Category: Tax News

Updates in income taxes and tax problem resolution and IRS news

  • NJ Homestead Benefit Deadline Extended to 01/31/14

    State Treasurer Andrew Sidamon-Eristoff has announced that the deadline for
    filing 2012 Homestead Benefit applications has been extended to January 31,
    2014. The deadline had previously been extended from November 22 to
    December 31.

    More information and income requirements can be found here – http://www.state.nj.us/treasury/taxation/homestead/geninf.shtml

  • Coping with the Government Shutdown – Tax Problems Edition

    Solving tax problems for clients requires lots of interaction with the IRS. Generally, after meeting with a client, I file an authorization form so I can access their data online. Until last month, I filed those online, which presumably would have worked during the government shutdown. Now, we must fax them and wait 2-3 days for approval. Once I had accessed the taxpayer’s transcripts online, I usually call and speak to the IRS, asking for a collection hold, confirming details, and filing forms to resolve the issue.

    Essentially, the vital services we perform for taxpayers are on hold. It’s been tough for my clients so here’s what I’ve found out and experienced during the government shutdown.

    New Tax Liens and Levies
    Officially, new tax liens and levies are not being issued. However, some taxpayers have reported receiving Notices of Intent to Levy during the shutdown. According to reports, the notices will continue but the liens and levies are not being filed.

    Regardless, with most of the IRS not available, our options are limited. With my clients, I am preparing overdue returns and getting ready to contact the IRS once they’re open. Since authorizations to access client data are not being approved, it definitely limits our ability to complete tax returns and get an accurate overview of client accounts.

    Levies that were filed before the government shutdown are still a huge problem. Normally when a levy is filed, the bank freezes the money. Often, that’s when I get a call from a new client. We have 21 days to solve the tax problem and prevent the bank from sending the money seized to the IRS. We cannot do that, and it appears that banks are still required to forward the money to the IRS.

    Ongoing Tax Issues
    Basically, we’re in a holding pattern. Clients who are waiting for tax returns to be processed will have to wait longer, while interest and penalties accrue. Clients with garnishments are still having their wages reduced.

    Missed Deadlines
    Clients who are receiving automated notices with deadlines can miss those narrow windows if their response is not being processed. Will the IRS count the postmark date for these responses or will we have to file in Tax Court? It’s not clear at this point. The Tax Court is officially saying that petitions should still be filed to meet the 90-day deadline but will not be processed until the shutdown is over.

    Filing Tax Returns on Extension
    I would recommend filing taxes tomorrow electronically if possible. Paper returns take longer to process and the delays will increase this filing season once the IRS is back in business. For clients expecting a refund, they will not be issued until the government shutdown is over.

    Looking Ahead
    Once the IRS reopens, I expect increased delays while they process the backlog. If the government shutdown continues, preparing for next tax season could be very bumpy indeed.

  • 2012 NJ Homestead Benefit Information

    Here’s information directly from the NJ Division of Taxation:

    The Division of Taxation has begun mailing applications for the 2012
    Homestead Benefit. Applications are being mailed to homeowners over the
    next three weeks according to the schedule below. The deadline for filing
    is Friday, November 22, 2013
    .

    The Homestead Benefit application delivery dates by county are:

    • Camden, Hudson, Hunterdon, Salem, Somerset – October 10
    • Bergen, Burlington, Cumberland, Warren – October 12
    • Morris, Ocean – October 15
    • Atlantic, Essex, Monmouth, Sussex – October 18
    • Cape May, Union – October 19
    • Gloucester, Mercer, Middlesex, Passaic – October 22

    Homeowners who asked to receive their applications electronically will be
    sent an email containing instructions for downloading their 2012
    application packet. These messages will also be sent out by county
    according to the delivery schedule above.

    Because previous State Budgets limited eligibility for senior/disabled
    homeowners to those with New Jersey gross income of $150,000 or less
    , and
    for nonsenior/nondisabled homeowners to those with New Jersey gross income
    of $75,000 or less
    , homeowners whose 2012 income exceeded these limits will
    not receive applications.

    With very few exceptions, Homestead Benefit applications must be filed over
    the Internet or by phone. Homeowners who receive a packet should read it
    carefully and, if they meet the eligibility requirements, complete the
    worksheet in the packet prior to filing. The answers to most questions can
    be found in the application packet. Homeowners who have already sold the
    home that was their principal residence on October 1, 2012, or who plan to
    sell should pay particular attention to the instructions regarding sale of
    property to ensure they complete the application correctly.

