Archive for the ‘Uncategorized’ Category

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IRS Warns of Tax-time Scams

It’s true: tax scams proliferate during the income tax filing season. This year’s season opens on Jan. 31. The IRS provides the following scam warnings so you can protect yourself and avoid becoming a victim of these crimes:

  • Be vigilant of any unexpected communication purportedly from the IRS at the start of tax season.
  • Don’t fall for phone and phishing email scams that use the IRS as a lure. Thieves often pose as the IRS using a bogus refund scheme or warnings to pay past-due taxes.
  • The IRS doesn’t initiate contact with taxpayers by email to request personal or financial information. This includes any type of e-communication, such as text messages and social media channels.
  • The IRS doesn’t ask for PINs, passwords or similar confidential information for credit card, bank or other accounts.
  • If you get an unexpected email, don’t open any attachments or click on any links contained in the message. Instead, forward the email to phishing@irs.gov. For more about how to report phishing scams involving the IRS visit the genuine IRS website, IRS.gov.

Here are several steps you can take to help protect yourself against scams and identity theft:

  • Don’t carry your Social Security card or any documents that include your Social Security number or Individual Taxpayer Identification Number.
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact and are sure of the recipient.
  • Be careful when you choose a tax preparer. Most preparers provide excellent service, but there are a few who are unscrupulous. Refer to Tips to Help you Choose a Tax Preparer for more details.

For more on this topic, see the special identity theft section on IRS.gov. Also check out IRS Fact Sheet 2014-1, IRS Combats Identity Theft and Refund Fraud on Many Fronts.

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Charitable contributions may help lower your tax bill

Charitable contributions made to qualified organizations may help lower your tax bill. The IRS put together the following tips to help ensure your contributions pay off on your tax return.

• You must give to a qualified organization to have a legitimate tax deduction. To check if an organization is qualified to receive deductible charitable contributions, visit http://www.irs.gov/charities.

• You must file Form 1040, Individual Income Tax Return, and itemize your deductions on Schedule A.

• You can’t take a deduction for contributions made to specific individuals, political organizations or candidates or most foreign organizations.

• If you receive a benefit because of your contribution, such as merchandise, tickets to a ball game, dinner or other goods and services, you can deduct only the amount that exceeds the fair market value of the benefit received.

• Donations of stock or other non-cash property are usually valued at the fair market value of the property. Clothing and household items must generally be in good, used condition or better to be deductible. Special rules apply to vehicle donations.

• Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.

• Regardless of the amount, to deduct a contribution of cash, check or other monetary gift, taxpayers must maintain a bank record, payroll deduction records or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution. For text message donations, a telephone bill will meet the recordkeeping requirement if it shows the name of the receiving organization, the date of the contribution and the amount given.

• To claim a deduction for contributions of cash or property equaling $250 or more, you must have a written acknowledgment from the qualified organization or certain payroll deduction records. The acknowledgement must be written and include the amount contributed — or a description of the property contributed — and whether the organization provided any goods or services in exchange for the gift. If you received any goods or services, the acknowledgement
must provide a description and good faith estimate of the value. The acknowledgement should state that the only benefit you received was an intangible religious benefit, if that was the case.

• If the total deduction for all noncash contributions for the year is more than $500, taxpayers must complete and attach IRS Form 8283, Noncash Charitable Contributions, to their return.

• Taxpayers, donating an item or a group of similar items valued at more than $5,000, must also complete Section B of Form 8283, which generally requires an appraisal by a qualified appraiser.

• Other records may be required. Consult Publication 526, Charitable Contributions, for details

IRS Repeals Registered Tax Return Preparer (RTRP) Registration by citing 1884 “Dead Horse” law.

Disappearing Tax Deductions

Posted: September 23, 2013 in Uncategorized

Disappearing Tax Deductions

Deductions, credits and other provisions that will expire unless Congress takes action:

Educator’s Expenses
IRC Sec. 62(a)(D)
What it is now: Grades K–12 teachers, instructors, counselors, principals and aides can deduct up to $250 of out-of-pocket costs above the line.
What happens in 2014: Expires on Dec. 31, 2013

Cancellation of Debt — Mortgage Debt
IRC Sec. 108(a)(1)(E)
What it is now: Individuals can exclude up to $2 million ($1 million for married filing separately) of COD income from qualified principal residence indebtedness that is canceled because of their financial condition or decline in value of the residence.
What happens in 2014: Expires on Dec. 31, 2013

