Here is a bit of helpful information for U.S. taxpayers experiencing financial difficulty straight from the IRS website.
Taxpayer Advocate Service Case Intake Line: 1-877-777-4778 or TTY/TTD: 1-800-829-4059
PDFs:
Tax Impact of Job Loss
Job Related Questions During an Economic Downturn
Low Income Taxpayer Clinic List & Info.
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IRS Help for Financially Distressed Taxpayers
IRS website
If you are facing financial difficulties and struggling to meet your tax obligations the IRS can help. As the 2009 tax filing season begins, in addition to new credits, deductions and exclusions, the IRS is taking steps to help people who owe back taxes. Here are some areas where IRS can help:
• Added Flexibility for Missed Payments: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.
• Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.
• Prevention of Offer in Compromise Defaults – Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.
• Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.
• Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.
If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation. For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.
Thursday, April 15, 2010
Thursday, April 1, 2010
East Coast Storm Victims Granted Extensions
* * Storm Victims Granted Extensions * *
via NATP
Victims of severe storms and flooding that began March 12 in Rhode Island, West Virginia, and Massachusetts may qualify for tax relief. President Obama has declared several counties in these states federal disaster areas qualifying for individual assistance. As a result, the IRS is postponing until May 11 certain deadlines for taxpayers who reside or have a business in the disaster area. This includes the April 15 deadline for filing 2009 individual income tax returns, making income tax payments, and making 2009 contributions to an IRA. In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after March 12 and on or before March 29, as long as the deposits were made by March 29.
Additional information is available on these IRS websites:
Massachusetts - http://www.irs.gov/newsroom/article/0,,id=220830,00.html
Rhode Island - http://www.irs.gov/newsroom/article/0,,id=220829,00.html
West Virginia - http://www.irs.gov/newsroom/article/0,,id=220828,00.html
via NATP
Victims of severe storms and flooding that began March 12 in Rhode Island, West Virginia, and Massachusetts may qualify for tax relief. President Obama has declared several counties in these states federal disaster areas qualifying for individual assistance. As a result, the IRS is postponing until May 11 certain deadlines for taxpayers who reside or have a business in the disaster area. This includes the April 15 deadline for filing 2009 individual income tax returns, making income tax payments, and making 2009 contributions to an IRA. In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after March 12 and on or before March 29, as long as the deposits were made by March 29.
Additional information is available on these IRS websites:
Massachusetts - http://www.irs.gov/newsroom/article/0,,id=220830,00.html
Rhode Island - http://www.irs.gov/newsroom/article/0,,id=220829,00.html
West Virginia - http://www.irs.gov/newsroom/article/0,,id=220828,00.html
Wednesday, February 10, 2010
Summary of the updates of some of the 2010 tax law credits
Here are quick highlights of some of the 2010 tax law credit changes. I think they may make some of you very happy. Know that it is necessary to qualify for these credits based on a number of specific criteria. More information can be found at Internal Revenue Service
Earned Income Credit Expanded:
The credit has been expanded for larger families. As with the original credit, childless and single taxpayers may qualify for this credit as well.
Home buyer Tax Credits:
First-time home buyer tax credit has been extended to April 30, 2010. The limit of the credit remains $8,000.
Current homeowners that have lived in their home as their primary residence for a minimum of five consecutive years may qualify for a $6,500 tax credit when purchasing a new home.
Making Work Pay Tax Credit:
The changes in the tax tables may allow for bigger paychecks, however taxpayers should make sure that with the change in the tax tables, they are having enough tax taken out of their paychecks. Too little tax withheld could result in tax due on their tax return. This credit is also available to the self-employed who qualify. Self-employed individuals should calculate their withholding during the year and adjust if necessary. IRS Withholding Calculator
American Opportunity Credit:
This is a modification of the Hope Credit, allowing for higher income and adding required course materials as part of the qualifying expenses. It is now also allowing for 4 post-secondary years instead of the former two.
Sales Tax Deduction for New Vehicle Purchases:
New cars, light trucks, motor homes and motorcycles purchased between Feb. 17, 2009, through Dec. 31, 2009 may be eligible for a deduction of state and local sales and excise taxes. For those that live in a state that does not have sales tax, a deduction for other taxes and fees is provided. This deduction is not subject to itemized deductions qualification!
Residential Energy Credit:
Homeowners that make energy saving improvements to their homes may now qualify for an increase to 30% of the cost of all qualifying improvements such as energy saving windows, efficient air conditioning & heating, and the installation of insulation. The new maximum limit of the credit is $1,500 for those modifications done in 2009 and 2010.
Earned Income Credit Expanded:
The credit has been expanded for larger families. As with the original credit, childless and single taxpayers may qualify for this credit as well.
Home buyer Tax Credits:
First-time home buyer tax credit has been extended to April 30, 2010. The limit of the credit remains $8,000.
Current homeowners that have lived in their home as their primary residence for a minimum of five consecutive years may qualify for a $6,500 tax credit when purchasing a new home.
Making Work Pay Tax Credit:
The changes in the tax tables may allow for bigger paychecks, however taxpayers should make sure that with the change in the tax tables, they are having enough tax taken out of their paychecks. Too little tax withheld could result in tax due on their tax return. This credit is also available to the self-employed who qualify. Self-employed individuals should calculate their withholding during the year and adjust if necessary. IRS Withholding Calculator
American Opportunity Credit:
This is a modification of the Hope Credit, allowing for higher income and adding required course materials as part of the qualifying expenses. It is now also allowing for 4 post-secondary years instead of the former two.
