Online Tax Pros- Online Tax Help: January 2013

Wednesday, January 30, 2013

How to Spot Fraudulent Rental Posts

Identity thieves have increased their presence in the housing and rental markets making it even more important for potential homebuyers and renters to do due their diligence and know the warning signs of a scam.

The housing bubble caused many homes to be pushed into foreclosure and the owners into the rental market, and scammers are using a myriad of ways to steal personal information and money from unsuspecting victims. According to Raul Vargas, fraud operations manager for Identity Theft 911, many of the scams are occurring online.

Vargas explains that many of the scams involve an online post about an available property to rent and when someone is interested, the scammer sends a rental or lease agreement that requires a plethora of personal information like birth date, Social Security number and current address. Some even ask for bank account information to verify eligibility. The unsuspecting renter ends up giving up the information hoping he may be the first to get the property.

Some scammers even post bogus properties online and target renters moving from another city or state. “Everyone renting looks online to find a great price,” and the scammers know that, says Steve Weisman, a college professor at Bentley University and author of 50 Ways to Protect Your Identity in a Digital Age. Typically the fraudster will list a rental online with a market price far lower than others in the area. The listing will have a real address and photographs and the renter will be asked to either wire a deposit or send a money order to hold the rental. “The renter doesn’t get to see the place and the next thing they know they don’t have a place,” says Weisman. “It’s very easy to copy a listing and put up a phony one.”

Scam go both ways: People with a property to rent can also become victims. Weisman cites a popular scam that involves someone living outside the country agreeing to move into a rental unit sight unseen. The “renter” will even send a deposit of six months rent to ease any fear. A few weeks later, the scammer will call to back out of the agreement and tell the landlord to keep two months of the rent for the trouble and send the rest back. The landlord cashes the check, sends the money back and a week later the check bounces. “Even though you waited a few days for the check to clear the bank doesn’t tell you that it’s only provisional credit. The bank takes back the money when the check truly does bounce,” says Weisman.

Read the rest of the article here: http://www.foxbusiness.com/personal-finance/2013/01/30/how-to-spot-fraudulent-rental-posts/#ixzz2JTs6sHuy

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7 Ways to Protect Yourself Against Tax Scams

Follow these steps to lower your risk of becoming a victim of identity theft or tax fraud.

By Cameron Huddleston, January 28, 2013

You've probably started to receive some tax forms in the mail, and tax season officially starts January 30 when the IRS begins accepting returns. Even if you're not ready to start preparing your taxes, you need to start thinking about protecting your identity because thieves are looking for ways to steal it at tax time. In particular, they're after your Social Security number so they can use it to fraudulently file a return to claim a refund.

Tax- and wage-related fraud often tops the Federal Trade Commission's annual list of identity theft complaints. And the IRS sees thousands of scams meant to trick taxpayers into revealing personal information. The agency says it has stepped up its efforts this year to protect taxpayers from ID theft, including increasing the number of screening filters to spot fraudulent returns filed by thieves to collect refunds that don't belong to them. (Read about more IRS anti-fraud efforts). However, taxpayers need to take their own steps to protect their identity and guard against fraud during tax season.

Guard your Social Security number. The IRS warns taxpayers not to carry their Social Security card or any documents with your Social Security number or taxpayer identification number on them. And do not give out these numbers just because you're asked. You will be required to provide your Social Security number in any situation that requires your identity to be verified (such as an application for credit or a license) or about which the IRS must be notified. Otherwise, be sure to ask whether the agency, business or organization has to have it.

Monitor your mailbox. Make sure you receive all the W-2, 1099 and other tax forms you expect to get. If you fail to receive some, contact the company or financial institution that was supposed to send them to find out if and when they were mailed. If you suspect that any of these forms were stolen from your mailbox, contact the IRS Identity Protection Specialized Unit at 800-908-4490 extension 245.

Ignore e-mails from the IRS. The IRS doesn't send taxpayers e-mails or text messages. So do not reply to e-mails or messages supposedly from the IRS, open any attachments (which could contain viruses) or click on any links (which could take you to a fraudulent site). Forward all suspect e-mails to phishing@irs.gov.

Be wary of people claiming to be IRS agents. Don't reveal any personal information if someone calls and claims to be from the IRS. Instead, call the IRS at 1-800-829-1040 to see if an agent has a legitimate need to contact you.

Protect your refund. If you file your tax return by mail, use certified mail from the U.S. Postal Service to confirm that your return was received. And opt for direct deposit of tax refunds to avoid lost or stolen checks. The best way to make sure your refund check doesn't end up in the wrong hands is to NOT have a refund coming in the first place. To do so, use our tax withholding calculator to find out how many allowances you should be claiming on the W-4 form filed with your employer so you can get your money when you earn it -- not in a refund next spring.

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Five overlooked tax deductions that can pay off

You need to study the tax code!

There's a lot of talk right now regarding Americans paying their "fair share" to the tax man. While many issues are up for debate, most parties agree the tax code needs some work.

But as you gather documentation to do your 2012 taxes, forget about future tax policy.

The most important thing is to make existing tax breaks work in your favor. Nobody should pay more taxes than they have to – and if the IRS provides a legal deduction, it's not sneaky or unfair to take them up on the offer.

CUTTING TAXES: There's still time to cut 2012 tax bite with IRA

SAVINGS: Investors get a tax break with early dividends

The problem is that a convoluted tax code prevents many Americans from finding some deductions even when they're entitled to them. Here are five commonly overlooked deductions that may be worth noting.

• "Catch-up" retirement deductions: The IRA contribution limit for younger Americans is $5,000 for tax year 2012, but you get up to $6,000 if you're 50 and older. This deduction is designed to help those closer to retirement catch up if they're behind – and considering that some polls estimate half of Americans have zilch in retirement savings, you can understand why many need to catch up.