    Information on the 2012 Homestead Benefit is available at:
    http://www.state.nj.us/treasury/taxation/homestead/geninf.shtml

    The homeowner benefit Internet filing application on the Division of
    Taxation Web site (www.state.nj.us/treasury/taxation/) and automated
    telephone filing system (1-877-658-2972) will be available 24 hours a day,
    7 days a week during the filing period. Homeowners who have questions or
    need help filing their applications can call the Homestead Benefit Hotline
    at 1-888-238-1233. Representatives are available from 8:30 a.m. until 5:30
    p.m., Monday through Friday, except holidays.

    Most eligible homeowners will receive their Homestead Benefit for 2012 as a
    credit on a future property tax bill instead of receiving a rebate check
    (or direct deposit). These homeowners can expect to receive a property tax
    bill or advice copy from their tax collector that will reflect the amount
    of the benefit. Those homeowners who indicate when filing that they no
    longer own the property or those whose principal residence was a unit in a
    co-op or continuing care retirement community, will have their benefit
    issued in the form of a check (or direct deposit).

  • NEW S-Corp Late Filing Election Procedure

    Filing a late S-Corporation Election is now much easier and has a longer or no deadline for many filers. Previously, if a business intending to be taxed as a Sub-chapter S Corporation failed to to file a timely election, but proceeded as one, relief from this mistake was potentially possible under a few Revenue Procedures (Rev.Proc. 2003-43, 2003-1 C.B. 998; Rev. Proc. 2004-48, 2004-2 C.B. 172; and Rev. Proc.2007-62, 2007-2 C.B. 786), though it was rather unknown and obscure. I had detailed one such method earlier.

    However, this is all superseded by the new Revenue Procedure 2013-30. I’ll lay out the new guidelines as to who qualifies, how to apply, and what deadline, if any, applies.

    GENERAL REQUIREMENTS

    1. Intended to be classified as an S Corporation
    2. Relief requested within 3 years and 75 days after the Effective Date. This is essentially the day that if the filer had timely filed that the election would have gone into effect. However, see below for an important exception to this deadline.
    3. The failure to qualify as an S Corporation is solely because the election was not filed. In other words, the company must meet all other qualifications and must be acting as an S Corporation.
    4. Reasonable cause for filing to make a timely election and due diligence to correct the error upon discovery must be present. This can include a mistake upon the part of an employee or another entrusted to file the correct paperwork.
    5. No deadline applies if:
    • The corporation is not seeking a late corporate entity classification election;
    • The corporation fails to qualify as an S corporation solely because Form 2553 was not timely filed;
    • The corporation and all of its shareholders reported their income consistent with S corporation status for the year the election should have been made and all later years;
    • At least six months have passed since the corporation filed its first S corporation year tax return;
    • The IRS did not notify the corporation and the shareholders of any problem with the S corporation status within six months after the return was filed; and
    • The completed election form includes statements from all shareholders from the date the election was to have been effective to the date of the filing stating that they have reported their income consistent with S corporation status.

    HOW TO FILE

    Complete Form 2553. Include “Filed Pursuant to Rev. Proc. 2013-30” at the top of the form. An officer and anyone who was a shareholder from the Effective Date until the Form 2553 is completed must sign. Include signed statements from all shareholders that all income was reported consistent with the S Corporation election since the Effective Date. The statement indicating the reasonable cause must include this language:

    “Under penalties of perjury, I (we) declare that I (we) have examined this election, including accompanying documents, and, to the best of my (our) knowledge and belief, the election contains all the relevant facts relating to the election,and such facts are true, correct, and complete.”

    Those also seeking late corporation classification must include further statements relating to that relief.

    Current Year 1120S
    File Form 2553 with the current year 1120S.  State “Includes Late Election Filed Pursuant to Rev. Proc. 2013-30” at the top of the Form 1120S. If you are subject to the 3 year and 75 day deadline, be aware that an extension of time to file the 1120S does not extend the time under this Revenue Procedure.

    Late- Filed Prior Year 1120S
    File Form 2553 with the late-filed returns. All overdue returns must be included. State “Includes Late Election Filed Pursuant to Rev. Proc. 2013-30” at the top of the Form 1120S. Again, the 3 year and 75 day deadline, if applicable, is not extended.

    Form 2553 Filed Separately
    Form 2553 can be mailed alone to the applicable IRS Service Center.

    If this Revenue Procedure does not apply, relief may still be possible through a letter ruling. Consult a tax professional for help if you need to go that route.

  • Penalty Relief for 1099-K Filers Extended Again

    Payment issuers will continue to receive penalty relief for mis-matched Taxpayer Identification Numbers and names on Form 1099-K issued in 2013 and 2014. Notice 2013-56 has the details. Note that the penalty relief is solely for the mis-match errors and does not extend to failing to file Form 1099-K and obviously incorrect TINs.

    For those who expect to receive Form 1099-K from their merchant card processor or a third-party network like PayPal, watch for notices from them asking to verify Social Security Numbers or Employer Identification Numbers. Ignoring these notices might trigger backup withholding of funds due to your business.

