Help With Your Federal Income Tax, Articles and stories related to the IRS, taxes, tax credits, EITC and tax deductions and updated tax news

Wednesday, October 31, 2007

Honda Compressed Natural Gas Vehicle is Certified for the Qualified Alternative Fuel Motor Vehicle Tax Credit

WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc., that its Honda Civic GX Model Year 2008 vehicle meets the requirements of the Qualified Alternative Fuel Motor Vehicle Credit.

The Qualified Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005. To qualify these vehicles can operate only on alternative fuels or mixed fuels (a combination of alternative fuel and petroleum based fuel). The 2008 Honda Civic GX is an alternative fueled vehicle that operates on compressed natural gas. This vehicle should not be confused with hybrid vehicles.

The Qualified Alternative Fuel Motor Vehicle Credit amount for the Honda Civic GX Model Year 2008 is $4,000.

---

IRS Tax Talk Today Focuses on Worker Classification

WASHINGTON — The IRS’s November 6, 2007 Tax Talk Today Webcast, “What’s Hot in Employment Taxes: Independent Contractor or Employee?”, will focus exclusively on worker classification issues. The program starts at 2 p.m. ET.

A critical issue for all businesses is properly classifying workers as employees or independent contractors.

During the live, one-hour Webcast, a panel of experts will discuss legislative and judicial background and recent changes regarding worker classification, why the worker classification issue is important and what the IRS is doing about it, and what workers who feel they have been misclassified can do to correct their situation.

Tax professionals and business persons who wish to learn about the subject of worker classification are encouraged to watch and submit questions. The live Webcast enables viewers to ask questions via e-mail to the panelists and receive on-air answers.

Panelists will be Mary C. Gorman, Attorney, IRS Counsel; Richard Schampers, Senior Program Analyst, Employment Tax Policy, IRS; Joseph Tiberio, Program Manager, Employment Tax Policy, IRS; Rebecca Wilson, Attorney, IRS Counsel; Michael P. O'Toole, Esq., Senior Director, Publications and Government Relations, American Payroll Association; and F. Gordon Spoor, CPA/PFS, Spoor & Associates, P.A.

To access the Webcast at no charge, viewers can register online at www.TaxTalkToday.tv. Tax professionals in need of continuing education credits (CECs) are eligible to receive one CEC by viewing the November Webcast.

Archived shows are available on the Web site.


Refer to my previous post Here
about the subject. Especially for employees, it is very important that you are classified correctly. I suggest you watch this webcast.

Tim
---

Tuesday, October 30, 2007

IRS Grants Tax Relief for Southern California Wildfire Victims

WASHINGTON — The Internal Revenue Service is extending tax return filing and payment deadlines for victims of the severe Southern California wildfires.

Taxpayers in the Presidential Disaster Area –– consisting of Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara and Ventura counties –– will have until Jan. 31, 2008, to file returns, pay taxes and perform other time-sensitive acts.

The extended deadline applies to items due on or after Oct. 21, 2007, when the fires began, and on or before Jan. 31, 2008. This includes the federal withholding tax return, Form 941, normally due Oct. 31, and the estimated tax payment for the fourth quarter, normally due Jan. 15.

In addition, the IRS is waiving the failure to deposit penalty for employment and excise deposits due on or after Oct. 21, 2007, and on or before Nov. 5, 2007, as long as the deposits are made by Nov. 5, 2007.

If any affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply during the period from Oct. 21, 2007, to Jan. 31, 2008, or Oct. 21, 2007, through Nov. 5, 2007, for failure to deposit penalties. No penalty or interest will be abated for taxpayers that do not have a filing, payment or deposit due date, including an extended filing or payment due date, during this period.

“As California taxpayers start the recovery process, the last thing they should worry about is meeting a tax deadline,” said IRS Acting Commissioner Linda Stiff. “The IRS offers many resources for disaster victims online at IRS.gov, over the phone and in person.”

IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Taxpayers within the covered disaster area do not need to identify themselves as affected by the wildfires by writing on their returns or using the disaster designation in their tax software.

Affected taxpayers who reside or have a business located outside the covered disaster area are required to call the IRS disaster hotline at 1-866-562-5227 to identify themselves as eligible for disaster relief.

