Help Yourself by Filing Past Due Tax Returns
FS-2008-12, January 2008
In this article the Internal Revenue Service addresses several points of how non-compliance to the filing requirement impacts your life. Many governmental aid programs such as financial aid for higher education require applicants to submit copies of tax returns to qualify for assistance. In the case of a child submitting an application, many times the parents’ returns are required. Failure of the parents to file a return can cause long delays in the processing of aid and can cause the aid to be rejected on the basis of incomplete information. In an increasingly turbulent financial market many financial institutions are now requiring copies of tax returns to obtain mortgages as well. The service also reminds taxpayers not to let the fact that they can not full pay at the time of filing prevent them from filing the return. Payment options are available, and if you need assistance consult a tax professional or the IRS.
To read more of this article please visit:
http://www.irs.gov/newsroom/article/o,,id=178194,00.html
Facts about the 2008 Stimulus Payment
FS-2008-15, February 2008
The basic eligibility requirements to receive a stimulus payment are to file a 2007 tax return under a valid social security number and have qualifying income of $3,000. No additional forms are required and the IRS will compute the amount of your payment based on your return for you. The IRS defines qualifying income as earned income from wages, net self-employment income, Social Security, certain Railroad Retirement benefits, veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs. Individuals that normally meet the non-filing requirement are encouraged to file so that they may take part in the stimulus program. Individuals claimed as dependents are not eligible to receive a stimulus payment; however if they qualify under the child tax credit and have a valid social security number an additional $300 will be awarded. This is a major planning point for students in deciding how to file to receive the maximum benefit for 2007. The stimulus payment will not count toward or negatively impact any other income-based government benefits, such as Social Security benefits.
To read more of this article please visit
http://www.irs.gov/newsroom/article/o,,id=179095,00.html
IRS Enforcement and Audits up in 2007
January 2008
The IRS increased their enforcement and collections efforts once again in 2007. Audit rates increased for both businesses and individuals. The highest increases took place for high-earning individuals, with an 84% increase in audits for those making over $1 million. Business audits were also up, with a 25% increase for partnerships and a 26% increase for S-Corps. The IRS stated they have placed more emphasis on auditing these flow-through entities. In the area of collections, the IRS filed 3.8 million levies and almost 700,000 liens, also an increase from the previous year and a substantial increase from five years ago.
For more statistics on IRS enforcement and audits, go to:
http://www.irs.gov/newsrrom/article/0,,id=177701,00.html
Reporting Miscellaneous Income what is Taxable?
FS-2007-26 November 2007
Most people are aware that in addition to salaries and wages, you must report income such as tips, interest, dividends, and commissions on your tax return. However, there are many other forms of taxable income that should by law be reported on your tax return. The IRS considers all income received in the form of money, property or services to be taxable unless specifically exempted by law. Taxable income could include prize winnings (cash or goods), gambling winnings, or goods and services bartered for (report fair market value of goods/services received).
It is a common misconception that if the taxpayer does not receive a form 1099-MISC or if the income received is under $600, the income need not be reported. In fact, there is NO minimum amount when it comes to reporting. Income from odd jobs such as babysitting or lawn cutting, even under $600, should be reported. Self-employed persons should use Form 1040 and Schedule C or Schedule C-EZ to report income and expenses. If the net profit exceeds $400 for the year, you must also fill out form 1040 SE.
Another form of income that must be reported is rental income. Rental income not only includes monies paid for rent, but also goods or services exchanged for rent (based on fair market value). Rental income could also include advance rent payments, termination fees on lease agreements, or lease payments with option to buy. However, landlords may deduct expenses associated with the rental, such as utilities and maintenance to the property.
For more information on miscellaneous or rental income, go to:
http://www.irs.gov/newsroom/article/0,,id=175963,00.html
http://www.irs.gov/newsroom/article/0,,id=172596,00.html
Beware of Tax Avoidance Schemes
IR-2006-45, March 16, 2006
The IRS wants to warn taxpayers about tax avoidance schemes perpetrated through the internet, seminars, or through print media. These scams charge a fee to tell you how to supposedly reduce or eliminate your tax liability through legal trickery. These arguments have been repeatedly rejected by the IRS and the courts. Individuals attempting to avoid paying tax by using a frivolous argument will be subject to penalties including failure to file, failure to pay, accuracy related penalties, civil fraud, and up to $25,000 if a frivolous claim is brought to tax court.
The IRS wants the taxpayer to know, "If an idea to save on taxes seems too good to be true, it probably is". For more information or to read commonly used frivolous arguments, go to:
http://www.irs.gov/newsrrom/article/0,,id=155289,00.html
IRS Selects Three Firms to Take Part in Delinquent Tax Collection Effort
March 2006
The IRS has selected the CBE Group, Linebarger Goggan Blair & Sampson LLP, and Pioneer Credit Recovery Inc. to assist it in the collection of back taxes. These firms will be held to the same stringent taxpayer protection and privacy rules as the IRS and are limited to the collection of taxes where the liability is not in dispute. The privatization of collection is expected to bring an additional $1.4 billion over the next 10 years.
