Posts

Showing posts from 2012

Payroll Taxes Broken Down

The tax on wages consists of two portions:the employer's share and the employee's share.These can each be further broken down into portions for Medicare, federal income tax withholding, and social security.The Medicare tax rate is 1.45% for each, the employee and the employer.The federal income withholding portion is the federal income tax withheld for the employee.This portion is considered to be held "in trust" for the employee and this is where the "Trust Fund Recovery Penalty" may be applied.(For more information about the Trust Fund Recovery Penalty, see The Dove Firm's website.)

The social security portion is where the tax increase comes into play.For 2012, the employee tax rate for social security is 4.2%.This was instituted in 2011 as a compromise for the discontinuance of the Making Work Pay credit.(The decrease in funding to the Social Security program for the past two years was reimbursed by the general fund of the Treasury.) The employer'…

Thinking Outside the Theater Box

It may be interesting to see if Spain tries to close the loophole found by this theater.    The Quim Marce in Bescano, Spain, has stopped selling theater tickets, which are subject to a 21 percent sales tax, and now sells carrots, which are taxed only at 4 percent.

New Requirements for Some Return Preparers

As tax preparation season begins, make sure your return preparer is compliant with new IRS requirements.If you are using a CPA, attorney, enrolled agent, or any employee supervised by one of the above, your preparer has met the IRS requirements, so long as they are in good standing with their licensing agency and have renewed their Preparer Tax Identification Number (PTIN).If you are instead using a non-licensed preparer, they have until the end of 2013 to take and pass a Registered Tax Return Preparer competency test.See the IRS website for more information about the new requirements and the test.One key difference between the licensed preparers (CPAs, attorneys, and EAs) and the non-licensed preparers is noticeable only after your return is filed:licensed preparers have unlimited practice rights before the IRS, while non-licensed preparers can represent clients only in certain circumstances.

Estate Tax and the Fiscal Cliff

The current estate tax rate is 35% with a $5 million exemption.That is all set to change in 2013, with the rate jumping to 55 percent and the exemption dropping to $1 million.While there is still hope that Congress will do something before the end of the year to avoid such dramatic changes, some fiscal cliff talks have turned to the estate tax as the solution, leaving many Americans wondering if their estates could be affected by the changes.If you have questions about your current estate plan, or need to set up an original estate plan, speak with a knowledgeable estate planning attorney about your options.

Finance and Taxes Meet Technology

I will confess that I am not very tech savvy.I have, however, found a few helpful apps that even I can manage:
One app that I have used for a while now is from Mint.com.It started out as just a website that my husband and I used to get a snapshot of all our accounts.It lets you link to your bank accounts, credit card accounts, anything you can see online.Once I found the app, I had all of that information right at my fingertips.It also lets you create a budget and has a bill reminder feature.
The IRS has its own app, IRS2Go, which I have not used very much, but does have some useful information, like contact numbers for the IRS and new articles on irs.gov.It also includes a tool that is supposed to let you check your refund status.
An app that I believe is helpful to small businesses is Snap Payroll.This tool lets you put in your employees' gross pay and calculates the amount of withholding required.It also gives you some tips about paying payroll taxes.This app won't tell you ev…

What is Form 8938?

The IRS introduced a new form required for some individuals with offshore assets, Form 8938, Statement of Specified Foreign Financial Assets.This Form must be filed by any US citizen or US resident required to file a US income tax return who owns an interest in what are called "specified foreign financial assets"(SFFA) above certain values.SFFAs include foreign financial accounts, foreign securities, foreign corporate shares or partnership interests, and others.The value limitations vary depending on filing status and current residence.The Form was first required to be filed, for most individual taxpayers, with their 2011 tax returns.The FBAR is still required even if individuals file Form 8938.

Sales Tax Audits

Texas sales tax audits will begin with a letter, notifying the taxpayer they have been selected for audit.  If you get one of these letters, you have the right to be represented through the audit, or you can represent yourself.  You should either contact the auditor or a representative who will contact the auditor on your behalf.  Next, you will set up a time for the initial interview.  This can take place at your place of business or at your representative's place of business.  Many of our clients prefer to have the auditor in our office rather than theirs, simply for convenience.  Once the initial interview is conducted, the auditor will proceed to review financial records. This can take more than one visit, and the length of time required depends on the amount of records you have provided, whether the auditor is utilizing a sampling method, and the auditor's schedule (an auditor may schedule a follow up date weeks after the initial meeting due to their workload). 
Once the…

HSAs and Medicare

A while back, I was asked about the rules on contributing to a Health Savings Account (HSA) and how they relate to Medicare.The general rule is that an individual cannot contribute to an HSA if he or she is enrolled in Medicare.The question came up about people who are eligible for Medicare but have opted out of both Part A and Part B.After some research, I found that the IRS at one point answered this question in IRS Notice 2004-50, in Internal Revenue Bulletin 2004-33.The IRS stated that an individual otherwise eligible to contribute to an HSA who is eligible for Medicare, but not enrolled in Part A or Part B may contribute to the HSA.See http://www.irs.gov/irb/2004-33_IRB/ar08.html for the entire Notice.However, once an individual attains age 65, applies for, and begins receiving Social Security benefits, they are automatically enrolled in Medicare.A federal appellate court in 2011 ruled in Hall v. Sebelius that individuals receiving Social Security benefits cannot opt out of Medic…

IRS's Expanded Fresh Start Program May Already Be Leading to Changes in OICs

In May 2012, the IRS announced new procedures for handling Offers in Compromise (OIC) as part of an extension of the Fresh Start Program.These guidelines were much more taxpayer-friendly than the previous rules.At least one August 2012 report has found that since the new procedures were put in place, the IRS went from accepting only 15% of OICs to accepting 40% of OICs submitted.This is an opportunity for anyone who owes back taxes to get caught up.
The IRS press release announcing the new program can be found here:http://www.irs.gov/uac/IRS-Announces-More-Flexible-Offer-in-Compromise-Terms-to-Help-a-Greater-Number-of-Struggling-Taxpayers-Make-a-Fresh-Start

The Progression of the IRS Offshore Voluntary Disclosure Program

The tax code is complex and always changing.One part of the code that many taxpayers are not aware of is the requirement to disclose foreign accounts and assets.The form number is TD 90-22.1, also known as the "FBAR," and it requires taxpayers with an aggregate amount that exceeds $10,000 in offshore assets to disclose those assets.The FBAR form does not assess a tax on foreign assets, but a failure to disclose could lead to civil penalties or possibly criminal sanctions.
The IRS introduced a program in 2009 that allowed taxpayers who failed to disclose their offshore accounts to receive a certain level of amnesty in exchange for a penalty equal to 20% of the total value of their foreign assets.A similar program was available in 2011, with the penalty increased to 25%.Now, the IRS has announced it will continue the program indefinitely at a penalty rate of 27.5%.More information on the 2012 program can be found at the IRS website:http://www.irs.gov/uac/2012-Offshore-Voluntary…

Welcome!

Welcome to The Dove Firm's blog!  We run into various tax and business issues in our profession and encounter clients with questions about various topics.  The answers to those questions change with time and vary case by case.  However, we will try to post information here that can give readers a starting point to know where they can find the right answer to their legal questions.  We hope you find this information helpful.  Thank you for stopping by!

Carolyn Dove
www.thedovefirm.com