Casualty Losses

Affected taxpayers in a presidentially declared disaster area also have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. For details on figuring a casualty loss deduction, see IRS Publication 547, “Casualties, Disasters and Thefts.”

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

---

Monday, October 29, 2007

Tax Considerations When Re-Financing

Tax Considerations When Re-Financing

Have you ever wondered what exactly is up with taxes? This informative report can give you an insight into everything you've ever wanted to know about taxes.


For many homeowners the overall goals of re-financing are often paying less in interest overall and reducing monthly payments. When you are able to obtain a lower interest rate, there is usually the opportunity to re-finance the mortgage to capitalize on the lower interest rate. However, a lower interest rate does not automatically translate to a savings. You must carefully consider the amount of money they will be savings over the course of the loan in relation to the amount of money they will be spending to re-finance the mortgage. When the closing costs associated with re-financing are larger than the savings, re-financing may not be warranted. Re-financing can also have financial ramifications associated with tax options.

Paying Less Interest Equals Less of a Deduction

In most locations, you are permitted to deduct the amount of taxes you pay on your mortgage when filing your taxes. This is usually quite a substantial deduction for homeowners who owned the home for the entire tax year. Those who re-finance their mortgage will typically be paying less money each year in taxes on the mortgage. While this is great in the long run, it can adversely affect the your tax return.

Consider a situation where a homeowner is located just below a major tax bracket which would be quite costly for the homeowner. As all ready discussed, re-financing may result in the homeowner paying less money in taxes each year. This means the taxpayer will be able to make a smaller deduction this year now fall above the tax bracket they previously fell below. When this happens the homeowner may find themselves paying significantly more in taxes.

Consult a Tax Preparation Specialist

Determining the exact ramifications of paying less interest on a home mortgage on a tax return can be a rather tricky process. There are a number of difficult equations involved which can make the apt to make mistakes while trying to determine the consequences of paying less in taxes on the mortgage. For this reason, you should consult a tax preparation specialist when determining whether or not re-financing is worthwhile because the tax specialist can provide information regarding the impact of paying less in interest.

In selecting a tax preparation specialist, you should seek out opinions from friends and family members if you do not employ a specialist to prepare your taxes. This can be helpful because trusted friends and family members are only likely to recommend professionals they feel were knowledgeable, trustworthy and caring. A tax preparation specialists should have all of these qualities but should also be well versed in the area of tax preparation. This will enable the tax preparation specialist to make all of the right decisions when considering the needs of you.

Online Calculators

If you do not know a tax preparation specialist or for homeowners who are unable to afford the consulting services of these individuals, there are online calculators which you might find very useful. These calculators are readily available throughout the Internet and can be used to determine the tax ramifications to re-financing. These calculators ask the user to input specific criteria then returns results regarding the amount you will pay in taxes during the year if you refinance. Additionally, you can run these equations several times to consider a number of different scenarios.

If you base what you do on inaccurate information, you might be unpleasantly surprised by the consequences. Make sure you get the whole tax story from informed sources.


You can't predict when knowing something extra about taxes will come in handy. If you learned anything new about taxes in this article, you should file the article where you can find it again.

---
Tim Watson is a tax preparer during the tax season who also runs an Search Engine Optimization directory and an Video iPod directory. You may use this article as is provided the resource box stays intact.

Friday, October 26, 2007

IRS and GWU Host 20th Annual International Tax Conference

IRS and GWU Host 20th Annual International Tax Conference

WASHINGTON — Senior law professors from The George Washington University Law School will join with officials from the Treasury Department and IRS as well as officials from the tax authorities of Korea, Mexico and the United Kingdom to discuss significant tax compliance and treaty issues at the 20th Annual Institute on Current Issues in International Taxation.

The two-day program will be held on Dec. 13 and 14, 2007, at the Grand Hyatt Washington Hotel located at 1000 H Street, N.W., Washington, D.C. Those interested in attending can find out more about the topics, speakers and registration from the GWU Law School web site: http://www.law.gwu.edu/ciit.