• Job-hunting costs: Did you pay fees to an employment placement agency during your job search or join a professional organization to network? Are you out of pocket for travel to an interview, even if it was just gas and mileage, or spend hundreds on high-priced résumé stationery and work samples? These are applicable expenses that can be added to your itemized deductions.
Best of all, you don't have to be unemployed to qualify for many job-hunting tax breaks: Just looking for a job in your present field of employment allows you to reap these benefits. Make sure you're being reasonable, and that these costs are 100% related to a job search. In other words, a trip to the Super Bowl is not a tax write-off just because you fill out an application at Starbucks while you're in New Orleans.

• Interest on student loans paid by someone else: Since it's your name on the loan, it's your deduction, even if your parents co-signed and they're making the payments. The only way your parents can claim the interest is if you're still a dependent on their tax return or if the original loan was wholly in their names.

For the other two tips, read the rest of the article here.

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How to organize your tax records now

Don't let your tax records look like this.

(MoneyWatch) About 160 million individual tax returns will be filed this year, and over half of these will result in a tax refund. The average refund last year was about $3,000.

Whether you'll prepare your own return or use the help of a professional, the first thing you need to do is to get your tax information organized. Here's a checklist of the tax records that you'll need to gather:
- Your 2011 federal and state income tax returns
- Checkbook register and checking account statements for 2012
- Copies or images of canceled checks
- 2012 pay statements and W-2's
- Forms 1099 issued by bank and investment accounts
- Year-end mortgage statement
- Property tax receipts
- Receipts for expenses that may be deductible (see "itemized deductions" below)
- Financial and investment property records

Organize it. Use a filing system organized by category that includes folders for bills, tax documents and statements. Then put the filing system to use by filing your tax information and statements as these come in rather than letting them pile up on the counter or desk. I like to use a separate multi-file box for tax return and related statements for each year. These come preset for this purpose, and you can find them at Wal-Mart, Target and Staples.

Close out your checkbook register for 2012 and start a new one beginning January 1. File the register from last year with the 2012 tax information.

Deduct it. If you think you may have some expenses you paid that can be claimed as deductions on your tax return, then review a copy of Schedule A - Itemized Deductions and applicable instructions. Do this before you sit down to prepare your tax return yourself or with a professional. The major categories of expenses that may be deductible include:
- Medical and dental expenses
- Taxes paid
- Interest paid
- Gifts to charity
- Casualty and theft losses
- Job expenses
- Miscellaneous deductions

According to tax filing reports, the two biggest categories for which people miss claiming deductions is interest and taxes paid. Over 60 percent of the returns filed by homeowners omitted deductions for mortgage interest, real estate taxes, and state and local income taxes.

Also, remember that if you refinanced a mortgage, get a copy of the HUD-1 Settlement Statement. This includes any interest and points paid that may be deductible.

Read the rest of the article by clicking here.

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Thursday, January 24, 2013

Beware scammers and their buzzwords

Source: http://www.dailytelegraph.com.au/technology/beware-scammers-and-their-buzzwords/story-fn7bsi21-1226561171821

BEWARE tweets about Barack Obama, the Australian Open and gun control this month - internet security experts say they're the top three buzzwords currently being used by cyber criminals to lure victims on social media.

And keep an eye out for posts mentioning the Super Bowl, Playstation 4 and The Ashes, topics predicted to be popular with canny cyber crims throughout 2013.

Research by tech security firm Trend Micro Australia has revealed this month's most popular keywords used by online scammers, who use them to make their tweeted links to malware and hacking sites seem legitimate.

Trend Micro cyber safety expert Aman Chand said big news events such as President Obama's inauguration and the tennis, which are widely discussed on social media, were easy targets for criminals to latch onto.

"Without a doubt, Christmas or any other widely celebrated sporting event such as The State of Origin, for example, will always be a favourite cybercriminal bait,'' he said.

Mr Chand said criminals used the buzzwords to disguise links to dangerous websites as links to news stories or funny videos.

"As well as inflicting the fear factor into Australians, cybercriminals are using smart tactics such as social media posts, fake mobile apps and harmful news videos to lure in their victims,'' he said.

Popular keywords in 2012 included "Whitney Houston'', "Instagram'', "Angry Birds'' and "Olympics''.

2013 BUZZWORD PREDICTIONS
Super Bowl
X-Box 720
Playstation 4
The Ashes
Lions Tour
Click Frenzy
Christmas2012

POPULAR BUZZWORDS
Whitney Houston
Tax Season
Law
Enforcement
Temple Run
Jeremy Lin
Instagram
Android
Angry Birds
London 2012, Olympics
Tibet
Diablo 3
Space
iPhone 5
World of Warcraft
Obama
Christmas
Windows 8
Thanksgiving
Black Friday Sale
Cyber Monday Sale
Holiday
Bad Piggies

Why Is The Government In The Flood Insurance Business?

Hurricane Betsy hit the Gulf Coast in 1965.

There's a quick, one-word explanation for why the federal government started selling flood insurance: Betsy.

Hurricane Betsy, which struck the Gulf Coast in 1965, became known as billion-dollar Betsy. Homes were ruined. Water up to the roofs. People paddling around streets in boats. Massive damage.

This would be the time when you'd expect people to be pulling out their flood insurance policies. But flood insurance was hard to come by. You could get fire insurance, theft insurance, car insurance, life insurance. Not flood.

"There was a lack of data," says Eric Smith, president and CEO of Swiss Re in the Americas. "One of the bedrock principles of insurance is it has to be something that's somewhat measurable. You have be able to calculate its frequency, its severity. How often this going to occur and how much damage is it going to do?"

A few years after Betsy, in 1968, the government decided it would take on the job of selling flood insurance. Some people hated this idea. If private insurance companies wouldn't sell policies to people who wanted to live in flood zones, they argued, why should the government?

