Friday, August 26, 2011

3% Withholding Rule From Payments for Goods and Services

A law scheduled to go into effect in 2013 requires federal, state, and local governments to withhold 3 percent from payments for goods and services.  The law would be a constant cycle because funds would br withheld one year, recouped the following year, but then also withheld again. 

Withholding funsa amounts to floating the federal government an interest-free loan.  Businesses would have 3 percent less to spend, affecting day-to-day operations and future growth.  State and local governments would stress their already strained budgets administering this program.

Tuesday, August 23, 2011

Tax Delinquents May Be Prohibited from Passport Renewals

More than 224,000 people who received passports in 2008 owed a total of over $5.8 billion in federal income taxes, but Congress would need to change the laws to enable the State Department to coordinate with the IRS on denying them passports, according to a new government report.

The report, by the Government Accountability Office, noted that federal law currently prohibits the IRS from divulging taxpayer information, including unpaid federal taxes, to the State Department, unless the taxpayer consents. In contrast, federal law permits certain restrictions on the issuance of passports to individuals, such as individuals owing child support debts over $2,500 or with outstanding felony warrants.

Monday, July 11, 2011

Change in Federal Unemployment Tax Rate

Effective July 1, 2011, the IRS announced that there will be a reduction in the Federal Unemployment Tax Act (FUTA) rate due to the expiration of the 0.2 percent FUTA surtax. This will decrease the overall rate from 6.2% to 6.0% on FUTA taxable wages paid after June 30, 2011. The annual FUTA taxable wage base of the first $7,000 paid to each employee remains unchanged.

Sunday, July 10, 2011

Beware of emails claiming to be from the IRS

Bogus email scams are resurfacing, including one involving payments allegedly rejected by the Electronic Federal Tax Payment System.  The email has a link that may download malicious software.


Thursday, June 23, 2011

New Mileage Rates Beginning July 1, 2011

The Internal Revenue Service announced an increase in the optional standard mileage rate for the last six months of calendar year 2011.  The new rate will be 55.5 cents per mile, an increase from 51 cents per mile for the first six months of 2011.

In addition, the medical and moving rate will be 23.5 cents per mile, an increase from 19 cents per mile for the first six months of 2011.

The charitable mileage remains at 14 cents per mile.

Monday, March 28, 2011

Proposed Vehicle Mileage Tax

As an alternative to raising fuel taxes, one possibility would be imposing taxes on vehicle miles traveled. In order to impose so-called VMT taxes, however, metering devices would have to be installed in vehicles to keep track of the number of miles traveled. They might work similarly to transponder systems such as EZPass, which allow drivers to prepay tolls in 14 states.

Friday, March 11, 2011

IRS Will Audit More Landlords

The Internal Revenue Service announced their intention to audit more income tax returns containing rental properties, especially those reporting minimal income or losses.  The IRS believes that a significant number of landlords are either under-reporting rental income or over-reporting rental expenses - or both.  Targeted will be returns that continuously report losses and/or extraordinary expenses.

Landlords are cautioned to maintain accurate records and receipts, and to know the tax laws dealing with rental property.

Saturday, January 29, 2011

Forms Affected By the Extender Provisions

Taxpayers will need to wait to file if they are impacted by any of the tax credits or deductions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17. The delays impact taxpayers claiming:
Schedule A (Form 1040), Itemized Deductions
Form 8917, Tuition and Fees Deduction
Educator Expense Deduction claimed on Form 1040
Form 4684, Casualties and Thefts
Form 8859, District of Columbia First-Time Homebuyer Credit

A few other taxpayers will also need to wait to file, due to the impact of other recent changes, primarily some of those included in the Small Business Jobs Act of 2010. Affected forms include:
Form 3800, General Business Credit
Form 5405, First-Time Homebuyer Credit and Repayment of the Credit
Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit
Form 8834, Qualified Plug-In Electric and Electric Vehicle Credit
Form 8910, Alternative Motor Vehicle Credit
Form 8936, Qualified Plug-In Electric DriveMotor Vehicle Credit

The delay affects both paper and electronic filers. All tax returns claiming these credits or deductions should not be filed until the IRS is ready to start processing these returns in mid-to late February. IRS e-file is the fastest, best way for those impacted by the delay to get their refunds.

Friday, January 21, 2011

Tax Tips on Tip Income

If you work in an occupation where tips are part of your total compensation, you need
to be aware of several facts relating to your federal income taxes. Here are four things
the IRS wants you to know about tip income:

1. Tips are taxable. Tips are subject to federal income, Social Security and
Medicare taxes. The value of non–cash tips, such as tickets, passes or other
items of value, is also income and subject to tax.

2. Include tips on your tax return. You must include in gross income all cash
tips you receive directly from customers, tips added to credit cards, and your
share of any tips you receive under a tip–splitting arrangement with fellow

3. Report tips to your employer. If you receive $20 or more in tips in any one
month, you should report all of your tips to your employer. Your employer is
required to withhold federal income, Social Security and Medicare taxes.

4. Keep a running daily log of your tip income. You can use IRS Publication
1244, Employee's Daily Record of Tips and Report to Employer, to record
your tip income.