The program is designed primarily for corporate tax executives responsible for international tax matters, tax counsels of domestic and foreign multinational corporations, lawyers working in the international tax area and accounting firm partners and managers working in the international tax area.

The conference has been arranged to provide opportunities for lively exchanges between members on the panels who represent government, academia and the private sector and to offer question and answer periods with members of the audience. It will include the perennially popular ‘ask the IRS’ session where IRS officials respond to questions from the audience.

The conference is further described in Announcement 2007-100.


---

Purchasers of Ford Hybrids Still Qualify for Tax Credit

Purchasers of Ford Hybrids Still Qualify for Tax Credit

WASHINGTON — The Internal Revenue Service announced that purchasers of qualified Ford Motor Company vehicles may continue to claim the Alternative Motor Vehicle Credit.

The announcement comes after the IRS concluded its quarterly review of the number of hybrid vehicles sold. Ford sold 5,196 qualifying vehicles to retail dealers during the quarter ending Sept. 30, 2007. This brings the cumulative number of qualified Ford hybrid vehicles sold to 38,743.

The credit amount and make and model of the certified vehicles sold are:

* Ford Escape 2WD Hybrid Model Year 2008 $3,000
* Ford Escape 2WD, Model Years 2005, 2006 and 2007 $2,600
* Ford Escape 4WD Hybrid Model Year 2008 $2,200
* Ford Escape 4WD, Model Years 2005, 2006 and 2007 $1,950
* Mercury Mariner 4WD Hybrid Model year 2008 $2,200
* Mercury Mariner 4WD, Model Years 2006 and 2007 $1,950
* Mercury Mariner 2WD Hybrid Model Year 2008 $3,000

Purchasers of Ford’s qualified vehicles may continue to rely on the certifications concerning the vehicles’ qualification for the credit.

Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

---

Purchasers of GM Hybrids Still Qualify for Tax Credit

Purchasers of GM Hybrids Still Qualify for Tax Credit

WASHINGTON — The Internal Revenue Service announced that purchasers of qualified General Motors Corp. hybrid vehicles may continue to claim the Alternative Motor Vehicle Credit.

GMC sold 123 qualifying vehicles to retail dealers in the quarter ending Sept 30, 2007. This brings the cumulative number of qualified GM hybrid vehicles sold to 9,577. The credit amount and make and model of qualified vehicles sold are:

  • Chevrolet Silverado Hybrid 2WD, Model Years 2006 and 2007 $250
  • Chevrolet Silverado Hybrid 4WD, Model Years 2006 and 2007 $650
  • GMC Sierra Hybrid 2WD, Model Years 2006 and 2007 $250
  • GMC Sierra Hybrid 4WD, Model Years 2006 and 2007 $650
  • Saturn Vue Green Line, Model Year 2007 $650
  • Saturn Aura Hybrid, Model Year 2007 $1,300

Purchasers of GMC’s qualified vehicles may continue to rely on the certifications concerning the vehicles’ qualification for the credit.

Original owners may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

Related Item: Hybrid Cars and Alternative Fuel Vehicles

Tuesday, October 23, 2007

Keeping Good Tax Records

In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return. They also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. There are laws known as statutes of limitations that impact how long you must keep receipts, canceled checks, and other documents that support an item of income or a deduction on your return.

Generally, for questioning the amount of tax you reported or making an assessment of additional tax, the IRS has 3 years from the date you filed the return. For filing a claim for credit or refund, you generally have 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For either purpose, returns filed before the due date are treated as filed on the due date. There is no statute of limitations when a return is fraudulent or when no return is filed.

You should keep some records indefinitely, such as property records. You may need them to prove the amount of gain or loss if the property is sold.

Generally, income tax returns should be kept for 3 years from the date the return was filed. They could help you prepare future tax returns or amend a return.

Read The Rest

---

Monday, October 22, 2007

Reasons To Hire A Tax Attorney

Reasons to Hire a Tax Law Attorney

The IRS is probably the most feared arm of the United States government. There are people who fear the IRS more than they do the FBI or the CIA. In facing this branch of the government, you will need a lot of help. While some people may suggest you get a Certified Public Accountant, there are numerous of reasons not to do that. In fact, what you should do is get a tax law attorney.


