Ability to e-file may depend on the length of your name

May 16, 2013 at 1:39 pm (Business, Business Taxes, General Tax Information)

The Modernized E-file System (MeF) that the IRS, states and all tax software use has a required limit of 35 characters for a name, title or description (some states limit to fewer). The main problem is e-filing an application where your name or the name of your business/nonprofit will be set in stone based on what you put in that box, as with an Employer Identification Number (EIN). The IRS, however, only looks at the first 4 characters of the name when an actual return is e-filed. In many cases if your name is too long, you can paper file your application. However, in the case of an Exempt Org. postcard, you have no choice but to e-file.

Therefore, before registering or incorporating your business or nonprofit, you will want to keep the character limit in mind. It is a good idea to also ask the state where you may need to apply for certain tax status or numbers their character limitation as well. If you want to keep a long name, then create a shortened version of it as a DBA to use on your applications and returns.

When you apply for a number with your legal name, you may want to adjust it to fit the character limit as well so that your name, once altered, is as accurate as possible.

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Calculating Quarterly Estimated Taxes for the Self-Employed

March 20, 2013 at 9:00 am (Business Taxes, General Tax Information)

It’s that time of year again when taxpayers often pay an underpayment penalty with their tax due and then decide that this is the year that they will plan ahead and pay estimated tax payments to thwart that penalty next year.

Estimated Taxes:

To know if you need to pay estimates, you need to calculate if the total tax you’ll owe on your tax return will be covered by the amount of tax you have already had withheld (if applicable). If you only have self-employment income, then you need to figure out what your tax liability will be after deductions and credits you may receive and then cover that.
————–
This is what the IRS states about it:

Generally, you should make estimated tax payments if you will owe tax more, than an amount specific by law, after withholding and credits, and the total amount of tax withheld and your credits will be less than the smaller of:

1. 90% of the tax to be shown on your current tax return, or
2. 100% of the tax shown on your prior year’s tax return, if your prior year’s tax return covered all 12 months of the year.
————–
Estimated tax is the one area where you may call the shots to the IRS. Generally you are able to choose when and how much to pay. Your options are Apr 15, June 15, Sept 15 and Jan 15, 2014. You can pay quarterly, just once, twice or three times and decide how much.

To help you calculate how much you should be paying in estimated taxes in a given quarter after possible deductions and credits have been deducted from your income, consult the IRS Tax Tables found in this pdf for 2013. More information can be found in the IRS Form 1040-ES instructions.

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Tax relief for those affected by Hurricane Isaac in Louisiana and Mississippi

September 7, 2012 at 8:16 pm (Business Taxes, General Tax Information, IRS Information, Personal Taxes)

Via IRS.gov

Tax Relief for Victims of Hurricane Isaac in Louisiana

LA/MS-2012-15, Sept. 5, 2012

NEW ORLEANS — Victims of Hurricane Isaac that began on Aug. 26, 2012 in parts of Louisiana may qualify for tax relief from the Internal Revenue Service.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Louisiana will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The President has declared the parishes of Ascension, Jefferson, Lafourche, Livingston, Orleans, Plaquemines, St. Bernard, St. Charles, St. John the Baptist, and St. Tammany a federal disaster area. Individuals who reside or have a business in these parishes may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 26, and on or before Jan. 11, 2013, have been postponed to Jan. 11, 2013. This includes the quarterly estimated tax payment due on Sept. 17, 2012.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 26, and on or before Sept. 10, as long as the deposits are made by Sept. 10, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The parishes listed above constitutes a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and is entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Jan. 11, 2013, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 26 and on or before Jan. 11, 2013.

The IRS also gives affected taxpayers until Jan. 11, 2013, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 26 and on or before Jan. 11, 2013.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 26 and on or before Sept. 10 provided the taxpayer makes these deposits by Sept. 10.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “LOUISIANA/HURRICANE ISAAC” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, IRS.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Tax Relief for Victims of Hurricane Isaac in Mississippi

LA/MS-2012-14, Sept. 5, 2012

NEW ORLEANS — Victims of Hurricane Isaac that began on Aug. 26, 2012 in parts of Mississippi may qualify for tax relief from the Internal Revenue Service.

Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Mississippi will receive tax relief, and other locations may be added in coming days based on additional damage assessments by FEMA.

