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December 2009

House voted Thursday to permanently extend the estate tax, was is set to expire at end of 2009. Includes a top rate of 45% on some estates.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 50 cents per mile for business miles 16.5 cents per mile for medical or moving purposes 14 cents per mile for charitable organizations

November 2009

The IRS expanded five-year net operating loss (NOL) carryback rules - taxpayer elects to carry back an NOL for three, four or five years.

Adjusted gross income (AGI) less deficit (losses) reported for 2007 totaled $8.7 trillion, an 8 percent increase from 2006.

IRS is looking for taxpayers due $123.5 million in the form of 107,831 refund checks that were returned to the IRS. Tweet me to find yours.

On Recovery Act "Remember, the government cannot give anything to anyone that they have not first taken away from someone else."

October 2009

Millions of dollars may have been paid to people who fraudulently/mistakenly took a lucrative tax credit for first-time home buyers.

Treasury Department will announce Thursday plans to cut pay for 175 top executives at the seven largest firms receiving "bail-out" money.

September 2009

Forbes digital news service reports that a  New Jersey client of the international banking giant UBS has pleaded guilty to concealing more than $6 million in assets in Swiss bank accounts.   Juergen Homann of Saddle River is the fifth US client of UBS to plead guilty in an ongoing federal investigation into the bank’s practices.  UBS officials have admitted helping wealthy American clients use foreign accounts to hide assets from the IRS.

http://sum2llc.wordpress.com/2009/09/26/perp-walks-begin-ubs-client-pleads-guilty/

Monaco has agreed to share tax information with U.S. authorities. Under an agreement signed Tuesday, Monaco will provide the U.S. with all information required to enforce U.S. tax laws, including information related to bank accounts in Monaco.

http://www.accountingweb.com/topic/tax/us-and-monaco-agree-exchange-tax-information

Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return.

http://www.irs.gov/newsroom/article/0,,id=206291,00.html

Six Recovery Tax Incentives for Individuals  

The American Recovery and Reinvestment Act provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient, and parents and students paying for college.

Here are six things the IRS wants you to know about ARRA tax incentives for individuals:

1. First-Time Homebuyer Credit Taxpayers who haven’t owned a principal residence during the past three years prior to the purchase date of a home before Dec. 1 of this year may be eligible to receive a credit of up to $8,000 on an original or amended 2008 tax return. They can also wait and claim the credit on their 2009 return.
2. New Vehicle Purchase Incentive Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels.
3. Making Work Pay and Withholding The Making Work Pay Credit lowered employees’ tax withholding rates this year and has already put more money into the pockets of wage earners. Self-employed individuals will have an opportunity to claim this credit when they file their 2009 return. Taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is currently being withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers, workers without a valid social security number, some social security recipients who work and pensioners. Failure to adjust your withholding in these situations could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year.
4. Tax Credit for First Four Years of College The American Opportunity Credit can help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student.
5. Certain Computer Technology Purchases Allowed for 529 Plans ARRA adds computer technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.
6. Energy-Efficient Home Improvements The credit for nonbusiness energy-efficient improvements is increased for homeowners who make qualified improvements to existing homes. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

http://www.irs.gov/newsroom/article/0,,id=204335,00.html

August 2009

http://www.irs.gov/taxstats/article/0,,id=212160,00.html

For Tax Year 2007, there were about 23.1 million individual income tax returns that reported nonfarm sole proprietorship activity, a 4.7-percent increase since Tax Year 2006. Reported profits for these sole proprietorships were $280.6 billion in 2007, representing a decrease of 1.8 percent (in constant dollars) since 2006. Profits also decreased 0.4 percent (in constant dollars) between Tax Years 2005 and 2006.

The number of S corporations increased 5.1 percent to 3.9 million for Tax Year 2006, representing nearly two-thirds of all U.S. corporations.  The number of shareholders in S corporations also increased by 5.1 percent, to 6.7 million in 2006.  Total net income (less deficit) increased 7.0 percent to $386.2 billion.  The largest component of total net income (less deficit)—net income (less deficit) from a trade or business—increased $13.0 billion to $295.9 billion, representing 76.6 percent of total net income (less deficit).

Revenue Procedure 2009-20 was posted on April 6, 2009.  This revenue procedure provides an optional safe harbor treatment for taxpayers that experienced losses in certain investment arrangements discovered to be criminally fraudulent. It also describes how the Internal Revenue Service will treat a return that claims a deduction for such a loss and does not use the safe harbor treatment described in this revenue procedure. Taxpayers claiming a loss are instructed to mark "Revenue Procedure 2009-20" at the top of the Form 4684.  The taxpayer must also sign and attach a statement as defined in Appendix A.  This requires signatures from the individual, corporation, or partnership. 

A workaround for electronically filed TY2008 corporate or partnership returns has been posted.  The workaround provides guidance on how electronic filers may fulfill the requirements in Revenue Procedure 2009-20.  Taxpayers who electronically file Form 4684 with a TY2008 tax return claiming a loss as described in Rev Proc 2009-20 may fulfill the requirement to mark "Revenue Procedure 2009-20" at the top of the form 4684 by attaching a General Dependency and entering "Revenue Procedure 2009-20 on F4684" in the Description field.  Taxpayers may submit the required statement as defined in Appendix A of the Rev Proc, including the signature(s), as a PDF file.  Name the PDF file "RevProc2009-20.pdf" and enter "Rev Proc 2009-20" in the Description field of the BinaryAttachment.xsd file.  Attach the PDF file to the electronic return.

IRS Summertime Tax Tip 2009-16:With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.

Here are five important things the IRS wants you to know about claiming the home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:
 
• As your principal place of business, or
• As a place to meet or deal with patients, clients or customers in the normal course of your business, or
• In the case of a separate structure which is not attached to your home, it must be used in connection with your trade or business

For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
 

Link:  Publication 587, Business Use of Your Home  

The Internal Revenue Service is realigning its audit resources to focus on key areas of non-compliance with the tax laws. The strategy represents a new direction for the agency’s compliance effort.

Following months of research and planning, the new approach will focus on high-risk areas of non-compliance. The IRS effort will generally focus first on promoters and then on participants in these various schemes. The initiative will feature new and enhanced efforts on several priority areas, including:

• Offshore credit card users.
• High-risk, high-income taxpayers.
• Abusive schemes and promoter investigations.
• High-income non-filers.
• Unreported income.
• The National Research Program.

http://www.irs.gov/newsroom/article/0,,id=105695,00.html