Archive for January, 2009
Tuesday, January 13th, 2009
IRS issued new Publication 554 entitled “Tax Guide for Seniors.” Click Here for Pub. 554
Believe it or not, IRS has a great website, IRS Website, and many publications about tax are there for download. Just below is a quoted portion from Publication 554. There are selected topics of particular interest to older taxpayers. In addition, there are several ways that Seniors can get help preparing there income tax returns. For example, see AARP Tax Taxaide, for example. For help, the IRS says:”
Return preparation assistance: The IRS wants to make it easier for you to file your federal tax return. You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you.
Volunteer Income Tax Assistance and Tax Counseling for the Elderly.
These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. For the VITA/TCE site nearest you, contact your local IRS office.
For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. When asked, be ready to press in or speak your 5-digit ZIP code. Or, you can visit their website on the Internet at www.aarp.org/taxaide.
From Publication 554:
“The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. The publication will help you determine if you need to file a return and, if so, what items to report on your return. Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it.
While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. The following are some examples.
Higher gross income threshold for filing: You must be age 65 or older at the end of the year to get this benefit. You are considered 65 on the day before your 65th birthday. Therefore, you are considered 65 at the end of the year if your 65th birthday is on or before January 1 of the following year.
Higher standard deduction: If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. You are considered 65 at the end of the year if your 65th birthday is on or before January 1 of the following year.
Credit for the elderly or the disabled: If you qualify, you may benefit from the credit for the elderly or the disabled. To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled.
PS: No legal advice here; see your own attorney or accountant for tax advice.
Sunday, January 11th, 2009
According to the NYT, the Swiss Bank UBS, the world’s largest wealth manager, is going to return about $18 billion dollars to more than 19,000 account holders most of whom are US citizens. The US citizens holding the accounts, according to the IRS and Justice Department, have evaded at least $300 million a year in taxes, and that does not count penalties and interest.
In its article, “What to Do if UBS is Outing Your Secret Account,” NYT lists possible strategies to take in dealing with the IRS – see also NYT artcle about UBS’ plan to disclose accounts. If you have held such an account, your best choice to try and avoid criminal prosecution is to voluntarily disclosure your situation to the IRS. You may not be prosecuted, the choice is up to the Justice Department and the IRS, but you will have to report all your accounts and income and pay taxes, penalties and interest. Of course, paying money is better than sitting in a prison cell.
When I worked as an attorney in the Office of Chief Counsel, IRS, I specialized in criminal and civil tax matters involving offshore tax havens and hidden money. We had to decide how to investigate cases, get the money back and determine civil or criminal steps to take. We often collected millions of dollars in unpaid taxes, penalties and interest.
If you have the offshore account that has not been reported, do not wait for the IRS to knock on your door.
Tuesday, January 6th, 2009
The Treasury Inspector General for Tax Administration (TIGTA) is the only government entity that conducts internal audits the IRS. Well, now you can read the most recent interesting report that covers their audit April 1, 2008 through September 30, 2008. The report is TIGTA’s semiannual report to Congress.
There are some “blockbuster” (technical tax term) statements and recommendations in the report.
TIGTA says that IRS must focus on closing the Tax Gap noting that IRS does not consistantly assess penalties or penalize taxpayers for making false statements when filing returns. TIGTA recommends that IRS expand its enforcement efforts. As I have predicted before, along with other tax experts, in the future IRS will be increasing enforcement efforts. In fact, Chief Counsel, IRS, is looking for more attorneys, see Click Here
TIGTA said: “Now, more than ever, the IRS must focus efforts to close the Tax Gap – the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. In audits conducted over this reporting period, TIGTA found that the IRS has neglected to consistently assess penalties on non-compliant businesses and individuals. Additionally, TIGTA noted that the IRS generally does not penalize taxpayers for making false statements when filing official tax forms. The IRS must aggressively address the lack of taxpayer compliance and hold those in violation accountable for their actions.”
Read the whole report: Click Here
Monday, January 5th, 2009
Accounting Web posted a great article about famous tax cheats for 2008—sort of a looking back for tax cheaters.
The list: Wesley Snipes, Joe Francis (Girls Gone Wild), Nicholas Cage, Helio Castroneves and Paul Hogan (Crocodile) among others.
Read the whole story Click Here
Monday, January 5th, 2009
IRS has published the Form 1040 that individuals file for their 2008 tax returns. Yes, it is time to think about filing your 2008 individual income tax return. The normal due date is April 15, 2009. There a some new changes this year. IRS publishes the new Form 1040, along with instructions, every year. The instructions are, believe it or not, organized and easy to read.
Many people are talking about the economic stimulus payment, recovery rebate credit and withdrawal of your stimulus payment from a tax favored account, see my favorite tax blogger Taxgirl. You should read the IRS 1040 instructions, page 6, for some plain talk explanations. Click Here
Any stimulus payment you received is not taxable for federal income tax purposes, but it may reduce your recovery rebate credit. What? The recovery rebate credit, you ask. The credit is available if, for some reason, you did not receive a stimulus payment in 2008 and meet other requirements. In the instructions there is a full explanation and a somewhat workable “worksheet.” Also, see Recovery Rebate Credit Here
Other new items:
First time home buyer: If you bought a home after April 8, 2008, and before July 1, 2009, and did not own a main home during the prior 3 years, you may be able to take the “first time home buyer credit.” The single largest provision in the $15.1 billion package of housing tax incentives in the recently enacted Housing Assistance Tax Act of 2008 (the “Housing Act”) is a measure allowing individuals buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified home buyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds the tax. However, they are then required to pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government.
The IRS standard mileage rate for business use of your vehicle in 2008 is 50.5 cents per business mile driven through June and 58.5 cents per business mile thereafter. The standard mileage rate for 2009 is 55 cents. You will need to allocate your automobile expenses between business and personal use based on miles driven during the year. Proper recordkeeping is crucial in the event of an IRS challenge.
If you received an economic stimulus payment last year that was directly deposited to a tax favored account and you withdrew the payment by the due date of your return (including extensions), the amount withdrawn will not be taxed. Good news, eh?
Of course, I must tell you that all of the above information is general in nature. It is not meant to tax advice or a legal opinion. Always consult a tax professional before thinking that information here is a “slam dunk” for tax advice.