Sales Tax Deduction for New Vehicle Purchases:
New cars, light trucks, motor homes and motorcycles purchased between Feb. 17, 2009, through Dec. 31, 2009 may be eligible for a deduction of state and local sales and excise taxes. For those that live in a state that does not have sales tax, a deduction for other taxes and fees is provided. This deduction is not subject to itemized deductions qualification!
Residential Energy Credit:
Homeowners that make energy saving improvements to their homes may now qualify for an increase to 30% of the cost of all qualifying improvements such as energy saving windows, efficient air conditioning & heating, and the installation of insulation. The new maximum limit of the credit is $1,500 for those modifications done in 2009 and 2010.
Still Waiting for a W-2 or 1099?
W-2s and 1099s are to be sent out by January 31st. Many companies send them out earlier, but many do not. Therefore, do not be alarmed if you have not yet received yours.
If you do not receive anything by February 14th, or if your wage statement is wrong, you should first contact your employer. If you do not get a response, you can register a complaint with the IRS and file Form 4852 for a substitute W-2 or other wage statement. The IRS will then send a letter to your employer to get a fire under them. Your employer should send you a letter with the information needed after that.
* You may not submit this form until after February 14th.
* It is important that the number you use on your wage statement matches the ID number you use on your tax return!
If you do not receive anything by February 14th, or if your wage statement is wrong, you should first contact your employer. If you do not get a response, you can register a complaint with the IRS and file Form 4852 for a substitute W-2 or other wage statement. The IRS will then send a letter to your employer to get a fire under them. Your employer should send you a letter with the information needed after that.
* You may not submit this form until after February 14th.
* It is important that the number you use on your wage statement matches the ID number you use on your tax return!
Complete Your Tax Worksheets
If you prepare your taxes yourself, you may have noticed worksheets in your tax packet if using the paper method or an icon to open a worksheet in a tax preparation software program. Do not ignore these important tools! Worksheets and tables are used to make sure that the taxpayer actually qualifies for the credits for which they are applying. There is a lot of valuable information contained within and the answers to the questions asked can either make or break your credit qualification. Many terrible mistakes are made by skipping this step and many a taxpayer who received a refund has had to pay back some or all of the monies received. Be smart - be complete. ;)
Saturday, August 1, 2009
Tax Break on New Car Purchases Available in States With No Sales Tax
NATP
The IRS announced that the tax break for the purchase of new motor vehicles is also available in states such as Alaska, Delaware, Hawaii, Montana, New Hampshire, and Oregon that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.
Taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.
To qualify for this deduction, the vehicle must be purchased after February 16, 2009, and before January 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.
The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle. The deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 ($250,000 and $260,000 for joint filers).
The IRS announced that the tax break for the purchase of new motor vehicles is also available in states such as Alaska, Delaware, Hawaii, Montana, New Hampshire, and Oregon that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.
Taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.
To qualify for this deduction, the vehicle must be purchased after February 16, 2009, and before January 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.
The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle. The deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 ($250,000 and $260,000 for joint filers).
IRS Releases Audit Technique Guide on Hobbies
NATP
The IRS has released a new Audit Technique Guide, IRC § 183: Activities Not Engaged in For Profit, that auditors will use to differentiate between a business activity in which deductions are allowable, an activity not engaged in for profit where deductions are limited, and personal activities for which deductions are generally not allowed.
Some of the factors examination agents will consider when determining if an activity is engaged in for profit include whether: (1) the activity has large expenses with little or no income; (2) losses from the activity offset other income on the taxpayer's return; (3) the activity results in a large tax benefit to the taxpayer; and (4) the taxpayer's history of the activity shows that it generated profits in any tax year.
The guide also provides a list of possible activities that may be affected by the hobby loss rules of §183. The appendix lists the nine relevant factors used to evaluate whether an activity is engaged in for profit with a brief explanation of each factor.
A more simplified version can be found by the IRS below.
Is your hobby really an activity engaged in for profit?
By the IRS
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
The IRS has released a new Audit Technique Guide, IRC § 183: Activities Not Engaged in For Profit, that auditors will use to differentiate between a business activity in which deductions are allowable, an activity not engaged in for profit where deductions are limited, and personal activities for which deductions are generally not allowed.
Some of the factors examination agents will consider when determining if an activity is engaged in for profit include whether: (1) the activity has large expenses with little or no income; (2) losses from the activity offset other income on the taxpayer's return; (3) the activity results in a large tax benefit to the taxpayer; and (4) the taxpayer's history of the activity shows that it generated profits in any tax year.
The guide also provides a list of possible activities that may be affected by the hobby loss rules of §183. The appendix lists the nine relevant factors used to evaluate whether an activity is engaged in for profit with a brief explanation of each factor.
A more simplified version can be found by the IRS below.
Is your hobby really an activity engaged in for profit?
By the IRS
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
- Does the time and effort put into the activity indicate an intention to make a profit?
- Do you depend on income from the activity?
- If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
- Have you changed methods of operation to improve profitability?
- Do you have the knowledge needed to carry on the activity as a successful business?
- Have you made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
- Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
- Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
- Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
- Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
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