  • Offer in Compromise IRS Tax Debt Program Updated

    If you owe tax debt that you are struggling with, take a look at the Offer in Compromise program. The IRS just released new guidelines that greatly reduce the amount that needs to be offered to settle your tax debt.

    An Offer in Compromise lets you settle with the IRS for a lower amount than what you owe. It is based on your current assets and income.

    Let’s go through an example to see if you might benefit. To start working with your own numbers, you can get a rough estimate using my Offer in Compromise Calculator.

    First, you need to gather your current assets. This will include all cash and investments on hand and the quick-sale value of the things you own.

    Next, we figure your disposable income. Add up your monthly income. Subtract your monthly living expenses.

    The IRS sets allowable limits for certain expenses, some of which are based on where you live and the number and ages of family members. Under the new guidelines, we can include credit card payments, bank fees, and some student loans. Also a percentage of back state and local taxes may be allowed. Previously, none of these expenses could be included in the Offer in Compromise calculations. By increasing the allowable monthly expenses, we decrease disposable income, thus decreasing your offer amount.

    Once we have your disposable income calculated according to the IRS regulations, we multiply it by 12 or 24 months depending on whether the offer amount will be paid within 5 months or within 6-24 months. This is a significant decrease. Previously, we had to multiply the income amount by 48 or 60 months.

    Let’s do some math and see how this might benefit you – If your disposable income came to $300/month, under the previous rules, the income portion of your offer would be $14,400 or $18,000. If your tax debt is less than this amount plus your assets, you would not qualify for an Offer in Compromise. If your tax debt was more than these amounts, you might qualify but would have to pay at least $14,400 to settle your debt.

    Under the new rules, in this same scenario, the income portion of your offer would be $3600 – $7200. That’s a big difference. This will make it much easier for struggling taxpayers to make an offer that they can afford and get out from under their tax debt.

    Try my updated Offer in Compromise Calculator to see if you qualify and what your settlement amount might be. Call me for a free consultation to discuss your options.

  • New Jersey Where’s My Refund Now Available

    New Jersey has added online and phone-based tools to check the status of your NJ tax refund. If you know your refund amount, enter it online along with your Social Security Number to get the status of your mailed or direct deposit tax refund. To check your NJ tax refund status by phone, call 1-800-323-4400 or 609-826-4400.

    Another helpful online service can help you track missing NJ tax refund checks. If the check was returned as undeliverable to New Jersey, then you can begin the process of submitting a claim to have your refund check re-issued. This service includes tax refund checks from 2003 and later.

    The IRS has a similar online option to check the status of your Federal tax refund, called Where’s My Refund

  • $31,185 in Income Tax Refunds for NJ Residents Expiring

    The IRS released figures that show that 8,000 New Jersey taxpayers have not claimed $31,185 in Federal tax refunds due on 2008 tax returns. The average refund is $716. The deadline for filing to receive these refunds is April 17, 2012. After that, they are gone forever. If you have not filed and may be due a refund, I can help you gather the necessary info to file, even if you do not have all of your paperwork from that year.

     

  • New Free Online Offer in Compromise Calculator

    We’re pleased to announce the release of a free online Offer in Compromise Calculator. While the calculations for an Offer in Compromise can be complex, this online version is a great starting point for taxpayers when deciding on a solution for their tax debt problems.

    The IRS has increased audits and other tax enforcement actions, and more taxpayers are finding themselves in a situation where they owe substantial tax debts. Penalties and interest continue accruing and many people find themselves in a difficult situation and needing guidance.

    TV commercials from dubious firms promise a magical “pennies on the dollar” solution to troubled taxpayers. Before speaking to a sales rep at one of these firms, they can get instant results about their potential eligibility for an Offer in Compromise.

    An Offer in Compromise is made to the IRS when a taxpayer owes more in taxes, penalties, and interest than they will be able to pay. They can offer to pay a portion of the debt and the remaining debt is forgiven. For many people in tax trouble, it is a life-saver.

    To see if they might qualify, users enter their assets, income, expenses, and tax debt into the free online Offer in Compromise Calculator. If the results show they would save on their tax debt by submitting an Offer in Compromise, they are encouraged to call me for a more detailed and accurate calculation in a free, no-obligation consultation.

  • 2012 Small Business Calendar Available

    Free IRS Small Business CalendarOrder the IRS Small Business Calendar and keep track of important tax and payroll dates. Did I mention that it’s free? Completely free and very handy to have around the office. I keep a few on hand to give to new small business clients.

    12/29/12 UPDATE – The 2012 IRS Calendar is “sold-out.” Here’s a printable PDF copy and a handy online calendar