The Tax Preparation Blog

Archive for October, 2009

In November 2009, the IRS launched a new National Research Program Initiative (the Initiative): an industry wide detailed random audit of employment taxes for 6,000 businesses over the course of the next three years. The purpose of the Initiative is two fold: (1) assess systemic employment tax compliance; and (2) collect assessments from delinquent employers.

With tax revenues dwindling from the recession, the U.S. Treasury Department is stepping up efforts to close the tax gap the difference between overall tax liabilities and taxes paid to the IRS. Auditing employment taxes is seen by the IRS as a crucial means of closing the tax gap. For tax year 2001 for example, the gross tax gap was estimated by the IRS at around $345 billion, with underreporting of employment taxes accounting for around 17% of the tax gap.

The IRS will audit businesses to ensure that Federal withholding taxes are deducted and paid over to the government from employees wages for Social Security and Medicare as well as Federal Unemployment taxes. An employer found to be in noncompliance could face stiff civil penalties and interest on unpaid taxes. These penalties could have a particularly severe impact on small business owners.

The IRS has prioritized four areas to focus their auditing efforts under the Initiative, including:

aE¢ Worker classification: i.e. whether an employer properly classifies an employee as an employee or independent contractor for tax purposes. Determining which depends on the behavioral, financial and type of relationship the company has with the person performing the work.

aE¢ Employee fringe benefits: A fringe benefit is a form of pay for the performance of services. i.e. benefits such as insurance coverage, company car or child care, etc. that are provided by employers tax free to employees but not to independent contractors.

aE¢ Reimbursed business expenses: e.g. reimbursement for taking a client to lunch, purchasing office supplies: which requires a written business expense plan. I.E. You must have paid or incurred expenses that are deductible while performing services as an employee. You must adequately account to your employer for these expenses within a reasonable time period, and you must return any excess reimbursement or allowance within a reasonable time period.

aE¢ Compensation of owners who are also employees of the company, whereby unpaid taxes may result in personal liability for the employer.

Now that the Employment Tax audit Initiative has started, it has been reported that the IRS has already begun the process of selecting businesses for audit of their employment taxes. Noncompliance with employment tax law can result in severe consequences for employers. To ensure that procedures are in place for Employment tax compliance with applicable tax law can save time, money and heartache in the event of an audit.

For example, the Internal Revenue Code requires a written reimbursement plan in order to take advantage of the tax benefits of legitimate business expenses. Employers should consider consulting with experienced counsel in preparation for the Initiative and in the event of an audit of their employment taxes.

Another week of GW News, May 23, 2010 [A Few Things Ill Considered]

Logging the Onset of The Bottleneck Years This weekly posting is brought to you courtesy of H. E. Taylor . Happy reading, I hope you enjoy this week’s Global Warming news roundup Read the rest of this post… | Read the comments on this post…

How has MSC legislation affected Agencies and Contractors?

Question: when will you get your tax stimulus check if you filed through Jackson hewitt?

taxs where filed on time feb 3rd, it was direct deposit , but today is the day for the stimulus payment and nothing in the bank. so what does that mean? I owe no one, but is it because I use a tax service company and had them take the tax fee out my taxes?
thanks Mr. man great info

Answer: Ok,

Per the LYING NO GOOD IRS/GOVERNMENT….they NEGLECTED to tell folks from the BEGINNING….that if you paid a “fee” like thru Turbo Tax, paying the fee out of your income tax check, then that is not considered “direct deposit” it is considered a “wire transfer” and if u had a rapid refund….same thing. So, that means A LOT of folks did not get a check! There are a majority of people that get there taxes done thru Turbo Tax or H & R block, who have it refunded ASAP, so if u did any of the above….you will not get a check until June/July/August. So thanks to our no good government….they screwed us AGAIN! Oh just FYI, they just so happened to put that info online recently….it has not been there from the beginning….I know, I checked quite frequently…see how sneeky they are…!

Health bills could expand IRS role

Under the proposed health care legislation, Internal Revenue Service agents would be checking to see whether Americans have health insurance.

