or more high end of high dollar. Some of these audits take months. There is no way the average person should ever represent themselves on this type of audit.
3. The matching documentation program. IRS has a system that matches up all W-2’s, 1099’s and various other documents filed within their system. This is all done or conducted by the mail. A footnote here, this program usually runs a year or two years after the due dates of the filing of your tax return.
Tips for Audits
* make sure the audit is limited only to the periods and the issues they spell out in the letter
* make sure they do not ask to audit other years
* make sure IRS does not drag “other” into your audit
* if you are going to owe money as a result of the IRS audit or examination is there a affordable plan to pay IRS on the back taxes.
* make sure you know your appeal rights if you do not agree with the decision.
Since the average person going into an audit has a natural fear the reality of this situation is that the taxpayer has no idea what to expect. The IRS audit seems like such a simple process. But all agents are trained to look for other issues, maybe on back tax years or tax years going forward. Many times they will drag the IRS audit or examination on to include the current tax year. There are many tricks the IRS uses on to the unsuspecting taxpayer. IRS agents vary and many of them conduct clean , smooth, simple audit but you have no idea who your luck of the draw will be.
How Fresh Start Tax helps you:
* we review all your tax records before the IRS examine and understand the strengthen and weakness of the tax years involved
* develop a plan of action how we will best handle the audit examination
* keep the audit to the years involved in the IRS initial request
* close the audit before a new tax year starts
* keep all penalties and interest as low as possible
* if taxes are owed we come up with a settlement plan
Call us today 1-866-700-1040
by steve | Jun 18, 2010 | IRS Tax Advice, Tax News
IRS and the Effective Tax Administration Offers in Compromise
General Overview Effective Tax Administration Offers in Compromise
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This IRS section provides guidance for IRS offer examiners in considering effective tax administration Offer in Compromise requests.It is a very little used Offer in Compromise.
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Offer in Compromise, Form 656, and Form 656?A, Additional Basis for Compromise, should be completed by taxpayers requesting consideration of an offer to compromise based on effective tax administration.( ETA)
3. This is an offer in compromise is rarely used but a very effective tool to settle cases.
Considering the Effective Tax Administration Issue
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If there are no grounds for compromise under the doubt as to collectibility or doubt as to liability provisions, a compromise may be entered into to promote effective tax administration when compromise of he liability will not undermine compliance with the tax laws, and:
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Collection of the full liability will create economic hardship within the meaning of Treasury Regulation section 301.6343?1; or,
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Regardless of the taxpayer’s financial circumstances, exceptional circumstances exist such that collection of the full liability will be detrimental to voluntary compliance.
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Factors supporting a determination that compromise would not undermine compliance with the tax laws include:
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Taxpayer does not have a history of noncompliance with the filing and payment requirements of the Internal Revenue Code
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Taxpayer has not taken deliberate actions to avoid the payment of taxes; and,
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Taxpayer has not encouraged others to refuse to comply with the tax laws.
These factors should be considered but no minimum compliance requirement exists.
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Factors supporting a determination of economic hardship include:
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Taxpayer has a serious illness that renders the taxpayer incapable of earning a living and it is reasonably foreseeable that taxpayer’s financial resources will be exhausted providing for care and support during the course of the illness;
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Although taxpayer has certain assets, liquidation of those assets to pay outstanding liabilities would render the taxpayer unable to meet basic living expenses;
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Although taxpayer has certain assets, the taxpayer is unable to borrow against equity in those assets and disposition by seizure/sale of the assets would have sufficient adverse consequences such that enforced collection is unlikely.
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The following examples illustrate cases in which collection of the full liability will create economic hardship and could qualify for Effective Tax Administration
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Taxpayer is disabled and lives on a fixed income that will not, after allowance of adequate basic living expenses, permit full payment of his tax liability under an installment agreement. Taxpayer also owns a modest house that has been especially equipped to accommodate his disability. Taxpayer’s equity in the house is sufficient to permit payment of the liability he owes. However, because of his disability and limited earning potential, taxpayer is unable to obtain a mortgage or otherwise borrow against this equity. In addition, because the taxpayer’s home has been specially equipped to accommodate his disability, forced sale of the taxpayer’s residence would create severe adverse consequences for the taxpayer, making such a sale unlikely. Taxpayer’s overall compliance history does not weigh against compromise.