The President has declared the counties of Hancock, Harrison, Jackson and Pearl River a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 26, and on or before Jan. 11, 2013, have been postponed to Jan. 11, 2013. This includes the quarterly estimated tax payment due on Sept. 17, 2012.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 26, and on or before Sept. 10, as long as the deposits are made by Sept. 10, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitutes a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and is entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Jan. 11, 2013, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 26 and on or before Jan. 11, 2013.

The IRS also gives affected taxpayers until Jan. 11, 2013, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 26 and on or before Jan. 11, 2013.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 26 and on or before Sept. 10 provided the taxpayer makes these deposits by Sept. 10.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “MISSISSIPPI/HURRICANE ISAAC” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, IRS.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

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Tax Relief in Disaster Situations and Locations

March 8, 2012 at 2:27 pm (General Tax Information, IRS Information)

Via the IRS website

Update: IRS e-File, Free File to Remain Available to Victims of Irene, Lee and Texas Wildfires through Oct. 31.

Relief for Victims of Hurricane Irene

The IRS is in the process of providing tax relief to victims of Hurricane Irene. Relief for taxpayers in various locations, including postponement of filing and payment deadlines, will be listed here as it is announced. Watch this page for updates.

For information on disaster recovery, visit disasterassistance.gov.

Other Recent Tax Relief

  • Kentucky victims of February 2012 storms, see news release
  • Alabama victims of January 2012 storms, see news release
  • Virginia victims of August 2011 earthquake, see news release
  • Puerto Rico victims of September 2011 Tropical Storm Maria, see news release
  • Iowa victims of May 2011 flooding, see news release
  • New York victims of September 2011 remnants of Tropical Storm Lee, see news release
  • Pennsylvania victims of September 2011 Tropical Storm Lee, see news release
  • Texas victims of August 2011 wildfires, see news release
  • Kentucky victims of June 2011 severe storms, see news release
  • South Dakota victims of March 2011 flooding, see news release
  • Missouri victims of June flooding, see news release
  • Nebraska victims of May flooding, see news release
  • Montana victims of April 2011 storms and flooding, see news release

Don’t See What You’re Looking For? Around the Nation contains links to previously issued disaster relief.

The latest Federal Emergency Management Agency disaster declarations are available.


The IRS has two new fact sheets describing the impact of recently enacted laws on disaster relief:

For a definition of the Midwestern Disaster Area for Various Provisions of the Tax Extenders and AMT Relief Act of 2008, see Notice 2008-109


The Housing and Economic Recovery Act of 2008 offers a new option to homeowners who previously claimed a casualty loss deduction resulting from hurricanes Katrina, Rita and Wilma. See the news release, notice and questions and answers for further details.

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IRS Offers New Penalty Relief and Expanded Installment Agreements to Taxpayers under Expanded Fresh Start Initiative

March 8, 2012 at 2:20 pm (General Tax Information, IRS Information)

via the IRS website

WASHINGTON — The Internal Revenue Service today announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment Agreements available to more people.

Under the new Fresh Start provisions, part of a broader effort started at the IRS in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS is doubling the dollar threshold for taxpayers eligible for Installment Agreements to help more people qualify for the program.

“We have an obligation to work with taxpayers who are struggling to make ends meet,” said IRS Commissioner Doug Shulman. ”This new approach makes sense for taxpayers and for the nation’s tax system, and it’s part of a wider effort we have underway to help struggling taxpayers.”

Penalty Relief

The IRS announced plans for new penalty relief for the unemployed on failure-to-pay penalties, which are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

To assist those most in need, a six-month grace period on failure-to-pay penalties will be made available to certain wage earners and self-employed individuals. The request for an extension of time to pay will result in relief from the failure to pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two categories of taxpayers:

  • Wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year.
  • Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

This penalty relief is subject to income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly or not exceed $100,000 if he or she files as single or head of household. This penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers meeting the eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief. The new form is available on IRS.gov.

The failure-to-pay penalty is generally half of 1 percent per month with an upper limit of 25 percent. Under this new relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS strongly encourages taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, also with a 25 percent cap.

Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes.

The IRS announced today that, effective immediately, the threshold for using an installment agreement without having to supply the IRS with a financial statement has been raised from $25,000 to $50,000. This is a significant reduction in taxpayer burden.

Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of months or years. The maximum term for streamlined installment agreements has also been raised to 72 months from the current 60-month maximum.

Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F). Taxpayers may also pay down their balance due to $50,000 or less to take advantage of this payment option.

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, a taxpayer must agree to monthly direct debit payments.