This argument did not win the day. The government created flood maps, gathered data, and set up the National Flood Insurance Program. "I think it generally worked out OK overall, until Katrina,"

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Kansas’ Governor and G.O.P. Seek to End Income Tax

Source: http://www.nytimes.com/2013/01/24/us/politics/gov-sam-brownback-seeks-to-end-kansas-income-tax.html?_r=0

TOPEKA, Kan. — President Obama stood on the steps of the Capitol in Washington on Monday afternoon and laid out an expansive liberal agenda for the nation. Inside the Kansas State Capitol here this week, Gov. Sam Brownback and Republican legislators have been drafting what could be a blueprint for the other side.

On Wednesday, lawmakers received a bill to inch the state closer to eliminating income taxes, a centerpiece of a broad legislative vision that many in the Republican Party here hope will serve as a model of conservative governance for other states, if not the nation, to follow.

While Republican principles of small government and low taxes have holds on large swaths of the country, Kansas provides perhaps the starkest view of the crimson ideology that could challenge Mr. Obama’s Inauguration Day rallying cry.

This month, the largest tax cut in Kansas history took effect, and most of its Medicaid system was handed over to private insurers. The bill introduced this week would pare taxes further, with the goal of eventually eliminating the state’s individual income tax. Mr. Brownback has already slashed the state’s welfare roll and its work force. He has merged government agencies and is proposing further consolidation. He is pushing for pension changes, to change the way judges are selected and for altering education financing formulas.

“I think it is the leading edge of the conservative economic and political movement,” said State Representative Tom Sloan, a Republican representing the area around Lawrence. “As such, it is the example that other state leaders will look to to determine whether the political philosophy can mesh with the expectations of the public.”

In last year’s elections, the state bucked its long tradition of moderate Republicanism. Conservatives ousted several moderates in Senate primary contests and went on to victory in November. Now, for the first time in generations, the House, the Senate and the governor’s office in Kansas are controlled by conservative Republicans. In much of the rest of the country, the political equation is similar: The Republican Party now controls both legislative chambers and governorships in 24 states. Democrats have single-party control in 13.

Many here, including the governor, have characterized the state’s legislative endeavors as an experiment. Mr. Brownback, elected in 2010, and his supporters are betting that their agenda will show the rest of the country that conservatism provides a path to economic prosperity.

“I think the unique thing is that we’re applying the principles on how you get your cost down and still provide a high-quality product,” Mr. Brownback said in an interview. “That’s been in the private sector, but it hasn’t been in the public sector for 50 years.”

Skeptics, meanwhile, contend that Mr. Brownback is leading Kansas toward economic devastation that will leave many of the state’s residents without basic services and its children without a proper education.

“It kind of eliminates a large group of Kansans out of that pursuit of happiness,” Senator Oletha Faust-Goudeau, a Wichita Democrat, said of the governor’s proposals. “They will still struggle. They’ll pay the highest taxes. They are already working jobs with no benefits or very little benefits.”

Representative Barbara Bollier, a Republican representing the suburbs of Kansas City, questioned why the state was cutting taxes at a time of sagging revenues. “It’s beyond extremely conservative because no one else is doing it,” she said.

Legislation passed last year that took effect this month consolidated three income tax brackets into two (4.9 percent and 3 percent). It also eliminated taxes on nonwage profits for certain types of businesses.

Supporters said these measures were necessary to reverse years of economic stagnation. Private-sector jobs have grown just 1.6 percent in the state over the past 14 years, compared with 12.2 percent in the 10 states with the lowest tax burdens, according to data compiled by the Kansas Policy Institute. The state estimates that the tax cuts will generate nearly 23,000 jobs by 2020 and $2 billion of income for the state.

“If you look at the demographics of my voter base, a lot moved to Florida and Nevada for lower taxes,” said Senator Susan Wagle, the Republican Senate president who represents Wichita. “I’d like to see them come back.”

Kansas’ tax policy has caught the attention of its neighbors. Gov. Dave Heineman of Nebraska, a Republican, has introduced a bill to eliminate a variety of taxes, including ones on individual income and small businesses. Gov. Mary Fallin of Oklahoma, also a Republican, plans to call for modest income tax cuts, and Missouri lawmakers have discussed reforming their tax code.

But there is significant concern in Kansas over the cost of the tax cuts, which is expected to total nearly $850 million in the coming fiscal year. In the budget he presented last week, Mr. Brownback proposed to help cover the cost of those cuts by keeping in place a sales tax increase that was scheduled to expire this year and by eliminating the mortgage interest deduction. Both proposals have proven unpopular among conservatives and liberals alike.

“I think it’s going to be a hard sell,” said Representative Ray Merrick, the Republican speaker of the House, who supports the income tax cuts.

Critics say Mr. Brownback’s tax cut was passed on the backs of low-income Kansans. The bill included the repeal of tax credits for food, rental housing and child care that benefited low-income residents. Because of those repeals, the poorest 20 percent of Kansans will spend an additional 1.3 percent of their incomes, an average of $148 per year, on taxes, according to a report by the Institute on Taxation and Economic Policy. The top 1 percent, meanwhile, will see the share of their income that goes toward taxes drop by 2 percent, or $21,087 per year, the report said.

“This tax bill that passed is really what I call Robin Hood in reverse,” said Senator Anthony Hensley, the Democratic leader, who represents Topeka.

While Mr. Brownback has aspired to make Kansas a state without income tax, critics note that other such states have other streams to supplement their revenue — Texas, for instance, has oil, and Florida has tourism. And as he looks to reduce taxes, Mr. Brownback has not increased financing for education to the level that a state appellate court mandated this month. (The state is appealing that ruling.) Opponents fear deeper spending cuts.

Brownback supporters say more focus needs to be placed on efficient government spending, in education and other areas, rather than the amount that was being spent.

But Mr. Sloan said he felt that lawmakers were simply tailoring spending to fulfill the tax cuts, risking essential services without so much as discussing what the priorities should be.

“Bottom line is, if the governor’s right and I’m wrong, the state will prosper,” he said. “If I’m right and the governor’s wrong, then the state will suffer long term. I hope he is correct because that’s the path we’re on, but I have my doubts.”