Why should you hire a tax law attorney?


First of all, facing the IRS means that you either haven't hired an accountant, or your current accountant has done a pretty bad job of managing your finances. This means that it is nowadays too late to hire another CPA to fix your problem. The IRS has already done the math, so you will be wasting resources if you hire another stuff to do it all over and. You need to focus on areas that you still need to prepare for. What you need is a competent tax law attorney to help you with the legalities that you will be facing.

There is also the issue of client - attorney confidentiality. While a CPA can be forced to disclose any information concerning your accounts to a conciliator, a tax law attorney is legally exempted from doing so. Remember that this confidentiality can be extremely ponderous during trials.

Another advantage that tax attorneys have over CPAs is a deep understanding of the ambiguity of tax law. CPAs are trained to recognize something as either black or white. They are easy to categorize things very specifically and may not recognize the various gray areas of tax law. A good tax law attorney knows that the law can have a thousand different interpretations and uses this fact to your advantage.

A tax law attorney can further help you by giving you truly complete advice. This is because of the fact that they are experienced in matters involving tax laws. A tax law attorney will be able to give you helping hand on different legal measures that you can take to solve your tax problems. A CPA can only help you in terms of fixing your budget or computing your taxes, but can offer very little help regarding how to fix your tax problems.

A tax law attorney, on the other hand, can show you a lot of things you can do to legally get the IRS off your back. A good tax law attorney can help you by giving you various tips on how to compromise with the IRS and end up paying much less than what you might think you owe.

The IRS can use different techniques to intimidate you into paying the amount that they will insist you owe. People who are unfamiliar with the methods of the IRS often pay this amount without taking the time to question why. A good tax law attorney can help you get over your fear of the IRS and meet them on the legal battleground. A good tax attorney will hold the resources necessary to help you overcome any intimidation tactics that the IRS may use to force you to pay.

The best reason that you can have to hire a tax law attorney is the fact that taxes are based on laws and tax attorneys know the ins and outs of the complicated tax code and laws.

----
Tim Watson is a tax preparer during the season who also runs an Search Engine Optimization directory and an Video iPod directory. You may use this article as is provided the resource box stays intact.

Friday, October 19, 2007

Find Information About Tax Debt Attorneys

Where to Find Information About Tax Debt Attorneys on the Internet

If you find yourself looking for information about tax debt attorneys, then you should try looking in the internet. This is probably the best resource you can use as it gives you access to the largest collection of information available today. Be discreet, however, as the internet can become quite a maze if you do not know where to look. What you need is a guide or at prime mattering much to point you in the general direction where you should go. Here are some places in the internet you can check out:

1 ) Online encyclopedias– These sites are visited a lot on the internet as of the various types of information that can be gotten from them. These online encyclopedias are often used by people in search of comprehensive information observation a certain topic or subject.

If you are looking for information on tax debt attorneys for research purposes, then you can go to one of the online encyclopedias available on the internet today. These online encyclopedias often offer information regarding the different specializations of tax debt attorneys, the methods that they use to help people and how they can be found. This means that you can actually find out how a tax debt attorney can help you through an online encyclopedia.

2 ) Listings– Many firms prefer to list their sense details in various websites in order to become accessible to more clients. Searching through these listings for tax debt attorneys can pretty much be equated to searching in the yellow pages. Sites like these offer the various contact details of tax debt attorneys under one heading. This can be very convenient especially if you are low-key trying to make up your mind on which tax debt attorney to hire.

Listings can also be very helpful if you have very little idea of what type of tax debt attorney that you will need. This way, you will be able to search out if a certain firm or tax debt attorney will be able to help you before committing to affair.

3 ) Company sites– If you are interested in a specific firm or tax debt attorney but do not know how to contact them, you should try to find out if they have a website. Most companies today realize the fact that the internet has become a very important medium in bringing information to people. Because of this, companies try to advertise on the internet.

4 ) Web directories– People more or less begin their searches using web directories. Using this type of website, a person looking for tax debt attorneys would be able to screen results quite quickly. This means that a person looking for tax debt attorneys cede be sound to eliminate the ones that he or she does not need and stick to the ones that can help him or her the most.