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Taxpayer has assets sufficient to satisfy the tax liability. Taxpayer provides full time care and assistance to her dependent child, who has a serious long-term illness. It is expected that the taxpayer will need to use the equity in her assets to provide for adequate basic living expenses and medical care for her child. Taxpayer’s overall compliance history does not weigh against compromise.
3.
Taxpayer is retired and his only income is from a pension. The taxpayer’s only asset is a retirement account, and the funds in the account are sufficient to satisfy the tax liability. Liquidation of the retirement
4. Each case is determined on its own merit and no two cases are alike.
The collection division of the Internal Revenue Service handles these cases
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Collection has jurisdiction over offers based on Effective Tax Administration. Collection will retain offers based on economic hardship, and Detriment to Voluntary Compliance offers will generally be forwarded to Examination for consideration.
2. 90% of all these Offer in compromise are worked by the Collection Division.
There are so many cases out there right now that qualify for Effective Tax Administration that the American public has know idea their case can be settled for cheap.It should also be noted there are no guidelines for Effective Tax Administration , just judgment involved in the settling of these Offers in Compromise. A true hardship must be documented but these cases do go through and get accepted.
If you have a case the qualifies, call Fresh Start Tax today 1-866-700-1040
by steve | Jun 17, 2010 | IRS Tax Advice, Tax News
IRS Collection Procedural Questions on Late filing Penalties and Interest
Question: What kind of interest and penalties will I be charged for filing and paying my taxes late?
Answer: Interest is compounded daily and charged on any unpaid tax from the due date of the return until the date of payment.
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The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months.
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For current interest rates, go to News Releases and Fact Sheets and find the most recent Internal Revenue release entitled Quarterly Interest Rates.
In addition, if you filed on time but didn’t pay on time, you’ll generally have to pay a late payment penalty.
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The late payment penalty is one-half of one percent of the tax (0.5%) owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent.
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You will not have to pay the penalty if you can show reasonable cause for the failure.
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The one-half of one percent rate increases to one percent if the tax remains unpaid after several bills have been sent to you and the IRS issues a notice of intent to levy.
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Currently, if you filed a timely return and are paying your tax via an installment agreement, the penalty is one-quarter of one percent for each month, or part of a month, that the installment agreement is in effect.
If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause.
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The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to 25%.
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The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return.
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After five months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid.
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The total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed. What a rip off!!!!!!!!!!!!!!!!!!
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If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 ($135 for returns required to be filled after December 31, 2008) or 100% of the tax required to be shown on the return.
If you have any questions, call Fresh Start Tax today. 1-866-700-1040
by steve | Jun 16, 2010 | IRS Tax Advice
Business Expenses allowed by the IRS,
Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.
But, What Can A Company Deduct?
According to Internal Revenue Service to be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.
It is important to separate business expenses from the following expenses according to the Internal Revenue Service
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The expenses used to figure the cost of goods sold,
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Capital Expenses, and
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Personal Expenses.
Cost of Goods Sold
If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.
The following are some of the types of expenses that go into figuring the cost of goods sold.
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The cost of products or raw materials, including freight
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Storage
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Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
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Factory overhead
Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.
This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.
Capital Expenses
You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. There are, in general, three types of costs you capitalize.
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Business start-up cost
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Business assets
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Improvements
Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible.
according to IRS, if you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information.
Business Use of Your Car
If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year mileage rates see the Standard Mileage Rates.
Other Types of Business Expenses
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Employees’ Pay – You can generally deduct the pay you give your employees for the services they perform for your business.
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Retirement Plans – Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’ retirement.
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Rent Expense – Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
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Interest – Business interest expense is an amount charged for the use of money you borrowed for business activities.
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Taxes – You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
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Insurance – Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
There are so many rules and regulations regarding the different expenses, you should be aware that only a true tax professional can give you the correct and safest advise. Also a true tax professional can make sure your tax return stays off of the IRS radar screen. Call us today. Fresh Start Tax 1-866-700-1040