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Important IRS deadline for small businesses is just days away

Source: http://www.pressconnects.com/article/20130124/BUSINESS/301240014/Important-IRS-deadline-small-businesses-just-days-away?nclick_check=1

Small businesses

hate paperwork.

And small businesses really hate paperwork from the Internal Revenue Service. But you’d better take care of one bit of paperwork from the IRS and do it quickly because An important deadline is approaching: Thursday, Jan. 31.

That’s the deadline for filing the 1099-MISC form.

What most people in business

simply refer to as “1099s” are the forms businesses must send to any independent contractors they’ve used in the past year.

Perhaps you paid a tech consultant to help you maintain your computers

. Perhaps you hired a marketing consultant to manage your Facebook accounts, or maybe you used an electrician to wire new offices.

If you paid any individual $600 or more in 2012, the IRS wants to know about it.

Small businesses like using independent contractors. They provide services on an as-needed basis, giving small companies much-desired help and expertise with flexibility. But the IRS scrutinizes few areas as much as the use of independent contractors.

One way to make sure you stay out of hot water is to be sure to file 1099s for all your contractors on time.

Whom must you send a 1099?

-- Any individual you’ve paid more than $600 for services during 2012.

-- Anyone -- other than a real-estate agent -- you’ve paid rents to during 2012.

-- Any lawyer to whom you’ve paid more than $600 in legal fees during 2012, whether incorporated or not.

Who don’t you have to send a 1099?

-- Employees on your payroll who receive a W-2.

-- Corporations. If an independent contractor has incorporated his or her business, or you’ve used a service provider that is a corporation, no 1099 is needed.

-- People you’ve hired for personal, nonbusiness, services.

If a company fails to file a 1099 for its independent contractors, it can have serious -- and expensive -- consequences. That’s because the IRS is on the lookout for companies that abuse independent contractor/employee status.As a business, you can treat employees in one of two ways: as an employee or as an independent contractor. Many businesses would prefer to treat employees as independent contractors. Here’s why:

If you treat workers as employees, you pay additional taxes: Social Security, Medicare, unemployment, worker’s compensation, and the like, and workers get more protections under federal and state labor laws.

If you treat them as independent contractors, you pay no additional taxes and they get very few worker protections.

Eureka! You like the independent contractor choice better.

Equally obviously, the federal government, states and cities want to make certain that anyone doing the work of an employee gets treated -- and protected -- as such. It’s also far easier for the IRS to ensure that taxes are paid from employees via withholding than from independent contractors.

Few areas of employment law are murkier than those dealing with independent contractors. IRS guidelines on who qualifies are not crystal clear.

The main issue the IRS tries to determine is who “controls” the worker. Auditors look at three areas:

Behavioral. Does the worker control how he does the work? The IRS looks at issues such as who controls:

-- When and where the worker does the work.

-- What tools or equipment the person uses.

-- Who determines where the person purchases supplies.

-- What order or sequence of work to follow.

Financial. Does the worker have a significant investment, such as owning his own tools; can she make a profit or loss; does she make their services available to others, work for other businesses?

The relationship. How permanent is the relationship, do you have written contract, is the worker responsible for his or her own benefits, and is the work performed a critical and regular part of the business?

The IRS is particularly aggressive in pursuing companies that intentionally -- or unintentionally -- pay workers as independent contractors instead of employees.

But the IRS does provide some protection for businesses that make mistakes in good faith. Agents will look to see whether a business relied on advice of a lawyer or accountant, followed industry practice, treated workers consistently.

But, and this is important, a company that fails to file a Form 1099 for an independent contractor has absolutely no protection.So don’t let Jan. 31 slip by without getting those 1099s in the mail.

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Wednesday, January 23, 2013

FAFSA help sites scam undergraduate students

Source: http://www.cm-life.com/2013/01/23/fafsa-help-sites-scam-undergraduate-students/

Students who fill out their FAFSA form too quickly or carelessly could find themselves victims of a website scam that preys on undergraduates.

The Free Application for Federal Student Aid is a paperwork requirement for all students attempting to receive financial aid.

Websites like FAFSA.com or FAFSAOnline.com offer the ability for students to fill out the forms that would otherwise be free on the official FAFSA website, for an $80 fee.

“We’re well aware of those types of websites,” said Kirk Yats, director of the Office of Scholarships and Financial Aid. “Everything we communicate to students, both on and off the website, we reference to the official FAFSA website.”

A plethora of FAFSA “help-sites” are available online, and many are listed in a warning section of the OSFA website. However, the websites appear and disappear at such a steady rate that it makes it difficult to warn students of specific sites.

“The problem is they’re hard to track,” Yats said. “As a general rule of thumb, we tell students to never pay for financial assistance. It’s all available for free on the FAFSA.gov website.”

Like the name implies, the actual FAFSA has zero service fees unlike the financial help sites. It is funded by the United States government through the Department of Education and, according to the website, processes more than 21 million submissions each year.

The application process can seem complicated to many but has been largely simplified both in part by the government and through tips posted on the CMU website.

“FAFSA.gov has edits built into it that will walk students through the process,” Yats said. “These edits will help clarify things and assist students as they fill out their information. It helps improve the initial accuracy of the FAFSA form.”

CMU also does its part to help students by offering step-by-step instructionals and a list of tips to avoid mistakes. A new service offered through the OSFA, FAFSA Fridays, is also available.

“We reserve the fourth floor of the library and sit down to help students either there or in the office here in Warriner,” Yats said. “You don’t have to be a CMU student either. We just want to help both current and prospective students through the process.”

Despite the efforts to help students properly and completely fill out the FAFSA form, there continues to be a large number of mistakes each year. According to Yats, some of the biggest mistakes can be something as simple as mistyping a Social Security number.

“The biggest problems we find during the processing of FAFSA paperwork is entering the wrong federal income tax paid amount,” Yats said. “Listing an incorrect Social Security number or driver’s license number can also be problematic. It just delays the registration process.”