Web directories are also very user friendly. This means that people using these sites to look for tax debt attorneys will have an easy time and not have to go through different processes such as clicking various buttons only to find out that they lead you to dead ends.

This guide should at least help you get started on your search for tax debt attorneys. By following these tips, you should do just fine and you should be able to find the information you need in no time at all.

----
Tim Watson is a tax preparer during the season who also runs an Search Engine Optimization directory and an Video iPod directory. You may use this article as is provided the resource box stays intact.

Poker Tournament Winnings Must be Reported to the IRS

Poker Tournament Winnings Must be Reported to the IRS

IR-2007-173, Oct. 19, 2007

WASHINGTON — Starting next year, casinos and other sponsors of poker tournaments will be required to report most winnings to winners and the Internal Revenue Service, according to the IRS.

The new requirement, which goes into effect on March 4, 2008, was contained in guidance released Sept. 4 by the Treasury Department and the IRS. The guidance is designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.

For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on an IRS Form W-2G.

Read The Rest

---

Federal Court Grants Class Certification In FedExGround/Home Delivery Case

South Bend, Indiana (October 15, 2007) - In a major development, Judge Robert Miller of U.S. District Court for Northern Indiana, today granted class certification on behalf of approximately 14,000 current FedEx Ground/Home Delivery drivers – as well as upwards of 10,000 former drivers - across the nation who are challenging the company’s embattled independent contractor model.


Read The Rest

I'm very interested in this case and how it will end up, and I'm hoping the drivers win. The general rule is that an individual is an independent contractor if (the person for whom the services are performed) has the right to control or direct only the result of the work, and not what will be done and how it will be done or method of accomplishing the result.

It is tough being labeled as an independent contractor. I have had 2 jobs where I was considered an independent contractor. One of them was doing new construction cleaning, and thinking about it, I should have been considered an employee, given the definition of employee. In my course of work, I was told what would be done and how it should be done, and their were certain methods we had to use. I wish I would have known taxes then. Between driving to far away job sites, buying our own supplies and gas, it actually cost a lot of money to have that job. I'm not sure how it is with the FedEx drivers, but it does seem they should be considered employees.

---

Millions of People Missed Tax Breaks

According to a report by the U.S. Treasury Inspector General for Tax Administration, millions of people missed or overlooked important tax breaks and made other costly mistakes on their 2006 tax returns.

Many people did not claim the telephone excise tax refund, which is $30-60, depending on how many exemptions they have. Roughly 93 million people had filed for the refund, totaling about $4-billion. The IRS had expected 145-165 million people would claim the refund, totaling about $8-billion.

In addition, about 2.1 million taxpayers who were eligible to deduct their state and local sales taxes did not do so. This figure is up by 50% over the previous year, and they missed roughly $3.6-billion in deductions, according to the Treasury auditors.

Part of the reason for many mistakes is how complex the tax code is. Even though many people use software to prepare their taxes or go to a tax preparer to have their taxes done, there are many changes to keep up with. Part of the blame also lies with Congress, because they waited until the end of the year to extend several tax provisions that expired at the end of 2005, which was past the deadline the IRS had to send the forms and publications to the printer.

Look over your 2006 tax return, and if there are any mistakes, file an amended return using form 1040X, Amended U.S. Individual Tax Return. Amended returns cannot be filed electronically.

-----

Thursday, October 18, 2007

IRS Announces Pension Plan Limitations for 2008

IR-2007-171, Oct. 18, 2007

WASHINGTON — The Internal Revenue Service today announced cost of living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2008.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the Commissioner annually adjust these limits for cost of living increases.

Many of the pension plan limitations will change for 2008 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, for others, the limitation will remain unchanged. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $15,500. This limitation affects elective deferrals to Section 401(k) plans and to the Federal Government’s Thrift Savings Plan, among other plans.

Effective January 1, 2008, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $180,000 to $185,000. For participants who separated from service before January 1, 2008, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2007, by 1.0236.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $45,000 to $46,000.


Read The Rest

---

2008 Inflation Adjustments Widen Tax Brackets

IR-2007-172, Oct. 18, 2007

WASHINGTON — For 2008, personal exemptions and standard deductions will rise, tax brackets will widen and workers will be able to save more for retirement, thanks to inflation adjustments announced today by the Internal Revenue Service.