Lani Misalucha – Amazing Grace (This is A-M-A-Z-I-N-G!)

Question: Where can i get forms for registration of professional Tax for Employers and Employees in Karnataka?

Answer: u jsut login to www.kar.nic.in/ctax and download the same

Live: India, in real time

India is a country on the go; at any given moment in time, there is much happening in the fields of politics and governance, of finance, of development; there is constant churning in society, considerable activity in sports and in the arts… It’s almost too much to keep track of. And hence, this effort: a real-time, constantly updated look at the events that matter.

If you’ve been straddling the fence about buying a home, you could be kicking yourself when this unique window of opportunity closes. Never in history have the cards beens stacked for the buyer as they are now.

Here are eight reasons that will convince you that NOW is the right time to stop renting and buy your own home.

1. The market is with you. A Buyer’s Market occurs when there are more sellers than buyers, which results in more choices and lower prices due to excess supply. Homes are bought in both Buyer’s and Seller’s markets, but for the purchaser, now is the time they will get the most bang for their buck.

2. Favorable interest rates. As of the week ending April 16, 2009, a 30-year fixed rate mortgage averaged about 4.82 percent. The same time last year, the same mortgage was 5.88 percent. Five-year-Hybrid Adjustable Rate Morgages (ARMS), were 4.88 percent, down from 5.48 percent a year ago, and the lowest since 2005. Imagine knowing that for the next 30 years, you’ll pay under 5 percent for your mortgage.

3. Foreclosure opportunities abound. Currently foreclosure properties make up about one quarter of all house sales. In California, 55 percent of all closings are lender-owned properties. Banks that do not want to be in the real estate business are dictating the price of homes, and they are anxious to cover their investment and sell. You have to be careful of what you’re purchasing, but the deals are out there.

4. Tax credit for first time buyers. If a buyer has not owned a home in the past three years, and falls in the eligible income range, they can take a tax credit worth 10% of the home’s sale price, up to a maximum of $7,500. This applies to homes that have closed between April 9, 2008 and before July 1, 2009, and can be applied to either the 2008 or 2009 taxes.

The really nice part of this tax perk is that it is a true credit. If you owe $8,500 in taxes, the $7,500 refundable credit comes off the top, leaving an amount owing of only $1,000.

Not only is this a refundable tax credit, but it’s also a loan. This means that within two years buyers must begin paying it back at no more than $500 per year for 15 years. If the home is sold during that time, the amount is withdrawn from the profit. If there is no profit, the loan slate will be wiped clean.

5. The cost of rent is not going down, but house prices are. The cost of buying a house has gone down in most of the U.S., in some areas more dramatically than ever. This drop in price has not affected rent prices, which have remained fairly solid. According to a report from John Burns Real Estate Consulting in Irvine, California, which surveyed 50 percent of the 76 main area markets in the country, the average person can buy a house for less than they could rent one.

6. Solid investment. In this tenuous market of shaky hedge funds and bankrupt financial institutions, it’s good to have an investment that you can feel relatively safe with. Every dollar you pay against your principle goes back in your own pocket when you finally sell, and with some extra added profit to boot.

7. More House for Your Money. With the combined lower prices and record low interest rates, a new buyer can start out with far more house than they could have if they had entered the market four years ago.

8. Today’s Built in Safety Features. Some states, such as California are trying to make it easier for people to invest in a home. The California Association of Realtors have introduced the Housing Affordability Fund’s Mortgage Protection Program. For a house purchased in 2009, if a homeowner is unable to make their payments, the fund will cover up to $1,500/month for six months.

Private sector is key to Washington’s prosperity

Lawmakers gathered in Olympia for the 2010 legislative session can either set our state up for long-term prosperity or put off the tough budget decisions until 2011, when it will be even more difficult to solve our financial problems.

California Budget is a MESS! Dec. 2009 Comptroller Report.

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Frigid week forecast

Steady currents of arctic and Canadian air are bearing down on Missouri, and forecasters are predicting that temperatures will stay below freezing for the next week.

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