As for the website scam, the options for solutions are limited. The OSFA works directly with high school counselors and other advisors to make sure students are using the correct information.

“We’ve had our fair share of complaints,” Yates said. “It’s misleading to create those types of websites that undermine the official website. We do just about all we can to warn students in as many different ways as we can.”

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Tax fraud: How to protect yourself

Source: http://www.myfoxtampabay.com/story/20655214/2013/01/23/tax-fraud-how-to-protect-yourself

TAMPA (FOX 13) -

Anthony Meaker knew as soon as he heard it something wasn't quite right.

"It caught me off guard right off because I had a tax problem last year," the Brandon resident said.

"Here's this voicemail that comes up. It's talking about 'contact the IRS immediately' and 'here's the phone number," Meaker said.

Turns out it was a scam. Identity thieves were fishing for Meaker's personal information so they can file bogus tax returns.

"These are traditional types of identity theft scams that you should be wary of," said white collar crime expert and former federal prosecutor, L.T. Lafferty.

But he said that's not the big problem.

These days thieves don't want just one identity, they want hundreds.

"These perpetrators are targeting health care providers, insurance companies, schools, financial institutions, any type of institution that routinely collects this type of information," Lafferty said.

He said the crooks pay someone on the inside, usually employees who are willing to steal social security numbers, addresses and more – everything needed to file boatloads of bogus returns.

"It's very easy," Lafferty said. "Anything from photocopying the paper records that you have to taking cell phone photographs of the personal information that's up on the computer screen."

That's why Lafferty said to keep your personal information to yourself, and that's exactly what Meaker did.
"I'm retired military and, of course, I would like to take my expertise and take care of things," he said. "But my integrity and honesty won't let me do that. All we can do is fight back."

So, what can you do?

First, experts say, don't carry your social security number or any other personal information with you in your wallet or purse.

Don't give out your social security number unnecessarily. Just because someone asks for it doesn't mean they need it, including the bank, your child's school and even the doctor's office.

File early before somebody else files for you.

And in case your return is swiped, you can minimize the harm by cutting the amount of tax withholding from your paycheck.

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U.S. IRS rescinds tax preparer rules after court ruling

Source: http://newsandinsight.thomsonreuters.com/Legal/News/2013/01_-_January/U_S__IRS_rescinds_tax_preparer_rules_after_court_ruling/

By Patrick Temple-West and Kim Dixon

Don't let this be your online tax preparer!

WASHINGTON, Jan 22 (Reuters) - The tax return preparation industry was thrown into disarray on Tuesday when the U.S. Internal Revenue Service rescinded new registration and training rules affecting up to 700,000 tax return preparers.

The tax-collection agency backed away from its new program, meant to crack down on unscrupulous preparers, after a court decision on Friday barred the IRS from enforcing tax return preparer regulations.
In complying with the court's permanent injunction, the IRS said nonprofessional tax return preparers "are not currently required" to register with the agency, pass a competency test or take continuing education classes to do tax returns.

"I'm just picking my jaw off the ground," said Jeff Trinca, a Washington lobbyist who represents some tax preparers, adding that the suspension of the IRS program could put billions of dollars in tax returns at renewed risk of being mishandled.

"This isn't chicken feed, this is dramatic," Trinca said.

The government can appeal the decision, written by Judge James Boasberg for the U.S. District Court for the District of Columbia, who was nominated by President Barack Obama in 2010.

The IRS "continues to have confidence in the scope of its authority to administer this program," the agency said in a statement. "It is considering how best to address the court's order and will take further action shortly."

The IRS said lawyers, accountants and other licensed tax return professionals must still meet the regulatory requirements related to their certifications.

The IRS rules were criticized by some because of the new fees they slapped on practitioners, but broadly supported as a way to regulate a free-wheeling industry and fight tax refund fraud.

Thousands of independent "mom and pop" operators, as well as employees for tax return companies H&R Block Inc and Jackson Hewitt Tax Service Inc were complying with the IRS rules.

"It is quite a mess," Mark Steber, chief tax officer at Jackson Hewitt, told Reuters in the wake of the court ruling.

About a quarter of the roughly 140 million individual tax returns filed annually are done with help from a non-professional tax preparer, said Gil Luria, an analyst with investment firm Wedbush Securities.

The court ruling could hurt institutional tax-preparation providers such as H&R Block and Jackson Hewitt by reopening the market to small competitors that the IRS program had been expected to squeeze out, said Luria, who covers the industry.

TOP PRIORITY
Under the IRS requirements, preparers had 2 1/2 hours to finish a 120-question competency test that cost $116. They also had to take 15 hours of continuing-education classes annually.

About 55,000 individuals have already passed the test, said Chuck McCabe, chief executive of the Income Tax School in Richmond, Virginia. Some of these individuals will seek a refund from the IRS for their test fee, he said.

If the court decision is not reversed on appeal "it could be a real can of worms," McCabe said.
Regulating tax preparers was a top priority for former IRS Commissioner Doug Shulman before he stepped down in November.

Shulman called in 2009 for an IRS effort to root out tax preparation fraud. The return preparer initiative began in 2011.

Shulman, now a guest scholar at the Brookings Institution, could not be reached for comment.
In March 2012, three independent tax preparers and the Institute for Justice, a conservative civil-liberties advocacy group, challenged the program's legal authority. They accused the IRS of enforcing the requirements without congressional approval.

The IRS said a law dating to 1884 gave it that authority, but the court disagreed and halted the agency's initiative.

The IRS wants to weed out dishonest tax preparers who can abuse their access to clients' sensitive financial information. Tax refund fraud soared in the years leading up to the regulations as Congress passed new tax credits refundable for cash.

The IRS prevented $6.1 billion of tax refund fraud in 2012, according to the agency.
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Amazon fails to collect new Georgia tax

Source: http://www.ajc.com/news/news/amazon-fails-to-collect-new-georgia-tax/nT4wm/

By Arielle Kass

The Atlanta Journal-Constitution

Georgia shoppers at Amazon still aren’t paying sales tax, three weeks after the start of a state law designed to snag the money from the world’s biggest online retailer.

