Tax Relief Blog

2010 Small Business Jobs Act : Important Points

September 28, 2010 | Mike Habib, EA

The recently enacted 2010 Small Business Jobs Act includes a wide-ranging assortment of tax breaks and incentives for businesses. Here’s a brief overview of the tax changes in the Small Business Jobs Act.

Enhanced small business expensing (Section 179 expensing). To help small businesses quickly recover the cost of capital outlays, small business taxpayers can elect to write off these expenditures in the year they are made instead of recovering them through depreciation. Under the old rules, taxpayers could generally expense up to $250,000 of qualifying property–generally, machinery, equipment and software–placed in service in during the tax year. This annual limit was reduced by the amount by which the cost of property placed in service exceeded $800,000. Under the Small Business Jobs Act, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment limit to $2,000,000. The Small Business Jobs Act also makes certain real property eligible for expensing. Thus, for property placed in service in any tax year beginning in 2010 or 2011, the $500,000 amount can include up to $250,000 of qualified leasehold improvement, restaurant and retail improvement property.

Extension of 50% bonus first-year depreciation. Before the Small Business Jobs Act, Congress already allowed businesses to more rapidly deduct capital expenditures of most new tangible personal property placed in service in 2008 or 2009 by permitting the first-year write-off of 50% of the cost. The Small Business Jobs Act extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (as well as 2011 for certain aircraft and long production period property).

IRS Tax Levy On IRA Account

September 15, 2010 | Mike Habib, EA

Can the IRS levy an IRA for Back Taxes? Yes the IRS can levy your IRA for unpaid back taxes.

Mr. Wayne Smith did not pay his back taxes after filing 3 years of tax returns. He owed the IRS around $36,000 of back taxes. He went to tax court, and the court ruled for the IRS and its $36,000 levy on Mr. Smith. Mr. Smith had a personal hardship, he was spending more than $800,000 plus his IRA income on his gambling addiction and not paying his back taxes.

Ordinary creditors are prevented from levying pension and IRA accounts due to anti-alienation provisions, the IRS does not conform to these anti-alienation provisions as many taxpayers think, the IRS can and will levy IRA and other retirement accounts to collect on any unpaid back taxes. In other words, the IRS is pretty much free to levy IRA accounts at its own will specially in cases of flagrant taxpayers abuse. Learn more by reading Internal Revenue Manual Section 5.11.6.2(5).

Tax Representative: Why Representation Is A Powerful Tool

September 1, 2010 | Mike Habib, EA

Skills of a Tax Representative

Tax representative is a person who is a licensed tax professional representing individual or business taxpayers regarding their tax issues before the IRS or state taxing agency. Only Enrolled Agents, Tax Attorneys and CPAs are authorized by the IRS to represent taxpayers.

Companies and individual taxpayers with complex tax matters should consider hiring a professional tax representative who would work on resolving your tax controversy problems.

Franchise Tax Board (FTB) and Tax Gap: Unfiled Tax Returns

August 20, 2010 | Mike Habib, EA

Franchise Tax Board is Contacting Thousands of Businesses to File Delinquent Tax Returns

Sacramento: The state is contacting more than 40,000 California businesses that have not filed their 2008 state income tax returns with the Franchise Tax Board (FTB).

The notices inform the businesses that they have 30 days to file a return or show why there is no tax filing requirement. Businesses that disregard these notices could face tax assessments that may include penalties, interest, and fees.

AVOIDING IRS TAX PENALTIES: TAXPAYERS BEWARE Part 2

August 10, 2010 | Mike Habib, EA

Part 2 of 2

• Dishonored Check – A penalty is charged if a taxpayer’s check is returned because of insufficient funds. For checks of $1,250 or more, the penalty is 2% of the check amount. For checks less than $1,250, the penalty is the lesser of $25 or the amount of the check.

• Paying Late – The penalty is ½% of the unpaid tax for each month or part of a month the tax is unpaid. If the IRS issues a Notice of Intent to Levy and the taxpayer does not pay the balance within 10 days, the penalty increases to 1% per month. The penalty cannot be more than 25% of the tax paid late. The late payment penalty is reduced to ¼% per month for those paying in installments.

AVOIDING IRS TAX PENALTIES: TAXPAYERS BEWARE Part 1

August 5, 2010 | Mike Habib, EA

Most tax penalties are substantial, punitive and can dramatically increase the overall tax bill. Penalties are assessed for a many reasons. Some tax penalties are due to a taxpayer’s carelessness or inattention to tax details. Other penalties are incurred due to the overstatement of deductions, the failure to report income, missing documentation, negligence, fraud or procrastination.

Recently, Congress added additional penalties for making excessive claims or filing frivolous tax returns. The following is an overview of the IRS penalties that can be imposed on a taxpayer.

The IRS assessed taxpayers over $29,000,000,000.00 (that’s 29 Billion Dollars) in penalties during 2009.