To Read more about this article please visit
http://www.irs.gov/newsroom/article/0,,id=155069,00.html
IRS Has $2 Billion for People who have not Filed a 2002 Tax Return
Feb 21, 2006
It is estimated that 67,500 people in Michigan failed to file a 2002 tax return before their refund expired on April 17th, 2006. Federal refunds expire three years after the due date to file your return. All told Michigan residents passed up an estimated $77.6 million dollars in federal tax refunds. Refunds for 2003 are set to expire in April of 2007 so act now to avoid passing up yet another refund.
For more information please read
http://www.irs.gov/newsroom/article/0,,id=154625,00.html
Reconstructing Your Records
January 2006
In light of the recent hurricanes and other disasters, the IRS has laid out what a taxpayer should do in the event that a casualty has occurred. For tax purposes: a taxpayer must establish the decrease in value due to the casualty and their adjusted basis in that property (normally the original cost plus improvements). The smaller of these two amounts less any reimbursement maybe deducted on your taxes. In many cases of a casualty, records are lost; therefore the taxpayer should begin by documenting the loss itself. It is recommended that the taxpayer take photos of the loss before anything is done to establish the extent of loss. The next step is to contact outside sources for documentation on the assets worth before the loss. Furthermore, the IRS recommends that you retain all receipts spent towards the repair and clean up of the casualty to further substantiate the loss.
For a more detailed breakdown on what to do please visit
http://www.irs.gov/newsroom/article/0,,id=152317,00.html
Are you Withholding Enough?
The IRS has developed a withholding calculator to assist you in determining the amount you should have withheld from your pay to meet your federal income tax liability. It is very important that you withhold an amount that is as close to your actual liability as possible to stay compliant with federal law and avoid penalties. This application is designed to help individual tax payers fill out form W-4.
To see if you are withholding the right amount visit
http://www.irs.gov/individuals/article/0,,id=96196,00.html
Do You Need to File a Federal Income Tax Return?
In attempt to minimize the confusion of who must file a federal tax return the IRS has developed a list of questions that are designed to answer just that. Many one time or infrequent financial transactions will require you to file a tax return. Furthermore, you will need to file a return if you wish to get a refund of any withholdings on your income.
To see if you need to file visit
http://www.irs.gov/individuals/article/0,,id=96623,00.html
IRS Improves Enforcement and Services In 2005
In a statement by IRS Commissioner Mark W. Everson, the IRS has made great strides in its efforts to step up it enforcement and collection efforts for the 2005 fiscal year. All told the IRS pulled in a record $47.3 billion form its enforcement activities, a 10% increase over last year. The overall number of audits of individuals and businesses alike increased across the board. Small businesses were particularly targeted this year after years of decline as the number of audits rose from 7,294 to 17,867.
If you would like to learn more about the IRS stepped up enforcement please visit
http://www.irs.gov/newsroom/article/0,,id=150358,00.html
US Tax Gap Increasing
The IRS has released a study showing the US tax gap is increasing. They show the tax gap to be over $312 billion dollars. The IRS is only able to recover about 18% of that leaving the net gap at $257 billion. These figures are for the year 2001. The largest reason for the large gap is underreporting and non-compliance. These 2 components account for over 80% of the total gap according to recent IRS findings.
Since 2001, the IRS has taken many steps to increase enforcement revenues. President Bush has requested an 8% increase in funding for enforcement in the 2006 budget. The additional funding will go towards increasing audits, expanding collection and criminal investigation efforts. IRS Commissioner Mark W. Everson states "We are moving aggressively to reduce the tax gap, with proper funding; over a number of years we will be able to close a significant portion of the gap".
Much of this information was derived from the IRS website. If you want to learn more go to http://www.irs.gov/newsroom/article/0,,id=137247,00.html.
Are You Missing 73 Million Dollars?
November 1, 2005
The IRS currently owes over 84,000 taxpayers $73 million. These are taxpayers whose checks were undeliverable in 2005. A taxpayer only has 3 years from the date the return was filed to retrieve their refund otherwise it is lost. The average amount owed to each taxpayer is $871.
A taxpayer may go to www.irs.gov to check the status of their refund. When checking the status taxpayers must know their Social Security number, filing status, and refund amount.
If you would like more information regarding missing refunds go to http://www.irs.gov/irs/article/0,,id=149988,00.html or http://www.irs.gov/individuals/article/0,,id=96596,00.html.
Lothamer Featured in Business Review
November 3, 2005
Lothamer Tax Resolution is featured in Lansing/ Jackson Business Review. The article is regarding
S-Corporations and increased IRS enforcement.
Click on the link below to see the article.
http://www.mlive.com/mbusinessreview/lansing/index.ssf?
/mbusinessreview/lansing/stories/20051103_s.html