Shoppers buying items from Amazon.com to be shipped to Georgia should be prompted to pay sales tax under the law that took effect Jan. 1. But repeated checks of Amazon.com show that isn’t happening.
Amazon’s inaction could throw the state and the internet giant into a potentially costly battle that feeds into a national debate over whether all online retailers should be required to collect sales tax across the country.
Amazon has fought against charging its customers sales tax, leading to legal battles in some states and negotiations to delay the taxes in others.

If online-only retailers — the target of Georgia’s new law — collected the tax, it would add an estimated $16 million annually to Georgia’s already depleted coffers. The added tax would please owners of local stores, who complain that having to charge sales tax puts them at disadvantage.

Online stores already are required to collect sales tax in Georgia if they have a physical presence in the state. The new law expands the definition of physical presence. For example, Amazon would have to charge sales tax because it gets some customer traffic from other sites that have physical operations in Georgia.

Amazon is maintaining those relationships but is not collecting the tax, to the surprise of other website operators and legal experts.

Whether or when Amazon’s tax collection will begin is unclear. State officials are aware Amazon isn’t collecting the money, but they aren’t disclosing what they will do about it.

“Our expectation is that the law would be abided by,” said Ryan Teague, executive counsel to Gov. Nathan Deal.

Amazon did not return several phone calls and emails seeking comment. Eric Tresh, an Atlanta attorney who represents the company, declined to talk about Amazon’s position as regards Georgia, but said laws in various states that require online collection are “arguably unconstitutional.”

In states such as New York and Illinois, Amazon has challenged such laws, with mixed results. After reading Georgia’s version, Richard Pomp, a professor of law at the University of Connecticut School of Law, said the law was poorly drafted, because it does not require the activities that would require tax collection take place in Georgia.

“My inference is that they feel comfortable challenging the legislation, probably with good reason,” he said. “They probably feel comfortable not collecting. Georgia’s going to have litigation they probably didn’t expect.”

If Amazon continues to not collect the tax, the Georgia Retail Association may sue, said Rick McAllister, its president and CEO.

Because the law has been in effect for less than a month, taxes Amazon might owe are not yet required to be sent to the state. Newly registered companies file taxes on a monthly basis. Jud Seymour, a spokesman for the Georgia Department of Revenue, said the department does random audits across businesses, but he could not comment on plans to audit any specific company.

By provoking an audit, Amazon may set itself up to challenge the constitutionality of Georgia’s law, said John Swain, a professor of law at the University of Arizona’s Rogers College of Law. In a case dealing with catalogue companies, the Supreme Court found that in order to collect sales tax in a state, a retailer had to have a physical presence there.

A lawsuit in Georgia could affect the national landscape, Swain said. Amazon does or will collect sales tax in a dozen states, and national legislation that would require online sellers to collect local sales tax is wending its way through Congress.

In some states, Amazon has made deals to collect sales tax after a delay, often in exchange for bringing jobs to the state. Whether Georgia is in such conversations with the company is unknown. Several Georgia legislators and state employees said they had no knowledge of any negotiations.

Department of Economic Development spokeswoman Alison Tyrer said she could not confirm whether the state is in talks with Amazon, but said “sales tax collection is not a part of our negotiations with companies looking to locate or expand in Georgia.”

When Georgia’s law was put into place, it was widely expected that Amazon would end relationships with people like Chuck Shiflett, who earns a commission each time a shopper buys from the Amazon link on his websites, such as bowrenchdirect.com.

But Shiflett hasn’t heard from Amazon since last spring. Neither has Dave Andre, the founder and chairman of Cartera Commerce. Greg Hoffman, who owns a Georgia Internet marketing agency, received a newsletter from the company last week. It had no mention of the Georgia law.
“I’m completely mystified by what’s going on,” Andre said.

Other businesses, like Overstock.com and Vitacost.com, have ended their relationships with Georgia websites in order to avoid collecting the tax. It is odd that Amazon — the largest online seller — has not, said McAllister of the state retail association.

Some legal experts have speculated that Amazon’s ownership of Georgia-based Fabric.com — which does collect tax on Georgia residents — has affected Amazon’s willingness to fight the law.

Then again, maybe Amazon just likes its odds, said Pomp, with the University of Connecticut. “They may feel very comfortable they’re going to win this one.”

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Tuesday, January 22, 2013

The Top 10 Income Tax Return Mistakes That People Make

10 Common Income Tax Snafus - An infographic created by Olson Tax Consulting

The Top 10 Income Tax Return Mistakes That People Make

Missing the deadline
Forgetting to file (or deciding not to)
Forgetting their social security number, or adding the wrong number by mistake
Math errors
Failing to keep old copies of their returns
Forgetting to sign and/or date their return
Claiming false dependents
Losing their important receipts
Failing to report and pay taxes for domestic employees
Failing to check the work the tax prep company or person does on their behalf

Other Common Tax Errors:

Filing the wrong forms
Filing under the wrong status
Not filing or calculating self-employment tax
Failing to check whether or not you are subject to the alternative minimum tax
Mis-using or not using the earned income credit
Failing to pay attention to changes in tax laws
Failing to declare all income

Jana’s Free Income Tax Advice
Be sure to print out and save copies of your old bank statements, tax returns, and any other documents you have that are currently in electronic format. This way you don’t have to worry about losing records because of a lost file or computer problem.
If printing these docs out doesn’t sound like a good option, then be sure to invest in a good backup system (you can backup your files to the web, or buy an at-home RAID storage device).

This information and infographic is brought to you by http://www.olsonirstaxattorney.com/503/10-common-income-tax-snafus/

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Charities worry new tax law will cut gifts

Source: http://www.deseretnews.com/article/765620714/Charities-worry-new-tax-law-will-cut-gifts.html

WASHINGTON — Charities and nonprofit organizations are worried that new limits on tax deductions for high earners will hurt donations just as charitable giving is starting to rebound from the depths of the recession.