By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2008. Key changes affecting 2008 returns, filed by most taxpayers in early 2009, include the following:


The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007.


The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.


Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.


The maximum earned income tax credit for low and moderate income workers and working families with two or more children is $4,824, up from $4,716. The income limit for the credit for joint return filers with two or more children is $41,646, up from $39,783.

Read The Rest

---

Wednesday, October 17, 2007

IRS Warns Taxpayers About Certain Trust Arrangements Sold As Welfare Benefit Funds

IR-2007-170, Oct. 17, 2007

WASHINGTON – The Internal Revenue Service and the Treasury Department cautioned taxpayers about participating in certain trust arrangements being sold to professional corporations and other small businesses as welfare benefit funds and identified some of the arrangements as listed transactions.

There are many legitimate welfare benefit funds that provide benefits, such as health insurance and life insurance, to employees and retirees. However, the arrangements the IRS is cautioning employers about primarily benefit the owners or other key employees of businesses, sometimes in the form of distributions of cash, loans, or life insurance policies.

“The guidance targets specific abuses involving a limited group of arrangements that claim to be welfare benefit funds,” said Donald L. Korb, Chief Counsel for the IRS. “Today’s action sends a strong signal that these abusive schemes must stop.”

The guidance explains that, depending on the facts and circumstances, a particular arrangement could be providing dividends to the owners of a business that are includible in the owners’ income and not deductible by the business. The arrangement could also be a plan of nonqualified deferred compensation. Even some arrangements providing welfare benefits may have tax consequences different than what is claimed.



Read The Rest

---

Tuesday, October 16, 2007

IRA's and Other Retirement Plans

Modified AGI Limit for Traditional IRA Contributions Increased

For 2007, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced if your modified adjusted gross income (AGI) is:

More than $83,000 but less than $103,000 for a married couple filing a joint return or a qualifying widow(er),

More than $52,000 but less than $62,000 for a single individual or head of household, or

Less than $10,000 for a married individual filing a separate return.

For 2007, if you are not covered by a retirement plan at work, your deduction for contributions to a traditional IRA may be reduced if you either live with your spouse at any time during 2007 or file a joint return for 2007.

If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your AGI is more than $156,000 but less than $166,000.

If your AGI is $166,000 or more, you cannot take a deduction for contributions to a traditional IRA.


Qualified Plans

For 2007, the maximum annual benefit for a participant under a defined benefit plan has increased to the smaller of:

100% of the participant's average compensation for his or her highest 3 consecutive calendar years, or$180,000.

For 2007, a defined contribution plan's maximum annual contributions and other additions (excluding earnings) to the account of a participant has increased to the smaller of:

100% of the compensation actually paid to the participant, or $45,000.



Compensation limit


For 2007, the maximum compensation used for figuring contributions and benefits has increased to $225,000.

Elective deferrals (401(k) plans). For 2007, the limit on elective deferrals for participants in 401(k) plans and SARSEPs (excluding SIMPLE plans) is $15,500.

For 2007, a plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions of up to $5,000.

The catch-up contribution a participant can make for a year cannot exceed the smaller of:

$5,000, or the excess of the participant's compensation over the elective deferrals that are not catch-up contributions.

Modified AGI Limit for Retirement Savings Contribution

For 2007, you may be able to claim the retirement savings contribution credit if your modified adjusted gross income is not more than:

$52,000 (up from $50,000) if your filing status is married filing jointly,

$39,000 (up from $37,500) if your filing status is head of household, or

$26,000 (up from $25,000) if your filing status is single, married filing
separately, or qualifying widow(er).


Roth IRA Contribution Limit

If you will be age 50 or older before 2008 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2007 is generally the lesser of:

$5,000, or our taxable compensation for 2007.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced.


Traditional IRA Contribution and Deduction Limit


If you will be age 50 or older before 2008, the most that can be contributed to your traditional IRA for 2007 is the smaller of the following amounts:

$5,000, or your taxable compensation for 2007.


403(b) Plans

For 2007, the limit on elective deferrals has increased to $15,500.