Tax Help

July 26, 2010 | Mike Habib, EA

Tax Help

Debt in taxes is a serious matter that should not be ignored. Compared to other debts, tax debts do not easily go away unless you find a viable solution to the problem. This is where tax help from the experts plays an important role in making sure that you do not get into further trouble with the IRS when it comes to dealing with your taxes.

Ask for help

Important tax developments

July 10, 2010 | Mike Habib, EA

The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

Deadline extended for closing home purchase to qualify for homebuyer credit. Relief has been provided to taxpayers who couldn’t meet a key June 30, 2010, closing date for qualifying for the homebuyer credit. As a general rule, both the regular first-time homebuyer credit of $8,000 and the reduced credit of $6,500 for long-term residents generally expired for homes purchased after Apr. 30, 2010. However, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit could be claimed if the purchase closed before July 1, 2010. Under the relief measure, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit may be claimed if the purchase is closed before Oct. 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.

Guidance addresses tax breaks for hiring new employees. Employers are exempted from paying the employer 6.2% share of Social Security (i.e., OASDI) employment taxes on wages paid in 2010 to newly hired qualified individuals. These are workers who: (1) begin employment with the employer after Feb. 3, 2010 and before Jan. 1, 2011, (2) certify by signed affidavit, under penalties of perjury, that they haven’t been employed for more than 40 hours during the 60-day period ending on the date the individual begins employment with the qualified employer; (3) do not replace other employees of the employer (unless those employees left voluntarily or for cause), and (4) aren’t related to the employer under special definitions. The payroll tax relief applies only for wages paid from Mar. 19, 2010 through Dec. 31, 2010.

Taxpayer Advocate Report

July 10, 2010 | Mike Habib, EA

National Taxpayer Advocate Submits Mid-Year Report to Congress; Identifies Priority Challenges and Issues for Upcoming Year

WASHINGTON — National Taxpayer Advocate Nina E. Olson today released a report to Congress that identifies the priority issues the Taxpayer Advocate Service (TAS) will address during the coming fiscal year. The report expresses concern about the adequacy of IRS taxpayer service, particularly as the IRS begins to implement health care reform, about new information reporting burdens facing small businesses and others, and about certain IRS collection practices.Among the areas the report identifies for particular emphasis in FY 2011 are the following:1. Taxpayer Services.

Spending for IRS taxpayer service programs has been declining in recent years. At the same time, more taxpayers have been contacting the IRS for assistance as the IRS has been tasked with administering an increasing number of social benefit programs, including Economic Stimulus Payments, Making Work Pay credits, and First-Time Homebuyer credits. The report says that as a result of the imbalance between taxpayer demand and IRS resources, the IRS has fallen short of providing adequate taxpayer service in important areas. Most notably, after answering a high of 87 percent of its calls from taxpayers seeking to reach a telephone assistor in FY 2004, the IRS answered only 53 percent of its calls in FY 2008 and has set of goal of answering only 71 percent in the current fiscal year.

Tax Problems

July 9, 2010 | Mike Habib, EA

Tax Problems are problems related to Taxation and most prominent is Income taxation. It affects natural persons – individuals or people and juridical persons – companies, corporation and other legal entities. Tax problems begins from the time you start earning for a living and receiving income or making profits, every time you spend or the expenses you incur up to the time you have spent all of your hard-earned money and profits. Tax Problems are those affecting any benefits you receive from the government and elsewhere, the tax exemptions you enjoy; even the savings you made and interest you earn and receive from any savings and investments. Tax problems also affect the home or properties you buy and sell; it involves even the how many children you have and if you donate to some charity or if somebody makes any payment to you or if you just inherited a lump sum of money, Tax Problem will be there if you don’t declare all you financial transactions and activities and don’t check which are taxable and not and if so, when, when and how to make tax payments.

This is so because, tax problem covers situations from the preparation of the income tax return, calculating the tax liabilities, earnings and expenses and exemptions until the full payment of the income tax is made. But this is just under the normal circumstances. Tax problems also arise under special circumstances like late in filing of the return, late in payment of the tax due, extension in filing returns, extension in payment of tax or taxes, and payment in installments. When you think everything is already fine and complied with, you will be notified and learn of a Tax Lien, Tax Levy or a Bank Levy against you and even garnishment on your wage. You may well discover that a tax audit has been made and discovery of deficiency in payment arising out of improper or erroneous calculation of tax, discovery of inconsistencies between that declared in your income statement, expenses and exemptions as against the records of the IRS from other sources such as your employer’s payroll, your bank statement and for companies – calculation of sales tax and other duties and taxes, 941 Payroll tax and many more; the incorrect calculation of interests and consequently erroneous payment of the amount due.

When you resort to solving the tax problem, you will find that you will encounter more related tax problems in paying back taxes, problems in settling your debt, problem in negotiating with the IRS, problem in complying with IRS payment plan and what have you. For an individual, untrained mind in the field of taxation, even small and big business, this is a real headache and the simplest issue in complying with form alone, albeit, the substance is enormous as a cross carried on one’s shoulder.