Experts doubt the new limits on deductions will have much impact on giving, but some major nonprofit organizations fear they're a sign that the charitable deduction is no longer sacrosanct on Capitol Hill, just as Congress is promising a broader effort later this year to overhaul the tax code.

The limits on deductions are part of the new tax law Congress passed on New Year's Day. They reduce the value of all itemized deductions for individuals making more than $250,000 and married couples making more than $300,000. Advocates are concerned the limits will reduce the tax incentive for people to make donations to charities and nonprofits such as religious institutions, colleges and groups that help the poor.

"The charitable deduction incentive is different than any other deduction or credit in the tax code," said Sandra Swirski, executive director of the Alliance for Charitable Reform, which lobbies on behalf of donors and private foundations. That's because the deduction encourages people to give away income, while other deductions and credits encourage people to buy things they can then write off, she noted.

Charitable giving in the U.S. increased in 2010 and 2011, according to the latest data. But it has yet to fully return to pre-recession levels, according to data from the Giving USA Foundation and the Indiana University School of Philanthropy.

Charitable giving by individuals, foundations and corporations topped $298 billion in 2011. In 2007, it was $337 billion, in inflation-adjusted dollars.

The new tax provision reduces the amount of itemized deductions a taxpayer can claim by 3 cents for every dollar of income above the threshold. For example, if a married couple has an adjusted gross income of $400,000, that's $100,000 above the threshold, so the itemized deductions would be reduced by $3,000.

Itemized deductions cannot be reduced by more than 80 percent, under the provision.

In this example, if the couple had a total of $60,000 in itemized deductions, they could claim only $57,000. If they were in the 33 percent income tax bracket, the provision would increase their taxes by $990.

The provision is a revival of the "Pease" limitation, first enacted in 1990 but phased out in 2010 as part of the massive package of Bush-era tax cuts. It is named after a deceased congressman, Rep. Donald Pease, D-Ohio, who wrote the measure.

Experts say there is no evidence that the limitation reduced charitable giving in the past, and no reason to think it will have much of an impact going forward. Charitable giving steadily increased in the 1990s, when the economy flourished.

One analysis estimates that, on balance, charitable giving will increase slightly because of the new tax law. That's because high earners facing the increased tax rates have more incentive to seek deductions, and those deductions become more valuable.

The new law increases the top income tax rate from 35 percent to 39.6 percent on taxable income above $400,000 for individuals and $450,000 for married couples. It also increases the top tax rate on long-term capital gains for taxpayers with incomes above those thresholds.

Both provisions increase incentives for people to make charitable donations, according to the analysis of the law by the Urban Institute Center on Nonprofits and Philanthropy.

For example, if a married couple has a top income tax rate of 35 percent, a $1 deduction will lower their tax bill by 35 cents. If that same couple has a top tax rate of 39.6 percent, a $1 deduction will lower their tax bill by nearly 40 cents, making the deduction more valuable.

Similarly, the higher tax rate on capital gains increases the incentive to donate securities to charity as a way to avoid those taxes, said Eugene Steuerle, a fellow at the Urban Institute who worked on the analysis.

The Pease limitation, meanwhile, should have a negligible impact on charitable giving because it is based on income, not on the amount of deductions, Steuerle said.

Nevertheless, nonprofits and charities are wary of any provision that could limit the charitable deduction.

"We just know that this change is definitely not going to be helpful," said Gloria Johnson-Cusack, executive director of Leadership 18, an alliance of CEOs of charities, non-profits, and faith-based organizations. "We don't think now is the time to be experimenting with a policy that has the potential" to reduce the incentive to donate.

Charitable organizations fear that even more tax changes could be coming as momentum builds in Congress to overhaul the tax code, to make it simpler and more transparent. So far, lawmakers have been wary of publicly targeting any tax break for elimination, to avoid generating opposition before the process gets started.

Still, interests groups of every stripe already are lobbying Congress to protect cherished tax breaks.

Leadership 18 is part of the Charitable Giving Coalition, a broad group of nonprofit organizations dedicated to preserving tax incentives for charitable giving.

"We are trying figure out the best way to address any kind of changes that they may be talking about that would act as a disincentive," Johnson-Cusack said. "We're real worried about it."

Taxes can play a role in how much people donate to charity, but other factors play a larger role, said Patrick Rooney, associate dean of the Indiana University School of Philanthropy.

"When you ask why people why they are donating, taxes are fairly far down on the list," Rooney said. "The key motivations are really to do things like feed the hungry and house the homeless and to support one's religious organization or to improve the quality of one's alma mater."

"The single biggest factor that would change giving is an improvement in the overall economy," Rooney said.

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Intuit 'Disappointed' in Decision Preventing IRS From Regulating Nonprofessional Preparers

Source: http://www.foxbusiness.com/technology/2013/01/22/intuit-disappointed-in-decision-preventing-irs-from-regulating-nonprofessional/

Source: http://www.commonplaces.com/sites/commonplaces.com/files/styles/900x385/public/images/portfolio/intuit-logo.png

Financial software provider Intuit Inc. (INTU) said it is "disappointed" in a district court decision preventing the Internal Revenue Service from regulating nonprofessional tax-return preparers.

According to Reuters, the decision relates to the IRS Return Preparer Initiative that began in 2011, requiring tax preparers to register with the IRS and to pass competency tests and take classes to maintain their registration with the agency. However in March of last year, three independent tax preparers and a civil-liberties advocacy group, challenged the program's legitimacy, accusing the IRS of enforcing the requirements without congressional approval. The IRS had said a law dating to 1884 gave it the authority, but the court disagreed.

Intuit--which offers the widely used tax preparation and filing software Turbo Tax--had testified in support of the IRS effort at the public hearing the agency conducted in Chicago in September 2010.