If you are age 50 or older by the end of 2007, you may be able to make additional catch-up contributions of up to $5,000 to your 403(b) plan.

For 2007, the limit on annual additions has increased to $45,000



SIMPLE Plans


For 2007, the limit on salary reduction contributions to a SIMPLE plan has increased to $10,500.

For 2007, a SIMPLE plan can permit participants who are age 50 or older at the end of the calendar year to make catch-up contributions of up to $2,500. This is the same amount as allowable for 2006.

The catch-up contribution a participant can make for a year cannot exceed the smaller of:

$2,500, or he excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions



Income Exclusion for Retired Public Safety Officer


For distributions in tax years beginning after 2006, you can elect to exclude from income an eligible retirement plan distribution if you are a retired public safety officer. The distribution must be from a governmental plan and must be transferred directly to pay premiums for accident or health insurance or qualified long-term care insurance for you, your spouse, or your dependents.

The maximum annual exclusion is $3,000. You cannot deduct these premiums as medical expenses or, if you are self-employed, health insurance costs.


Catch-up Contributions if Your Employer Is Bankrupt

For 2007, if you participated in a 401(k) plan and the employer who maintained the plan filed for bankruptcy, you may be able to contribute an additional $3,000 to your IRA. For this to apply the following conditions must be met:


You must have been a participant in a 401(k) plan under which the employer matched at least 50% of your contributions to the plan with stock of the company.

You must have been a participant in the 401(k) plan 6 months before the employer filed for bankruptcy.

The employer or a controlling corporation must have been a debtor in a bankruptcy case in an earlier year.

The employer, or any other person, must have been subject to indictment or conviction based on business transactions related to the bankruptcy.

If you choose to make these additional contributions, you cannot use the higher contribution and deduction limits for individuals who are age 50 or older.

---

Friday, October 12, 2007

Honda Vehicle Certified As Qualified Hybrid Vehicle

R-2007-168, Oct. 12, 2007

WASHINGTON — The Internal Revenue Service has acknowledged the certification by American Honda Motor Company, Inc. that its Model Year 2008 Honda Civic Hybrid CVT meets the requirements of the Alternative Motor Vehicle Credit as a qualified hybrid motor vehicle.

The credit amount for the 2008 Honda Civic Hybrid CVT is $2,100.


Read It Here

Wednesday, October 10, 2007

Tax-filing Extension Expires Oct. 15

IR-2007-165, Oct. 5, 2007

WASHINGTON — The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax breaks and then file their returns electronically using IRS e-file or the Free File system.

Many of the more than 10.2 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. A record 58 percent of the 135.3 million returns received so far this year have been filed electronically.

In addition, the IRS urges all taxpayers with incomes at or below $52,000 to file their returns for free using Free File. Seven in 10 taxpayers qualify to use the software and electronic-filing services made available through the Free File Alliance, a public-private partnership between the IRS and a consortium of tax-preparation software manufacturers. Telephone customers can also use Free File to request this year’s one-time telephone excise tax refund.



Read The Rest

---

Friday, October 5, 2007

New Hampshire Tax Evaders Arrested

CONCORD, N.H. - A couple convicted of tax evasion who threatened violence if authorities approached them were arrested peacefully at their rural Plainfield home after holing up at the fortress-like compound for months, U.S. Marshals said.

One big question remained: How did authorities manage to take Ed and Elaine Brown into custody without the showdown they had promised?

U.S. Marshal Stephen Monier, who said repeatedly he would seek a peaceful surrender, planned to explain Friday morning in a news conference at the federal courthouse in Concord.

Ed Brown had warned authorities the authorities wouldn't take him alive: "We either walk out of here free or we die," he said earlier this year.

The Browns, who were turned over to the custody of the U.S. Bureau of Prisons, were convicted on federal tax charges in January and refused to turn themselves in to authorities when they were sentenced in April to five years and three months in prison.

They were convicted of scheming to avoid federal income taxes by hiding $1.9 million of income between 1996 and 2003.

Ed Brown, 65, and his wife, 67, have claimed the federal income tax is not legitimate. Their argument — repeatedly rejected by courts — is that no law authorizes the federal income tax and that the 1913 constitutional amendment permitting it was never properly ratified.