Taxpayers can set up an installment agreement with the IRS by going to the On-line Payment Agreement (OPA) page on IRS.gov and following the instructions.
These changes supplement a number of efforts to help struggling taxpayers, including the “Fresh Start” program announced last year. The initiative includes a variety of changes to help individuals and businesses pay back taxes more easily and with less burden, including the issuance of fewer tax liens.

“Our goal is to help people meet their obligations and get back on their feet financially,” Shulman said.

Input from the Internal Revenue Service Advisory Council and the IRS National Taxpayer Advocate’s office contributed to the formulation of Fresh Start.

Offers in Compromise

Under the first round of Fresh Start, the IRS expanded a new streamlined Offer in Compromise (OIC) program to cover a larger group of struggling taxpayers. An 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.

The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place more common-sense changes to the OIC program to more closely reflect real-world situations.

For example, the IRS has more flexibility with financial analysis for determining reasonable collection potential for distressed taxpayers.

Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

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IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

February 23, 2012 at 12:38 pm (General Tax Information, IRS Information, Personal Taxes)

via the IRS


IRS Has $1 Billion for People Who Have Not Filed a 2008 Income Tax Return

IRS YouTube Videos:
Haven’t Filed a Tax Return in Years?: English | Spanish | ASL

WASHINGTON — Refunds totaling more than $1 billion may be waiting for one million people who did not file a federal income tax return for 2008, the Internal Revenue Service announced today. However, to collect the money, a return for 2008 must be filed with the IRS no later than Tuesday, April 17, 2012.

The IRS estimates that half of these potential 2008 refunds are $637 or more.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim a refund within three years, the money becomes property of the U.S. Treasury.

For 2008 returns, the window closes on April 17, 2012. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2008 refund that their checks may be held if they have not filed tax returns for 2009 and 2010. In addition, the refund will be applied to any amounts still owed to the IRS, and may be used to offset unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2008. Some people, especially those who did not receive an economic stimulus payment in 2008, may qualify for the Recovery Rebate Credit. In addition, many low-and moderate-income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2008 were:

  • $38,646 ($41,646 if married filing jointly) for those with two or more qualifying children,
  • $33,995 ($36,995 if married filing jointly) for people with one qualifying child, and
  • $12,880 ($15,880 if married filing jointly) for those with no qualifying children.

For more information, visit the EITC Home Page on IRS.gov.

Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 800-TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2008, 2009 or 2010 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers can get a free transcript showing information from these year-end documents by ordering it on IRS.gov, filing Form 4506-T, or by calling 800-908-9946.

Individuals Who Did Not File a 2008 Return with a Potential Refund

State Individuals Median

Potential

Refund

Total

Potential

Refunds ($000)*

 

