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IRS Archives - Page 2 of 3 - R. Darren Sanford, CPA, CGMA
Jun 102014
 
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IRS Adopts “Taxpayer Bill of Rights;” 10 Provisions to be Highlighted on IRS.gov, in Publication 1

 The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.

The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on IRS.gov.

Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.

“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,’” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”

The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:

1. The Right to Be Informed

2. The Right to Quality Service

3. The Right to Pay No More than the Correct Amount of Tax

4. The Right to Challenge the IRS’s Position and Be Heard

5. The Right to Appeal an IRS Decision in an Independent Forum

6. The Right to Finality

7. The Right to Privacy

8. The Right to Confidentiality

9. The Right to Retain Representation

10. The Right to a Fair and Just Tax System

The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future.

The timing of the updated Publication 1 with the Taxpayer Bill of Rights is critical because the IRS is in the peak of its correspondence mailing season as taxpayers start to receive follow-up correspondence from the 2014 filing season. The publication initially will be available in English and Spanish, and updated versions will soon be available in Chinese, Korean, Russian and Vietnamese.

The IRS has also created a special section of IRS.gov to highlight the 10 rights. The web site will continue to be updated with information as it becomes available, and taxpayers will be able to easily find the Bill of Rights from the front page. The IRS internal web site for employees is adding a special section so people inside the IRS have easy access as well.

As part of this effort, the IRS will add posters and signs in coming months to its public offices so taxpayers visiting the IRS can easily see and read the information.

“This information is critically important for taxpayers to read and understand,” Koskinen said. “We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly.

Koskinen added, “The Taxpayer Bill of Rights will serve as an important education tool, and we plan to highlight it in many different forums and venues.”

(Credit:  www.irs.gov)

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Dec 062013
 
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2014 Standard Mileage Rates for Business, Medical and Moving Expenses

The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

The amount of the deduction is computed by multiplying the number of miles by the applicable standard mileage rate.

Rather than using the standard mileage rate method of calculating the deduction, taxpayers may calculate the actual costs of using their vehicle. Actual costs include gasoline, repairs, insurance, and interest. Only the business use portion of these expenses may be considered when calculating the deduction.

Furthermore, a taxpayer may not use the business standard mileage rate method for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. What this means is that a taxpayer may go from using the standard mileage rate method to the actual cost method, but they may not go from the actual cost method to the standard mileage rate method. In addition, the standard mileage rate for business cannot be used for more than four vehicles used simultaneously. In that case, the actual cost method must be used.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Adequate documentation must be maintained to substantiate a deduction for mileage. The date, number of miles, destination and purpose should be recorded in a mileage log. Most smart phones have apps that are great for tracking mileage.

For assistance with calculating business, medical, moving or charitable mileage deductions, submit your request below.

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Oct 082013
 
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Tax Implications of Divorce – Exemptions

Divorce can be a traumatic and highly emotional experience and the tax implications of divorce can lead to serious consequences.  Issues such as tax consequences of alimony and child support, tax implications of splitting and transferring property, changes in filing status and the impact of community property laws all must be considered when talking about the tax implications of divorce.  This article will address the topic of exemptions.  Other tax implications of divorce such as alimony, property settlements, costs of obtaining a divorce and community property will be discussed in future articles.

There are two types of exemptions:  (1) personal exemptions and (2) dependent exemptions.

Personal Exemptions

You may claim an exemption for yourself (personal) unless someone else can claim it.  If you are married and file a Married Filing Joint return, you may claim one exemption for yourself (personal) and one exemption for your spouse.  If your spouse has any gross income for the tax year and you are filing a Married Filing Joint return, you may claim his or her exemption (personal) as well.  The amount of the personal exemption changes each year.  For 2012, the personal exemption amount is $3,800.

If you are married and file a Married Filing Separately return, you cannot claim an exemption for your spouse UNLESS your spouse had NO gross income, is not filing a return, and was not the dependent of another taxpayer.  If you paid alimony to the spouse, you cannot claim an exemption for the spouse because alimony is considered income to the spouse who received it and they would fail the NO gross income test.

A spouse is NEVER considered a dependent for purposes of federal income taxes.

If you are divorced during the year and as of the last day of the tax year, you cannot claim an exemption for your former spouse regardless of the amount of support you provided to the former spouse.  Of course, if you remarry to another spouse, you may claim the exemption for that spouse pursuant to the rules discussed above for Married Filing Joint and Married Filing Separately returns.1040 Tax Button

Dependent Exemptions

You may claim one exemption for each person who qualifies as a dependent.  A dependent may be a qualifying child or a qualifying relative.  A qualifying relative as a dependent is outside the scope of this post and will be covered in a subsequent article.  If you claim an exemption for a dependent, that dependent CANNOT claim a personal exemption on his or her own tax return.