Mortgage Insurance Premiums Deduction
IRC Sec. 163(h)(3)
What it is now: Taxpayers with AGI no greater than $109,000 can treat qualified mortgage insurance premiums as home mortgage interest.
What happens in 2014: Expires on Dec. 31, 2013

Personal Energy Property Credit
IRC Sec. 25C
What it is now: A credit (subject to a $500 lifetime cap) is available for qualified energy efficiency improvements and expenditures to a taxpayer’s principal residence.
What happens in 2014: Expires on Dec. 31, 2013

Qualified Conservation Contributions
IRC Sec. 170(b)(1)(E)(vi), 170(b)(2)(B)(iii)
What it is now: The deduction limit for qualified conservation contributions by individuals is increased from 30% of AGI to 50% of AGI (100% of AGI for qualified farmers and ranchers) and the carry-forward period for qualified contributions in excess of the AGI limit is 15 years.
What happens in 2014: No special rules for qualified conservation contributions, so they are subject to the 30%-of-AGI limit and have a five-year carry-forward period.

Qualified Small Business Stock Gain Exclusion
IRC Sec. 1202(a)(4)
What it is now: QSBS acquired Sept. 28, 2010–Dec. 31, 2013 qualifies for 100% gain exclusion (if the holding period is met). For stock acquired during that period, the following rules also apply: 1. None of the 60% gain exclusion rules for QSBS issued by a QBE apply. 2. No portion of the excluded gain is added back to determine alternative minimum taxable income.
What happens in 2014: Gains on QSBS acquired after Dec. 31, 2013, qualify for a 50% gain exclusion [60% for QSBS issued by a qualified business entity (QBE)]. Also, a percentage of the excluded gain is an AMT preference item.

State and Local Sales Taxes Deduction
IRC Sec. 164(b)(5)
What it is now: Individuals can elect to deduct state and local general sales taxes instead of state and local income taxes.
What happens in 2014: Expires on Dec. 31, 2013

Tuition and Fees Deduction
IRC Sec. 222
What it is now: Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.
What happens in 2014: Expires on Dec. 31, 2013

Qualified Charitable Distributions
IRC Sec. 408(d)
What it is now: Taxpayers over age 70-1/2 can make tax-free transfers from an IRA directly to a charity. Any amounts so transferred count toward the individual’s required minimum distribution, but are not deductible as charitable contributions.
What happens in 2014: Income exclusion for QCDs expires on Dec. 31, 2013

Qualified Leasehold, Restaurant and Retail Improvement Property
IRC Sec. 168(e)(3)(E)
What it is now: Qualified leasehold improvements, qualified restaurant property and qualified retail improvements are assigned a 15-year (straight-line) recovery period.
What happens in 2014: All are assigned a 39-year (straight-line) recovery period.

Section 179 — Deduction Limit
IRC Sec. 179(b), (c) and (d)
What it is now: The Section 179 deduction and qualifying property limits are $500,000 and $2,000,000, respectively. In addition, off-the shelf computer software qualifies for Section 179 expensing and taxpayers can amend or irrevocably revoke a Section 179 election.
What happens in 2014: After 2013, the deduction and qualifying property limits are $25,000 and $200,000, respectively. Off-the-shelf software does not qualify for Section 179 expensing and the election generally is irrevocable with IRS consent.

Section 179—Qualified Real Property
IRC Sec. 179(f)
What it is now: Taxpayers can claim the Section 179 deduction on up to $250,000 of qualified real property (qualified leasehold improvements, qualified restaurant property and qualified retail improvement property).
What happens in 2014: Qualified real property is not eligible for Section 179 expensing.

Special (Bonus) Depreciation
IRC Sec. 168(k)
What it is now: 50% special depreciation is allowed for qualified property additions placed in service in 2013. (Note: For 2013, the Section 280F limit on depreciation for passenger autos is also increased by $8,000 for qualified property and no AMT adjustment applies to property for which the special depreciation allowance is claimed.)
What happens in 2014: Special deprecation only available for long production-period property and certain aircraft.

http://www.accountingtoday.com/taxprotoday/

New Year-End, New Headaches

Posted: September 11, 2013 in Uncategorized

New Year-End, New Headaches

Ideas for tax planning as 2013 begins to wind up