Alabama

18,400 $641 $15,738
 

Alaska

5,800 $641 $5,952
 

Arizona

29,000 $558 $24,913
 

Arkansas

9,600 $620 $8,152
 

California

122,500 $595 $112,201
 

Colorado

20,500 $589 $18,909
 

Connecticut

12,500 $697 $13,893
 

Delaware

4,200 $644 $3,784
 

District of Columbia

4,000 $642 $3,791
 

Florida

70,400 $650 $66,974
 

Georgia

35,800 $581 $30,661
 

Hawaii

7,600 $714 $8,307
 

Idaho

4,700 $541 $3,878
 

Illinois

40,800 $692 $40,712
 

Indiana

21,800 $664 $19,590
 

Iowa

10,600 $658 $9,295
 

Kansas

11,500 $631 $10,084
 

Kentucky

12,300 $640 $10,501
 

Louisiana

20,500 $662 $18,859
 

Maine

4,000 $579 $3,248
 

Maryland

24,600 $641 $22,591
 

Massachusetts

23,900 $699 $22,957
 

Michigan

33,300 $660 $30,903
 

Minnesota

15,200 $584 $12,772
 

Mississippi

9,900 $591 $8,254
 

Missouri

21,600 $593 $18,213
 

Montana

3,600 $599 $3,192
 

Nebraska

5,100 $623 $4,371
 

Nevada

14,500 $619 $13,381
 

New Hampshire

4,300 $733 $4,518
 

New Jersey

31,300 $716 $31,185
 

New Mexico

8,000 $611 $7,420
 

New York

60,300 $686 $61,240
 

North Carolina

30,800 $558 $24,997
 

North Dakota

2,000 $625 $1,895
 

Ohio

36,400 $622 $31,018
 

Oklahoma

16,800 $620 $14,787
 

Oregon

18,500 $527 $14,819
 

Pennsylvania

38,700 $695 $35,565
 

Rhode Island

3,400 $674 $3,040
 

South Carolina

12,200 $547 $10,158
 

South Dakota

2,300 $669 $2,234
 

Tennessee

18,400 $626 $16,130
 

Texas

96,200 $689 $97,057
 

Utah

7,800 $536 $6,676
 

Vermont

1,700 $647 $1,410
 

Virginia

30,800 $624 $28,670
 

Washington

29,900 $705 $32,138
 

West Virginia

4,300 $687 $4,068
 

Wisconsin

14,100 $592 $11,885
 

Wyoming

2,600 $773 $2,919
Grand Total 1,089,000 $637 $1,009,905

*Excluding the Earned Income Tax Credit and other credits.

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The new 1099-K form FAQs

February 16, 2012 at 6:07 pm (Adult Industry, Business Taxes, General Tax Information)

What are the new 1099-K forms and how are they different from the 1099-Misc that I get?

1099-K = Gross amount of income from credit card transactions when using a payment platform (Niteflirt, Keen etc). You deduct the fees on your tax return.

1099-Misc = Net amount of what you were actually paid by the company itself (Papillon, 121 etc.). If this is wrong, you need to take it up with your company. If they won’t help you, you can always deduct those fees from your income on your tax return. It is better that you report what the 1099 says than to under report it as that creates a ‘red flag’ with the IRS.

Why does the amount on the form include the fees etc. that I paid already?

Companies are required to file the gross amount of payments that a contractor received (income that includes all fees that were taken out before payment). This is the amount that includes the fees, bids etc. that is withdrawn before a payment is made to the contractor.

How do I deal with this form on my tax return?

You report the gross amount exactly as it is stated on your 1099-K form. If you have kept accurate records of your income and expenses, it will be easy to pull out the fees, bids or any other amount that you have already paid before you received each check from the processing company. These amounts are deducted on your tax return just like any other expense.

I’m not sure what that means. IRS Won’t Require Reconciling 1099-K Reports on Credit Card Payments with Gross Receipts  Tax Domme, does this mean no more 1099-K or a change to how earnings are reported on the 1099-K?

To ‘reconcile’ in accounting means to balance payments and earnings. You reconcile your checkbook at the end of the month to match the checks that you’ve written, deposits made and other transactions with what your bank statement says to make sure that they balance. Same thing here. The IRS is saying that taxpayers do not need to show their records to match the gross earnings (gross means all income without taking out fees and expenses paid) reported on the 1099-K. This means that you need to accept what the 1099-K states, report that amount on your tax return and then deduct any amount that pertains to fees etc. from that income on your tax return.

It is still a good idea to keep accurate records though regardless of what the IRS says. In the case of an audit, you would still have to show support of your expenses paid.

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Do You Need to File a Tax Return This Year?

January 6, 2012 at 11:17 pm (General Tax Information)

Via IRS.gov

For the IRS interactive program to determine if you need to file, please click on this link: http://www.irs.gov/ita/article/0,,id=219890,00.html

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren’t required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.

2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.

3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.

5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.

6. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits, visit www.irs.gov.

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2012 IRS Filing Dates and New Filing Rule

January 6, 2012 at 11:07 pm (General Tax Information, IRS Information)

The 2012 filing season has begun with new filing dates and a new filing rule for taxpayers and tax preparers.

E-filing officially begins January 17, 2012

The filing Season deadline for 1040 tax returns and extensions is Tuesday, April 17, 2012

Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns.

New IRS rule says that no tax return shall be e-filed until the taxpayer has received all of their expected tax forms (eg. W-2, 1099 etc). The deadline for issuers to send the forms is January 31st. Therefore, taxpayers may not receive their forms until February.

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Make it Easy on Yourself: Choose the Simplest Tax Form

January 6, 2012 at 4:17 pm (General Tax Information)

Via IRS.gov

Use the 1040EZ if:

  • Your taxable income is below $100,000
  • Your filing status is single or married filing jointly
  • You are not claiming any dependents
  • Your interest income is $1,500 or less

Use the 1040A if:

  • Your taxable income is below $100,000
  • You have capital gain distributions
  • You claim certain tax credits
  • You claim adjustments to income for IRA contributions and student loan interest

If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. Among the reasons you must use the 1040 are:

  • Your taxable income is $100,000 or more
  • You claim itemized deductions
  • You are reporting self-employment income
  • You are reporting income from sale of property

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