Dependent Exemptions for children of divorced or separated parents (or parents who live apart)

Generally, a child of divorced or separated parents is the qualifying child of the custodial parent.  The custodial parent is the parent with whom the child lived for the greater number of nights during the year.  The other parent is the non-custodial parent  A child is treated as living with a parent for a night if the child sleeps at the parent’s home, whether or not the parent is present or in the company of the parent, when the child does not sleep at a parent’s home such as when the child and parent are travelling away from home together.  If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.

A child will be treated as the qualifying child of his or her NON-custodial parent if all four of the following statements are true:

  1. The parents (1) are divorced or legally separated under a decree of divorce or separate maintenance, (2) are separated under a written separation agreement, or (3) lived apart at all times during the last six months of the year, whether or not they are or were married.
  2. The child received over half of his or her support for the year from the parents.
  3. The child is in the custody of one or both parents for more than half of the year.
  4. Either of the following applies:
  • a.  The custodial parent signs a written declaration that he or she will not claim the child as a dependent for the year, or
  • b.  A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to the tax year states that the non-custodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the non-custodial parent cannot claim the child as a dependent, and the non-custodial parent provides at least $600 for the child’s support during the tax year.

There are additional situations to consider when a child is the dependent of divorced or separated parents.  For example, if a child is away at camp and what month of the tax year the child turns age 18.

As this article has only addressed the tax implication of divorce, namely, exemptions, it is obvious there are a myriad of complexities related to this issue.  In addition to an attorney to handle legal matters, it is highly advisable to seek the services of a qualified tax return preparer.

As traumatic and emotionally upsetting divorce may be, the tax implications of divorce can be more so.

For a private and confidential discussion, feel free to submit your contact information below.

 

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Jun 122013
 
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The Internal Revenue Service today reminded taxpayers that, due to the current budget situation including the sequester, the agency will be shut down on Friday, June 14.

As was the case on May 24, the first furlough day, all IRS operations will again be closed on June 14. This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed.

IRS employees will be furloughed without pay. No tax returns will be processed and no compliance-related activities will take place. In addition, the online preparer tax identification number PTINsystem for tax professionals will also be shut down.

The IRS noted that taxpayers should continue to file their returns and pay any taxes due as usual. This includes the June 17 deadline for those making a second-quarter estimated tax payment. It also includes the June 17 filing deadline for taxpayers abroad and the June 30 deadline for filing foreign financial account reports FBARTaxpayers needing to contact the IRS about these or other upcoming returns or payments should be sure to take this Friday’s closure into account.

Because none of the furlough days are considered federal holidays, the shutdown will have no impact on any tax-filing or tax-payment deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.

The only tax-payment deadlines coinciding with any of the furlough days relate to employment and excise tax deposits made by business taxpayers. These deposits must be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS), which will operate as usual.

On the other hand, the agency will give taxpayers extra time to comply with a request to provide documents to the IRS. This includes administrative summonses, requests for records in connection with a return examination, review or compliance check, or document requests related to a collection matter. No additional time is given to respond to other agencies or the courts.

Where the last day for responding to an IRS request falls on June 14, the taxpayer will have until Monday, June 17–the next business day.

Some web-based online tools and phone-based automated services will continue to function this Friday, while others will be shut down. Available services include Withholding Calculator, Order A Transcript, EITC Assistant, Interactive Tax Assistant, Tele-Tax and the Online Look-up Tool for those needing to repay the first-time homebuyer credit. Services not available this Friday include Where’s My Refund? and the Online Payment Agreement. Visit online toolson IRS.gov to learn more about these tools.

The remaining scheduled furlough days are July 5, July 22 and Aug. 30, 2013. If necessary, the IRS may announce one or two additional furlough days.

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Jun 122013
 
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The Internal Revenue Service filmed a “Mad Men”-themed continuing professional education video last year featuring an actor patterned after the Don Draper character in the popular AMC cable TV series.

I thought this was an interesting post and wanted to share with others.

Check out the entire article at http://www.accountingtoday.com/news/IRS-Filmed-Mad-Men-Parody-CPE-Video-67065-1.html

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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May 162013
 
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IRS Closing – Taxes Still Due

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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May 062013
 
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Simplified Home Office Deductions

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Apr 102013
 
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Happy 100th Birthday to the Federal Income Tax…Or Not

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Jan 162013
 
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IRS Announces:  Eligible Home-Based Businesses May Deduct up to $1,500; 
Saves Taxpayers 1.6 Million Hours A Year

The Internal Revenue Service today announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes.

In tax year 2010, the most recent year for which figures are available, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction).

The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and record keeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.”

The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.  Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.

Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible.

Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option. 

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted today on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years. There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov. Include “Rev. Proc. 2013-13” in the subject line.

  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Rev. Proc. 2013-13), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

  • Hand deliver to: CC:PA:LPD:PR (Rev. Proc. 2013-13), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline for comment is April 15, 2013.

(Credit:  IRS Newswire)

If you are interested in starting your own home based business view our video opportunity presentation on how you can get started today.  You can find that presentation at http://tinyurl.com/3kxqvrr 

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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