According to Intuit, the U.S. District Court for the District of Columbia's ruling--issued Friday--could affect up to 700,000 tax-return preparers who won't have to obtain credentials, ranging from independent preparers to employees at national storefronts, such as H&R Block Inc. (HRB).

"Intuit supports efforts to strengthen and enhance the tax preparation services industry and is disappointed in the court decision regarding IRS industry oversight," said Dan Maurer, senior vice president and general manager of Intuit's Consumer Tax Group. "The public interest is best served when all competing tax service providers meet high standards."

Shares of Intuit closed Friday at $63.68 and were inactive premarket. The stock has risen 12% in the past 12 months.

Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
Copyright © 2013 Dow Jones Newswires

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Treasury and the Internal Revenue Service Announce Final Regulations to Fight Corupt Offshore Tax Evasion

Source: http://www.loansafe.org/treasury-and-the-internal-revenue-service-announce-final-regulations-to-fight-corupt-offshore-tax-evasion

(Source: Treasury) – WASHINGTON – The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today issued comprehensive final regulations implementing the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The issuance of the final regulations marks a key step in establishing a common intergovernmental approach to combating tax evasion.

These regulations provide additional certainty for financial institutions and government counterparts by finalizing the step-by-step process for U.S. account identification, information reporting, and withholding requirements for foreign financial institutions (FFIs), other foreign entities, and U.S. withholding agents.
“These regulations give the Administration a powerful set of tools to combat offshore tax evasion effectively and efficiently,” said Deputy Secretary Neal Wolin. “The final rules mark a critical milestone in international cooperation on these issues, and they provide important clarity for foreign and U.S. financial institutions.”

The final regulations issued today:
Build on intergovernmental agreements that foster international cooperation. The Treasury Department has collaborated with foreign governments to develop and sign intergovernmental agreements that facilitate the effective and efficient implementation of FATCA by eliminating legal barriers to participation, reducing administrative burdens, and ensuring the participation of all non-exempt financial institutions in a partner jurisdiction. In order to reduce administrative burdens for financial institutions with operations in multiple jurisdictions, the final regulations coordinate the obligations for financial institutions under the regulations and the intergovernmental agreements.

Phase in the timelines for due diligence, reporting and withholding and align them with the intergovernmental agreements. The final regulations phase in over an extended transition period to provide sufficient time for financial institutions to develop necessary systems. In addition, to avoid confusion and unnecessary duplicative procedures, the final regulations align the regulatory timelines with the timelines prescribed in the intergovernmental agreements.

Expand and clarify the scope of payments not subject to withholding. To limit market disruption, reduce administrative burdens, and establish certainty, the final regulations provide relief from withholding with respect to certain grandfathered obligations and certain payments made by non-financial entities.

Refine and clarify the treatment of investment entities. To better align the obligations under FATCA with the risks posed by certain entities, the final regulations: (1) expand and clarify the treatment of certain categories of low-risk institutions, such as governmental entities and retirement funds; (2) provide that certain investment entities may be subject to being reported on by the FFIs with which they hold accounts rather than being required to register as FFIs and report to the IRS; and (3) clarify the types of passive investment entities that must be identified and reported by financial institutions.

Clarify the compliance and verification obligations of FFIs. The final regulations provide more streamlined registration and compliance procedures for groups of financial institutions, including commonly managed investment funds, and provide additional detail regarding FFIs’ obligations to verify their compliance under FATCA.

Progress on International Coordination, Including Model Intergovernmental Agreements
Since the proposed regulations were published on February 15, 2012, Treasury has collaborated with foreign governments to develop two alternative model intergovernmental agreements that facilitate the effective and efficient implementation of FATCA.

These models serve as the basis for concluding bilateral agreements with interested jurisdictions and help implement the law in a manner that removes domestic legal impediments to compliance, secures wide-spread participation by every non-exempt financial institution in the partner jurisdiction, fulfills FATCA’s policy objectives, and further reduces burdens on FFIs located in partner jurisdictions. Seven countries have already signed or initialed these agreements.

Today, Treasury announced for the first time that Norway has joined the United Kingdom, Mexico, Denmark, Ireland, Switzerland, and Spain as countries that have signed or initialed model agreements. Treasury is engaged with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.

Additional Background on the Model Agreements
On July 26, 2012, Treasury published its first model intergovernmental agreement (Model 1 IGA). Instead of reporting to the IRS directly, FFIs in jurisdictions that have signed Model 1 IGAs report the information about U.S. accounts required by FACTA to their respective governments who then exchange this information with the IRS.

Treasury also developed a second model intergovernmental agreement (Model 2 IGA) published on November 14, 2012. A partner jurisdiction signing an agreement based on the Model 2 IGA agrees to direct its FFIs to register with the IRS and report the information about U.S. accounts required by FATCA directly to the IRS.

These agreements do not offer an exemption from FATCA for any jurisdiction but instead offer a framework for information sharing pursuant to existing bilateral income tax treaties. Under both models, all financial institutions in a partner jurisdiction that are not otherwise excepted or exempt must report the information about U.S. accounts required by FATCA. Therefore, the IRS receives the same quality and quantity of information about U.S. accounts from FFIs in jurisdictions with IGAs as it receives from FFIs applying the final regulations elsewhere, but these agreements help streamline reporting and remove legal impediments to compliance.

Background on FATCA
FATCA was enacted in 2010 by Congress as part of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA requires FFIs to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. In order to avoid withholding under FATCA, a participating FFI will have to enter into an agreement with the IRS to:
- Identify U.S. accounts,
- Report certain information to the IRS regarding U.S. accounts, and
- Withhold a 30 percent tax on certain U.S.-connected payments to non-participating FFIs and account holders who are unwilling to provide the required information.

Registration will take place through an online system. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.
Treasury and IRS will continue to work closely with businesses and foreign governments to implement FATCA effectively. Updates and further information on FATCA can be found by visiting the FATCA page at Treasury.gov or IRS.gov.

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Tuesday, January 22, 2013

The Top 10 Income Tax Return Mistakes That People Make