A recent Tax Court decision will change the way the IRS applies the law on IRA rollovers. For years, the IRS has interpreted the IRA rollover rules to mean that a taxpayer could do one rollover per year for each IRA he or she owned. In doing a rollover, the taxpayer is not taxed on […]
The IRS has launched a new Affordable Care Act Tax Provisions site at wwwIRS.gov/aca if you are looking for more information regarding the provision of the act. Also Open enrollment will start October 1, 2013 to acquire insurance through the exchanges. You can find more information about the exchanges at www.healthcare.gov or if you are a resident of California www.coveredca.com
I Thought I might share some Tax Humor
You know you are an extraordinary tax nerd if:
1. At your wedding on December 31, you insisted that the photographer take a picture of you exchanging vows in front of the Big Ball in Times Square to prove to the IRS that you got married before midnight.
2. On April 15th you keep moving west as you prepare income tax returns so as to extend the filing deadline by three hours.
3. Your favorite play is Phantom Income of the Opera.
4. When you finish preparing a return, instead of saying 10 4 over and out, you say 1040 completed and filed.
5. You insisted that your daughter Susie pay kiddie tax on her lemonade stand income.
6. You consider a Rabbi Trust an example of a reputable clergy person.
7. You analyze DNI to determine the genetics of the grantor of a trust.
8. You think a tax table is where deals are cut with the IRS.
9. You think that any person who masters the Internal Revenue Code is entitled to a Lifetime Learning Credit.
10. You think Batman collects taxes for the Commissioner.
11. Whenever you explain a QTIP, you give your client an earful.
12. You think the decision to hire a CPA rather than an attorney is a tax preference.
13. You think that people who get paid under the table use the cash method of accounting.
14. You keep changing your mind when asked if you recommend creating a revocable trust.
15. You think people who create disregarded entities lack self confidence.
16. You equate the office of the IRS Taxpayer’s Advocate to the fox watching the hen house.
17. You think of an IRS furlough day as a tax holiday.
18. You think those who are careless with their tires should be subject to a flat tax.
1. Track your monthly spending. Many people do not know how much they spend each month on food, clothing, housing, or entertainment. Whether you are paying with cash, a debit card or credit card, total your expenditures at the end the month to gain a better picture of how you’re spending your income.
2. Develop a household budget you can follow. Using the data you’ve compiled by tracking your monthly expenses, develop a realistic budget so that it’s easier live with. Track how well you follow it each month – that means continuing to track your monthly expenses.
3. Be sure to budget for savings. Your savings are a Rainy Day Fund, which is important when unforeseen expenses or emergencies arise. Be sure to budget part of your monthly paycheck for deposit into a savings account – ideally at least 10% of each check. If you find or earn extra money – put that away in a savings account, too!
4. Pay your monthly bills on time and avoid late charges. Take inventory of your regular monthly bills and make reminders for yourself on when each bill is due. That way you can avoid costly late fees, which can also damage your credit score. The best approach is to pay bills as soon as they arrive.
5. Review your credit report. The details of your credit report can have an enormous impact on your financial future. Obtain a free report once a year at www.annualcreditreport.com, and check it for accuracy. Be sure to dispute any errors.
6. Obtain your credit score. Your three-digit credit score tells lenders and businesses how well you manage your credit and your finances. Scores range between 500 and 850. The higher the number, the better the rating and the better chance you have of obtaining credit at a better rate. You can purchase your credit score through any of the nationwide credit reporting agencies after receiving your free annual credit report at www.annualcreditreport.com.
7. Eliminate credit card debt. Credit cards can make it easy to pile on debt. If your debt adds up faster than you can pay it off, you’re likely living beyond your means. Stop using the credit cards and pay off existing balances – the sooner you do, the less you’ll pay in interest. Remember: not all debt is bad; taking on loans for higher education or to buy a home is really an investment in your future.
8. Take advantage of free money. If your employer offers a contribution match for retirement savings or heath savings accounts, be sure that you’re contributing enough to obtain the maximum match amount. Otherwise, you’re missing an opportunity for free money. Maximizing your contributions can lower your taxable income.
9. Assess your insurance policies. Insurance is an important tool for protecting against financial hardships, and the premiums you pay can be one of your top household expenses. Talk with your provider to be sure you have the appropriate level of protection – that way, you’re not paying too much for coverage.
10. Use legitimate financial institutions. Millions of people do not rely on traditional banks or financial institutions to manage their money. Open a checking and/or savings account at an FDIC-insured bank, savings and loan, or credit union. Be sure to research whether there are any fees for their services before choosing an institution.
If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your return. Most return preparers are professional, honest and provide excellent service to their clients.
This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their Preparer Tax Identification Numbers (PTINs).
Here are a few points to keep in mind when someone else prepares your return:
Check the person’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number (PTIN). In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.
Check the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.
Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.
Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.
Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.
Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.
Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.
Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.
Make sure the preparer signs the form and includes his or her preparer tax identification number (PTIN). A paid preparer must sign the return and include his or her PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.
The IRS can help many taxpayers prepare their own returns without the assistance of a paid preparer. Before seeking a paid preparer, taxpayers might consider how much information is available directly from the IRS through the IRS Web site. Check out these helpful links:
The most common method of detecting fraud and defalcation (embezzlement) is a tip or complaint from an employee, vendor, customer or anonymous informant. Although small business frauds have a relatively low detection rate by audits, this fact does not accurately reflect the effectiveness of audits as deterrents to fraud by putting personnel on notice that fraud is likely to be detected.
The following list of practical fraud prevention tips has been compiled from a variety of sources.
1. Separate the duties of receiving funds, disbursing funds, writing checks, signing checks, and reconciling bank accounts. Having one employee responsible for all cash-related functions makes small businesses vulnerable to fraud.
2. Have the monthly bank statement delivered unopened to the owner, who should review it for unusual transactions such as declining deposits and unfamiliar payees.
3. Owners should look for a) signatures or endorsements that look forged, b) missing checks, c) check numbers that are out of order, and d) checks where the payee listed does not match the name in the check register.
4. Consider an independent review of the cash accounts and bank statements by an anti-fraud specialist.
5. Institute background checks on new employees, and notify job applicants that their backgrounds will be checked.
6. Employees who receive regular and recurring training about the detrimental aspects of fraud are more likely to aid in controlling it.
7. Employees who feel well-treated and adequately compensated are less likely to commit occupational fraud than those who don’t.
8. Employees who hold grudges against their employers – whether or not justified – are more likely turn to occupational fraud and abuse.
9. Insist that employees take a vacation for at least one week every year and use that time to have the books reviewed for discrepancies.
10. Adopt a tip hotline or complaint-reporting mechanism that will enable employees, vendors, customers, or outside sources to report suspected fraud anonymously or without fear of reprisal.
11. Employers can gain valuable information by simply asking questions in a non-threatening, non-accusatory manner.
12. Conduct internal and external audits, especially a “fraud audit” instead of a “general audit” if you suspect fraud.
13. Have an accounting software program expert, preferably a CPA, do the initial set-up of the program to make sure that helpful features are turned on and unhelpful features are turned off.
14. Access to personnel and vendor master file records should be password protected and restricted by job function.
15. Computer systems should create an audit trail of all changes made to the vendor master file records, including an identification of those who made the changes.
16. Changes to vendor master file records should require supporting documentation, supervisory approval, and independent review.