"We had no indication that the Browns intended to voluntarily surrender, so we had to move forward with an operation that promised the safest possible outcome. That day was today," Monier said in a news release Thursday.

Expert observers had praised the authorities' hands-off approach, but patience wore thin for Plainfield's 2,400 residents. During the summer, town selectmen asked Monier to stop the influx of militiamen and other anti-government groups to the Browns' home and to bring the couple to justice.


Read The Rest

---

Wednesday, October 3, 2007

Determining Your Property's Basis

My last post was about selling your main home, and I touched briefly on your property's basis and cost basis for tax purposes. In this article I will write a little more in-depth on these subjects.

Basis

You must determine the property's basis before the calculations required for tax purposes can be made, such as when you buy or sell a home or rental property.

Usually a gain or loss is realized when you sell your home. If the amount received is more than the adjusted basis, then there is a gain. Otherwise, there is a loss. Your gain or loss is usually a recognized gain or loss for tax purposes. Recognized gains are included in gross income, and recognized gains are deductible from gross income.

Basis is the amount of your investment in property for tax purposes. Basis is defined by how it is calculated: cost basis, adjusted basis, and basis other than cost. Your original purchase price of the property is you cost basis. The cost basis is increased or decreased by certain events to arrive at the adjusted basis. For example, any improvements you make to your property will increase its basis. Improvements are defined as increasing the value of the property, lengthening the property's life, and adapt the property to different use. Deductions for depreciation or casualty losses will decrease the basis. If you did not buy the property, the basis is calculated with a different method.

Cost Basis

Usually, the basis of the property is its cost. The cost is the amount you paid in cash, other property, services, or debt obligations. Cost may also include freight, sales tax, excise taxes, installation and testing, legal and accounting fees, and revenue stamps.

Some fees or closing costs can be included in the basis. These include abstract fees, charges for installing utility services, legal fees, recording fees, surveys, transfer taxes, and owners title insurance. Any amounts the seller owes that the buyer agrees to pay, such as back taxes or interest, mortgage fees, sales commissions, and charges for improvements or repairs can also be included in the basis.

Fees that cannot be included in the basis include casualty insurance premiums, fees for refinancing a mortgage, rent for occupancy of the building before closing, and charges for utilities or other services related to the occupancy before closing. Charges connected with getting a loan, points, loan origination fees, mortgage insurance premiums, cost of a credit report, loan assumption fees and appraisal fees are also not added to the basis.


---
Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.

Tuesday, October 2, 2007

Tax Information for Members of the U.S. Armed Forces

The tax laws provide some special benefits for active members of the U.S. Armed Forces, including those serving in combat zones.

For federal tax purposes, the U.S. Armed Forces includes officers and enlisted personnel in all regular and reserve units controlled by the Secretaries of Defense, the Army, Navy and Air Force. The Coast Guard is also included, but not the U.S. Merchant Marine or the American Red Cross. However, these and other support personnel may qualify for certain tax deadline extensions because of their service in a combat zone.


Questions & Answers on Combat Zone Tax Provisions — Military Pay Exclusions, Deadline Extensions and Miscellaneous Provisions for Qualifying Taxpayers; Employers.


A Combat Zone E-mail Address for members of the Armed Forces or their families worldwide to alert the IRS that they are serving in a combat zone.


Publication 3, Armed Forces' Tax Guide, addresses a wide range of issues that may affect members of the military:
o Online — browse the publication to find specific information;
o Portable Document Format (PDF) — download a copy to read later or print select pages;
o Hardcopy — order a paper copy by calling 1-800-829-3676.

More Information Here

---

IRS Issues Redesigned Allowable Living Expense Standards

IR-2007-163, Oct. 1, 2007

WASHINGTON — The Internal Revenue Service today issued the 2007 allowable living expense standards.

Allowable living expense standards, also known as collection financial standards, are used to determine the ability of a taxpayer to pay a delinquent tax liability. For purposes of federal tax administration the standards are effective Oct. 1, 2007.

http://www.irs.gov/newsroom/article/0,,id=174516,00.html